2012 Global Real Estate Index
The World’s Best Real Estate Markets
By Ronan McMahon
In pockets all across the planet, you’ll ﬁnd amazing opportunities to make money from real estate. I’m talking about beautiful places tucked into lush jungle-clad hills, on white sandy coves, in bustling cities, and in small colonial towns. These are markets on the upswing. The mainstream hasn’t heard of them yet. And in them today you’ll get excellent bang for your buck as well as great proﬁt potential. That’s why I’ve created this Global Real Estate Index. Here you’ll ﬁnd listed the 27 places in the world today that boast the most attractive, and potentially lucrative, real estate opportunities.
In one place tucked into a lush green valley, you can ﬁnd a penthouse suite with a 600-square-foot terrace overlooking a quaint colonial square for $42,000. In another, you can buy an ocean-view lot in a beachfront community on a jaw-dropping Paciﬁc coast of steep forested hills and sandy coves for $31,000. In a third, the appreciation has been rapid. Eight months ago, you could have bought a condo for $108,408. Today it sells for $155,834.
Each of these places has something special to recommend it…some attribute you won’t ﬁnd elsewhere. Those that top the list hold the most proﬁt potential right now. Those at mid-table and below are ones to watch—where serious opportunity could be right around the corner.
They’re all worth attention. But of course, what’s right for one investor may not be right for another. Are you interested in income? Short-term gains? A long-term hold? Do you have a modest amount to invest or deeper pockets? Are you looking for a place you can enjoy while it increases in value? Or are you in it strictly for the investment?
Whatever your priorities, this index is designed to point you in the direction of the market that might best suit. Here I compare “value for money,” “appreciation potential,” “income potential,” “costs,” and “ease of buying.” Other property indices combine published pricing stats with other data. But I ﬁnd them almost useless because they never make apples-to-apples comparisons. This Index does, however.
It isn’t the result of months of research done from a desk. This is based on years of boots-on-the-ground experience. I spend up to two weeks a month on the road scouting…on foot, by horseback, helicopter, speed boat, SUV, and rickshaw…
The top ﬁve places in this Global Real Estate Index are all fast-emerging beach locales. These are places on the up…where it’s still not too late to get in. Each offers outstanding natural beauty. Real estate prices are affordable. And something is happening that I believe will push prices higher. These are places where you can work with reliable contacts; your rights are enshrined in law and the costs of buying, selling, and holding real estate range from ridiculously low to affordable.
A star quarterback won’t get you far if he doesn’t have someone who can catch the ball. On my beat…cheap is no good if you pay a fortune in property taxes. And forget about appreciation potential if you are worried the government might take your property. But across the board, the top-scoring markets here make good sense.
The Winner—Ecuador’s North Coast
Ecuador’s north coast would be a great place to have a beach home. A great place to spend time…feet dangling in your pool, face in the bright sun, and warm breezes… long strolls on the beach at sunset.
This is one of the nicest stretches of Paciﬁc coast you will ﬁnd. Yet it stayed undiscovered because it was difﬁcult to get to. Prices are so low, it earns the highest rating possible in terms of value for money. You can buy a luxury beach home in a gated community for $135,000. Or a lot for $31,000.
Until a year ago, the drive time from Quito to this stretch of stunning Paciﬁc coast took more than eight hours. Now, thanks to a new road, you can drive from the capital to the coast in three-and-a-half hours.
Because of this improved accessibility, I expect prices will rise. The appreciation potential is considerable.
And you can generate a strong income here now, too. On my last trip, I visited a home that grossed $3,800 in rent last December. Not bad considering the owner bought it for $180,000. That’s a gross yield of 2.1% in December alone. And the value of his home is rising.
This coast earns top marks in terms of costs and ease of buying, too. Across Ecuador, your costs of buying, holding, and selling real estate are the lowest on my beat.
The owner of the home I mention above has the best of all worlds: an amazing beach home—rising in value—that he bought on the cheap. He visits three times a year. When he isn’t there, he lets the onsite rental-management team rent it out and take care of the details.
Runner Up—Tulúm, Mexico
Tulúm is a pristine, unspoiled paradise. It’s home to a protected biosphere, ancient Mayan ruins, and green jungle. Here you’ll ﬁnd some of the world’s ﬁnest white- powder beaches, backed by palm trees that rustle in the Caribbean breezes.
