Cuenca real estate market cools as sales decline and inventory grows; newer expats are opting for rentals over purchases

Mirroring a nationwide trend, the Cuenca real estate market is slowing down as monthly sales number decline and properties take longer to sell.

Real estate agents say that more expensive houses and condos are taking longer to sell.

“What’s happening in Cuenca is similar to what’s happening in the rest of the country,” says Jorge Dávilos, a consultant to developers in Quito. “For several years, the Cuenca market was driven by Ecuadorians living overseas, who were either returning home to live or making investments, but that has slowed down considerably. This part of the market accounted for 20% to 25% of all sales in 2009 and 2010, but it is about 10% today,” he said.

Dávilos said that the number of foreign residents buying in Cuenca has also declined. “This was never a very significant part of the market but it is even less significant today,” he said. From 2009 to 2011, Dávilos said that about one percent of sales in the Cuenca canton were to foreigners, mostly North Americans; today the number is less than half of one percent.

A recent CuencaHighLife cost of living survey of local expats bears out Dávilos’ analysis. In January 2013, the number of expat homeowners was 27%. Two-and-a-half years later, the number had dropped to 18%. In early 2013, about 40% of incoming expats said they were considering buying whereas the number today is less than 25% today.

“The number of foreigners coming to Cuenca appears to be holding steady,” Dávilos says. “They are just less inclined to buy.”

The market for high-end rentals is booming.

Despite the slowdown in sales, Dávilos says that property prices continue to appreciate. “For several reasons, prices continue to go up, although at a slower rate than a few years ago,” he says. “Five years ago, prices for newer condos in Cuenca, Quito and the coast, were appreciating at 10% to 12% a year. Today, it’s about 5%. Because of local mortgage policies, which require large down payments, and the fact that the market was making up for years of negative or zero appreciation, I expect prices to continue to rise but at slower pace,” he said.

Cuenca real estate agent Gustavo Jaramillo agrees with Dávilos. “The market is slow but there hasn’t been any depreciation and I don’t expect to see any. What I expect is that inventory will continue to grow and that the time it takes to sell properties increase. This is especially true for more expensive condos and houses.”

The real action in the expat market, according to Jaramillo, is with rentals. “Everyone is rushing into the market and even though there is growing demand, there are also more and more choices,” he said. “Many local owners are offering properties for rent that they would have sold in the past.”

Graciela Quinde, who manages dozens of turn-key rentals, mostly for foreigners, agrees. “Renters can be choosey these days because they have so many options,” she says. “This wasn’t the case a few years ago,” she added.

Despite predictions from some developers that President Rafael Correa’s proposal to increase capital gains taxes will have a negative affect on the real estate market, Davilos believes the impact will be minor. “The details of his plan were unclear in the first place and now that it has been withdraw and is being reconsidered, I think it will be minor,” he said. “It won’t have much effect on small buyers and sellers,” he said.