For Ecuador real estate agents and developers, the Covid-19 pandemic has only made a bad situation worse. Already in a slump in 2018 and 2019, those selling property today have seen the time on the market increase by as much as 50 percent since late 2019.
“The market is in crisis and even as we emerge from the pandemic the recovery will be slow,” says Mario Burbano de Lara, former presidential adviser for the government’s Casa para Todos program. “We have the classic over-supply, low-demand problem and until the high inventory begins to decline, the time properties sit on the market will be painfully long for sellers.”
Based on industry figures, the inventory of unsold properties is 23,000 in Guayaquil, 20,000 in Quito and 6,500 in Cuenca.
According to Burbano de Lara, total sales have been in decline since 2012, when the Ecuador real estate market peaked. “In Quito that year, there were 12,000 sales and there were 12,500 in Guayaquil. In contrast, sales dropped to 3,250 and 3,300 last year, during the pandemic. That’s a remarkable reduction.” He added that the situation is slightly better in Cuenca, with a market size about 30 percent of Quito’s, “There, we have seen about a 50 percent decline in total sales compared to the 2011 to 2012 period.”
During the pandemic, the time properties remain on the market has increased dramatically, the Quito Association of Real Estate Agents reports. “Before the pandemic, time-to-sale from listing was 20.68 months and now it is 30.9,” the association said in a recent statement. The wait time is longer in Guayaquil, extending from 26 months in 2019 to 38 months in May 2021. In Cuenca, time on the market has increased from 18.7 months to 27.5 months, according a source with the local real estate association.
One reason inventories remains high, real estate agents say, is that owners are reluctant to reduce prices, says Fernando Acurio, president of Acurio y Asociados in Quito. “They have only come down 3 percent on average here. The standard response to high inventory is lower prices but we’re seeing relatively few reductions,” he says. Prices have dropped a little more in Guayaquil and Cuenca, 5 percent and 3.5 percent respectively, but the reduction is not enough to reduce inventory, Acurio says.
One reason prices have not dropped more, says Burbano de Lara, is that most sellers do not hold mortgages. “We are different than many other countries where owners are forced to sell for less because of mortgage pressure. In Ecuador, more than 70 percent of all properties are owned outright so many owners can afford to wait.”
Despite owner hesitance to reduce prices, Burbano de Lara says Ecuador prices per square meter of construction are among the lowest in South America. “The real estate industries in Colombia and Peru are also in a deep crisis but per meter prices there are 15 percent to 20 percent more than in Ecuador.”
There are a few bright spots in a bleak market, Burbano de Lara says. “In Quito, properties are selling more quickly in the Parque Carolina district while some boutique developments in Cuenca’s historic district remain popular, particularly near the tram line.” Also encouraging, he says, is that construction starts are picking up in the larger cities. “It’s a small increase but it’s an indication that investors see light at the end of the tunnel.”
Looking at the long picture, Burbano de Lara says he is optimistic. “There will be a recovery even though it will not be a quick one. All markets are cyclical and ours is too. My guess is that is that we will need five years beyond the end of the pandemic for a full recovery.”