But unlike other parts of the Caribbean, this comes without the serious sticker shock. You could buy a ﬁve-acre jungle lot for $80,000 or a condo in a high-end community from around $180,000.
Just 80 miles from Cancún, Tulúm has stayed off the radar, attracting a chic and trendy set looking to escape the crowded resorts in Cancún.
The appreciation potential is better here than anywhere else on the Index. Bordered on one side by the Sian Ka’an UNESCO- protected reserve and on the other by those white-powder Caribbean beaches, Tulúm has a relatively small amount of land to develop. That means a supply constraint at a time demand is set to surge. Exactly the type of appreciation potential I look for.
There is a government plan to increase tourist numbers along this stretch of coast from three million to 11 million by 2020. Infrastructure that’s part of this plan is being developed. The series of highway bypasses at Playa del Carmen now reduce driving time from Cancún airport to an hour and a quarter. Development here will be boutique and high-end.
Demand for rentals is already strong. It’s set to get stronger as more visitors come. And that’s why Tulúm ties at the top of the Index for income potential.
3rd Place—Costa Rica’s Southern Zone
Costa Rica has done a great job selling itself. That’s why, in places, a half-acre lot could set you back up to $600,000. Costa Rica’s Southern Zone stayed off the radar, though. And it’s nicer than up north, the area most folks know.
Bright, thick, green jungle canopy rolls down to a coast of sandy beaches and rocky points. It’s truly stunning. And, while prices in other parts of the country soared, prices here stayed low. It was difﬁcult to get to. But a new, smoothly-paved coastal highway has changed that.
Located only a few minutes from a little town where you have restaurants and cafés, the entry price for a lot at the gold-standard project in this area is a modest $40,000. It’s very good value for money. Because of the new road, I expect prices will rise. And that makes the appreciation potential strong, too.
4th Place—Las Terrenas, DR
Last month I told you about Las Terrenas in my Market Watch column. Located on the Dominican Republic’s Samaná Peninsula, this is a little piece of paradise. Nineteen miles of walkable public beach, palm trees, warm breezes, and stars so bright it feels like you could pluck them from the sky… I can’t think of a nicer place to have a beach home. And you’ll ﬁnd your dollars stretch here.
$165,000 buys you a luxury, 1,700-square-foot townhouse in a new gated community on the edge of town. With opportunities like this, Las Terrenas scores well in the value-for-money category.
And there are few better places in the Index to earn an income from a beach property. One home I visited nets the owner $25,000 a year and lists for $285,000 (an 8.8% yield and a vacation home).
An excellent new road means that the capital, Santa Domingo, is now only an hour and forty-ﬁve minutes away. And ﬂights now come from North America to the El Catey airport 25 minutes from town.
5th Place—Iracema, Brazil
The rental market in the Iracema area of Fortaleza is strong. It joins Tulúm at the top of the income-potential category. And, as in Tulúm, demand is increasing. Iracema is undergoing a major facelift. Yet today, you can still buy cheap. I’m talking about a condo just back from the beach for as little as $125,000.
Brazil—now a middle-class country—has a strong economy. Fortaleza’s is particularly vibrant. $6 billion is being invested in tourism and infrastructure here in the lead- up to soccer’s World Cup, which visits the city in 2014. Its strategic location easily accessible to Europe and the U.S. makes it a logistics hub. And, with the help of a tax- free zone nearby in Pecem, it’s the perfect place for export-focused manufacturers to locate.
There’s oil offshore. New small businesses are opening in Fortaleza by the day. Major corporations are setting up regional operations here. That means more executives are relocating to the city.
The short- and long-term rental market is strong. It’s very difﬁcult to ﬁnd a quality rental. Fortaleza’s boardwalk is where the best market opportunity is today—at Iracema. This is where you’ll ﬁnd the bigger hotels and luxury multimillion-dollar condos. Here a three-mile curve of beach and glimmering skyline is fully built out.
But on the western edge there was a mile of beach in the historic but run- down area of Iracema that the boardwalk could absorb. It has. This past April, the boardwalk was extended. This area is set to boom, just as the rest of the city has.
