Sunday, November 10, 2013

Drug Money Estates

This column finds me in Central America, looking at property in Columbia and Panama. Well, not exactly looking to purchase, but more accurately “just looking”. I can report with some accuracy that one million dollars US will buy a pretty nice property in Cartegenia, and a smaller amount will buy a smaller property. Columbia is a country of "haves" and "have nots". Most of the residents fall into that latter class, but the cartels and some of the wealthy families most certainly are haves. Cartagenia is a city in Columbia, and is a city where the average income is around $500/month. So as it turns out, we were romancing the stone in the Old City, when it became pretty obvious that there is a new residential area, and it's a "gold coast" of spectacular condos. How could this city afford to build these properties? Where is the money coming from? Well, it's all guesswork, but here goes: One of the topics I follow is the cycle of real estate. The cyclical concept is really a prediction by those of us who live the market every day what will happen next...based on the concept that all civilization rests on change. But the real estate cycle, which has it's trigger points based on the ups and downs of the buyers and sellers can be modified when large quantities of cash need a home. And so it is in Cartegenia where large amounts of cash have found their way into the real estate market, and an Gold Coast of tall buildings has literally sprouted up out of the sand along a stretch of beach called Boca Grande. (Here they pronounce it Gran-day, opposed to the more nasal New York-ish pronunciation GRAND that we have come to accept in Englewood.) Syndicates in Cartegenia, (or cartels if you are more comfortable with that term), have found that they can spend the extra money they may simply have kicking around by building condominiums, and then waiting for buyers to find them. So today there are a multitude of beautiful white and largely empty buildings along a gorgeous stretch of Atlantic Ocean beach. I was not able to visit these condos in person, but my source here was our guide—a man of some 55 years and who was born and raised in Cartegenia. Building residences for people who are not ready to buy does fly in the face of reason and modifies the real estate cycle so that what we expect to happen simply does not, and what we don't expect seems to when we don't think it should. OK, so the message here is our crystal ball is a little cloudy—I would have expected a smallish building boom to be getting underway, but there are hundreds of condos all ready for buyers as I write this. Maybe HDTV will have a segment on these lovely buildings. A few months back I wrote that in the cycle of real estate there is a Seller’s Boom and then there is a Buyer’s Boom. Think of a seesaw, at some point in time sellers can pretty well set their prices and terms, and buyers just have to agree if they want to purchase a property; other times buyers are in control, and sellers who want to sell have to cave in to the buyers wants and desires. The beginning of the buyer’s market cycle will be quite hazy to all involved. As sales volume stagnates, sales prices erode, sellers become desperate and then lower prices to attract the few buyers left in the market—and then, not finding buyers, they default or abandon the property. The increase in inventory and the lower prices attract buyers and a buyer's market in underway. In a sellers market, the primary driver is buyer greed and optimism. A buyer's desire to get a good deal now before the market prices climb to a new record high. Sensing the “feeding frenzy” sellers react with a quick upward value trend, which normally will eclipse the previous value trend, and new record sales are recorded. But when there is an artificial building boom, all bets are off, and the cycle goes all askew. Time will tell what will happen here, but I suggest there will be some wonderful opportunities for buyers who want to live in this island paradise. Dane Hahn is a real estate professional serving Sarasota and Charlotte counties. You can reach him at 941-681-0312 or by email at See him on the web at

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