Cuenca News

Following a deep slump, Cuenca contractors and real estate agents looking for recovery

By LIam Higgins

Cuenca building contractor Carlos Taiano sees better times ahead for his business. Acknowledging the hard times he’s gone through in recent years, he borrows an old maxim to illustrate his point: It’s usually darkest just before daybreak.

Cuenca saw a building and real estate boom from 2008 to 2013.

“The last three or four years have been terrible for anyone involved in the construction business,” he says. “I’m not just talking about builders like me but also for laborers, craftsmen, construction materials merchants, and real estate sellers. Today, we are seeing the first signs of a recovery.”

Cuenca’s Chamber of Construction confirms Taiano’s assessment of the industry slump, reporting a 47% decline in building starts from July 2014 to July 2017. “Actually, you can add another 10% to that if you go back to late 2013,” says chamber president José Jaramillo.

“People see several large projects under construction around the city and they think we’re doing fine,” says Jaramillo. “What they don’t understand is that these jobs started three or four years ago and are finishing up. They don’t notice that very few new projects are starting. This is the result of the depression our industry has been suffering.”

Taiano says that the construction sector was set up for a fall following the real estate boom from about 2008 until 2013. “There were more buyers than new properties available and prices were appreciating 20% a year, some evening doubling,” he says. “Everyone in the business was making money.”

According to Taiano and other builders, the boom was fueled by sales to Ecuadorians returning from overseas or sending money home for investment. “They were mostly buying residential properties, especially condominiums, and at one time they represented more than 50% of all buyers in the Cuenca canton. It was really an anomaly and when those sales slowed down it hit everyone in the industry very hard.”

Taiano, who began his building career in South Florida, isn’t the only one who sees better times ahead. “We are turning the corner and when voters reject the Correa’s capital gains tax I predict you’ll see a lot more building starts,” says small builder Felix Piedra, referring to a question that will appear on a national referendum about a law aimed at stopping real estate speculation. “That law has held up building starts and when it’s repealed the industry will begin to have better health.”

Taiano does not expect another boom. “What I predict is slow, steady growth, not the frenzy we had a few years ago. Actually, we are better off if that doesn’t happen again. What we need is a consistent market that benefits everyone involved in all the building and sales trades.”

  • squeaky fromme

    I believe affordability for Ecuadorians is the single most important factor in the real estate industry here. Wages are not high and mortgage rates are often over 15%. It’s hard to see how many people would be able to afford a house or apartment given those factors. It is difficult to see rising demand unless it comes from outside the country.

    • Larry Von Eschen

      Actually, there are hundreds of thousands of Ecuadorians who have more money than you think, who are easily able to upgrade or to build new homes. The vast majority of any construction industry turn around will be fueled by Ecuadorians, not by foreigners.

      • squeaky fromme

        As I mentioned in my comment, I agree with you about the demand needing to come from Ecuadorians. It’s called reading comprehension. Wealthy Ecuadorians already own houses, perhaps various. Can’t see them providing a lot of demand. The real estate slump began 2 or 3 years before Correa installed the ” ley de plusvalia ” , taking it away benefits the developers more than it creates first time home buyers.

        • Ricki

          Most of the folks that own rentals are Ecuadorians, at Edificios . So the boom was actually rich Ecuadorians getting into the rental business. Like you said they already owned property. Many foreigners bought too, but have to wait a long time to get them sold.

    • StillWatching

      Squeaks! Do you mean that gringo expats aren’t the center of the universe and aren’t the driving force for good and evil in Cuenca (if not the entire world)? What a novel concept.

      • edgeof 2

        Behave yourself ! Ur getting out of control ! Cheers !

  • Kevin Lichtman

    At the level of the average consumer, Ecuador is a cash market. You see this everyday at the mini market, in a cab, etc. Few Ecuadorians have access to credit and, at 10% plus, even fewer can afford to finance a home purchase. Ecuadorians with ambitions of home ownership wait for years to buy a parcel of land, then plan to build, a brick at a time. This is why you see so many apparently unfinished homes with nobody working on them.

    • edgeof 2

      Just like the USA then – cheers mate !

  • Virginia W.

    The IESS re-started giving mortgages to people, that also contributed that people wanted to get a home for themselves.

  • LadyMoon

    I agree that the real estate market is for and about Ecuadorians. One part of the market is wealthy people purchasing condos or housing for their children.
    I think the expat boom is over in Cuenca. Uncertainty in the medical insurance field and the difficulty in transportation to and from Cuenca has a negative impact.

  • lorenzo

    What’s happened in the last forty years is called urban sprawl. The city of Cuenca is expanding up into the hills. Before, many parents who lived in these parts were cash poor, but had beaucoup hectares which their kids inherited. The kids would then divide it and sell. Now buildable land is disappearing so fast that I often see the value of the land being higher than the house that is built on it. City folk want to have a house in the “country”, so land around here is selling on average for $100/square meter.

    We are in the process of selling a sizable piece that an investor will some day buy and then divide. We were told by our real estate agent that ONE reason for the slowdown in sales is that investors are waiting to see what happens after the recent elections. There’s still plenty of money around to buy land.

    Right now, the city of Cuenca is conducting a land use study here in what is now a urban/rural area. Typical for Ecuador, to little to late.

  • Jason Faulkner

    Reducing capital gains taxes is not going to increase consumer demand. Construction starts are low because the market is overbuilt. There’s already a surplus of unoccupied housing units and Ecuadorians prefer to pay off the house they’re in over “upgrading” to a new mortgage. No amount of policy changes is going to change the reality that there is no demand.

    • lorenzo

      You are probably right, especially in large cities and urban areas. But what I am noticing in the former rural areas surrounding Cuenca is that land is being divided and bought up like there’s no tomorrow. The buyers are either from Cuenca or from smaller communities further out like Pucara and Chaucha who want to get closer to Cuenca. What really makes the deal is if there’s a road to the land that’s for sale. The land use plan that Cuenca is developing calls for more roads which will then bring in more housing. Not a good plan in my opinion because like you say, there’s probably already a surplus of unoccupied housing in Cuenca.