Yet you can still buy here for less than 50% of what you could pay on the old boardwalk. This is the anomaly that makes this opportunity particularly strong. You could buy a “ready-to-rent” condo here from $125,000. I expect prices will rise.
Places Worth Watching…
The opportunities don’t stop at the top ﬁve winners. Look down the list and you’ll ﬁnd other strong performers… places worth watching. In deeply distressed places like Ireland and Spain, real estate markets and the economy have imploded. While these places are almost certainly set for further falls (thus the low ratings in the “appreciation potential” category), interesting—in some cases downright extraordinarily good—deals can be found at ﬁre-sale auctions. If you missed out on that Irish cottage 20 years ago, now is the time to pay attention. I’m watching closely.
On Cambodia’s southern coast, French mansions sit abandoned in strangling jungle. From white-sand beaches you look out to an island-dotted horizon. Tourists haven’t come here yet in great numbers as they have to Thailand and Vietnam. So in Cambodia today, $80,000 buys you a nice condo of more than 1,000 square feet in a beach town. Thus, the strong showing in the “appreciation potential” and “value for money” categories. But rents are tiny and the whole process takes a lot of ﬁguring out. This is one for the budget-sensitive adventurer.
The celebs will still party in Punta del Este on Uruguay’s coast. But in my view, the market here has gotten frothy. A low “value for money” score drags its rating down. The opportunity in solid and stable Uruguay is, therefore, not in Punta del Este, but on Rocha’s coast. Development is moving down the coast from Punta toward Brazil. In fact, the beaches are nicer here. You can still buy a half-acre lot in a gated community from $31,900. That’s why Rocha scores highly in terms of “value for money” and “appreciation potential.” It’s not a place where you can generate much income…not yet, anyway. But this buy-and-hold locale could see strong increases in value.
For a coastal pick where your dollars will stretch further, look to Nicaragua’s south Paciﬁc coast. It’s not so trendy a place to invest as northern Costa Rica across the border. But the coast is jaw- dropping, the people warm and friendly, and it’s one of the safest places in Central America. Daniel Ortega’s third term as president may be unconstitutional, but foreign-ownership rights have been respected. He needs foreign investment. Here $65,000 could buy you an ocean-view lot in a high-end development close to a new clubhouse and restaurant facilities in one of the region’s ﬁnest communities.
How the Scores are Calculated
For the past eight years, my full-time job—and my passion—has been to travel the globe in search of these opportunities. For the five years before that, I was in it for the kicks and the side money. But the more potential I saw, the more serious I got.
In the last 18 months alone, I’ve been on the ground (sometimes more than once) in Colombia, Mexico, Belize, Vietnam, London, the Dominican Republic, Hong Kong, Macau, Ireland, Ecuador, Nicaragua, Laos, Cambodia, Costa Rica, Canada, France, and beyond…
I analyze and report on individual markets each month in these pages. But here, instead, I’d like to help you compare the best opportunities to one another. Unless you have, as I do, 13 years of experience on this beat, it’s difficult to know how these markets stack up. I believe in keeping things simple and sensible.
In examining a market, first I look at value for money. How far do your dollars stretch? Are you getting “a lot” for your money? “A lot” can mean quality construction, location, views, and amenities…the town or city the property is located in. Ecuador is good “value for money” because you can buy a beach condo for $100 per square foot. Santa Marta, Colombia (which doesn’t make this list), would score poorly on this measure because you could pay $250 per square foot for a comparable condo.
Next I consider appreciation potential—do I think prices are going to rise? For this I look for places that have been undervalued and where for some reason (new highway or an up-and-coming middle class) prices are likely to rise. Like the impact Brazil’s new middle class has had.
To rank by income potential I run the numbers on rental opportunities. I consider whether anything is happening that will increase supply or demand…and therefore affect the yield. It’s not a static snapshot. You buy a rental for at least the medium term. So you need to analyze how the rental market is going to look in the future.
Costs and ease of buying are the nuts and bolts. These are the buying, holding, and selling costs. The availability of English- speaking contacts. The legal protection you get as a foreigner and the availability of services like title insurance.
Of course, there’s a hefty subjective element to my analysis. Appreciation potential is my view on the prospects for values to rise. But that’s the point of this Index. It’s meant to give you a useful window into the world of analysis I do…and help point you to the markets that might make the most sense for you and your portfolio.