Why Buy Property in Nicaragua?

The development of Central America as both a tourist destination and an investment destination of the overseas property market has been swift and exciting. The advantages of exposure to a global audience, growing economies, favourable local tax laws and now stable governments, have made the countries separating North and South America the focus of the world’s real estate investors, multinational companies and property developers.

But countries such as Nicaragua are not just for people looking to invest in major cities, be it in apartments for the newly-rich, investments in local business communities or foreign workers on secondment from their large companies, Nicaragua also offers opportunities for those who would prefer to invest in something with more of a lifestyle element to it. Property in Nicaragua is not only some of the best value in the region, but offers growth potential to rival any other destination on the planet.

The opportunities in some of the markets in this region have grown incredibly rapidly, and some have started to show signs of levelling off after the initial spurt of growth. Nicaragua shows not only lower starting points for property prices, but also the potential for significant growth in tourist numbers and the business community.

Popular property buying locations in Nicaragua

The overseas property buyer in Nicaragua has a wide range of choices from colonial properties in the old, historic city centres, to new developments in the beautiful coastal regions which are being built with all of the features and amenities that modern tourists would expect from top-class travel destinations.

Nicaragua is situated to the north of Costa Rica, one of the biggest growth markets for US tourism and expat property ownership in recent years, and to the south of Honduras. The country was originally settled as a Spanish colony from Panama in the early part of the 16th Century, and became an independent republic in 1838, following periods of occupation by both the Spanish and British Empires. It is also the largest nation in Central America following its transition from colony to republic.

The country did suffer greatly from two major events in its recent history. Firstly, the political regime of Daniel Ortega was heavily involved in one of the biggest political scandals of the Reagan presidency in the US, which involved channelling arms and funds to Iran in return for hostages being released. This damaged the country’s standing in the region and in the world, and the reputation of Nicaragua as an open political democracy did not recover until after the free and fair elections of 1990.

In December 1972, Nicaragua suffered from a devastating earthquake that destroyed much of the capital city of Managua, and forced many of the capital’s residents to flee and find refuge on the outskirts of the city. This severely damaged communications and economic structures, and up to 90 per cent of the centre of the city was flattened. As most of the 1.4 million population managed to find refuge on the edges of the city and adapted quickly to life in a different location. In addition continuing economic difficulties in the region meant that much of the central part on Managua still hasn’t been rebuilt.

This is where some of the growth in the property market for investors is beginning to gather pace, as the government has announced plans recently to rebuild the city. Much of the rebuilding work will follow the lines and styles of the previous buildings, with added green spaces. The advantage socially of redeveloping this part of the city is that the work and new property that is created will displace very few ordinary Nicaraguans.

Managua is also on the shores of Lake Managua, giving property developers the opportunity to build alongside the leisure and watersports facilities that are near to the city.

The other two major cities in Nicaragua are blessed with similar amounts of colonial-style property in their museums and municipal buildings, along with some of the grander private residences. Granada is on the shores of the biggest lake in Central America, Lake Nicaragua, and has many buildings in the Spanish colonial style. The city is also one of the biggest expat communities in the region, lending a cosmopolitan atmosphere to the area.

Léon lies to the north of the capital, and is known as the intellectual centre of Nicaragua with universities, colleges and other seats of learning dotted around the city, as well as churches and cathedrals to improve spiritual learning.

Outside of the main urban centres, the attraction of Nicaragua for tourists and property buyers alike is along the coast. Like many of its neighbouring nations, Nicaragua has coastlines on both the Pacific Ocean and the Caribbean Sea, and the landscape and development to be found along the two differs greatly.

On the Caribbean coast, most of the towns are small trading and fishing ports which are very traditional and have yet to succumb to the modern ways of life. Bluefields is one of the most important among these port towns, and from many of them it is possible to take a boat out to the coral-fringed Corn Islands (Islas del Maiz), the larger of which is a popular tourist destination for Nicaraguans.

The Pacific coastline of Nicaragua is home to numerous tourist resorts that are geared more towards the overseas visitor, and which overlook spectacular beaches and are not too far from Managua. San Juan Del Sur is the most famous of these, and attracts surfers as well as families to its wide, sandy beach. Other resorts to look out for are El Coco, Marsella and Ocotal.

Legal issues

Nicaraguan law recognizes the right of foreign citizens to buy and own property in Nicaragua without restriction. This legal provision allows for 100 per cent ownership in the country with equal legal rights as a native Nicaraguan, though there are still parts of the process to which potential buyers must pay particular attention if they are to avoid being taken for a ride.

The property market in Nicaragua is developing rapidly, and there are some fantastic opportunities for the overseas property buyer, and many properties are being snapped up by foreign investors. As well as the huge new-build projects that are emerging on the coasts and in the cities, there is a significant market for resale properties, particularly for those in the older colonial style.

While the property investment market has developed at a staggering rate in the past months and years, some of the systems and procedures governing the sale and registration of property are yet to catch up, so it is essential to make sure you have expert, independent legal advice to guide you along the path of owning property in Nicaragua.

One of the main issues with older properties, as with many emerging markets in the international property marketplace, is making sure you have clean and undisputed title to the property. This is an issue which can afflict both rural and urban properties, and stems from the fact that many properties were illegally seized by the authorities in the 1980s, and there is no longer a clear-cut way of determining the proper title for the purchase process. Buyers are advised to be very wary of this part of the process, and if there is any suggestion that things are not as they should be, to question the legality of the documents they are presented with and be prepared to walk away from the deal if things are unsatisfactory.

Also be wary of properties that appear to have had some change made legally to the title, the usage or the land permits, as these are regularly challenged in the courts. This is not to say that it is impossible to find a good resale property in Nicaragua with clean, clear title, but perhaps for the time being, until the legal and buying process catches up with the speed of development, buyers may be best advised to look at new-build properties first.

The buying process

Buying a property in Nicaragua can be a reasonably straightforward process which can be completed in a little over two months. The first stage of this system is usually for a formal offer to be accepted, and for a deposit to be paid over (non-refundable) to the seller. The processes will then be put into place for the formal registration of the sale, the searches to be carried out, and for all timings to do with the transaction to be agreed and put into place.

The lawyer will carry out the appropriate searches and will make sure the property registration for the new owner is put through the right legal and administrative channels. The seller is obliged to provide all relevant tax registration, title deeds and other paperwork to the lawyer to complete this process. At the same time, arrangements are made for the transfer of funds to the seller.

As this is going on, the lawyer is arranging for the property to be registered under the new owner’s name. This is when the buyer must also pay the government taxes that are due on the sale of property in Nicaragua (details below).

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