The market peaked in early 2008, according to Brooke Rundle, a broker with Coldwell Banker Nicaragua. She estimated that the number of transactions has decreased 30 to 35% since.
However the downturn may have begun before then according to figures from the Managua office of the First American Title Insurance Company which shows that orders for title insurance began declining in 2006.
San Juan del Sur is the main coastal hub for tourism and real estate development but it has seen property sales slow. This is not surprising according to Rundle as most of Nicaragua's foreign property investors come from the US and Canada where the economic downturn is robust.
There is some hope that European property investors can be persuaded to the market. Sam Stewart, a broker with Re/Max Horizons in San Juan del Sur, said that the one of the big attractions is that Nicaragua is a cheap place to live for retirees.
He believes that Nicaragua's popularity as a retirement destination will increase as property values increase in other South American locations such as Costa Rica, Mexico and Panama.
But like all emerging property markets investing is not always straightforward. Although there are no restrictions on foreign ownership of property, real estate agents rarely get exclusive rights to advertise properties in Nicaragua, and that there is no multiple listing service. This means sellers can market their properties through several real estate agents simultaneously.
Buyers pay a transfer tax equal to 1% of the purchase price. An additional 1 to 1.5% in legal fees goes to the lawyer who researches the title and draws up the closing documents. The seller usually pays the real estate agent's commission, which is 3 to 6% for a home, but 7 to 10% for development land.
