May 14, 2016

The Vicious Cycle of Rental Inflation in Cuenca Ecuador

The ‘average’ foreigner, will google “Ecuador Inflation” and think he’s hit the jackpot.  “Aha”, he/she will say, “look here, inflation between 2% and 10%.  That doesn’t sound so bad”. 

Well those of us that have graduated to above average, just because we’ve been thinking independently for many years, already know that statistics, well, don’t show the complete picture.


2006 thru 2016 Inflation Chart for the COUNTRY of Ecuador

Here’s why:
 

The above chart shows ALL OF ECUADOR. Yes there are many places within Ecuador that are completely devoid of foreigners.  No Gringos, no Europeans, no Australians, no developed western world citizens.
 

And if a person ventures out into any of these virgin areas he/she will be first surprised, then astonished and amazed. Wow, I can still rent a house for $250 here. And $300 gets me a large, no make that huge family sized house.  According to these areas the inflation rate is probably 2% or less.
 

But but but…there are no westerners there.  You’re all alone with the Ecuadorians.  No gringo night, gringo meetings, gringo meetups, gringo bars, gringo restaurants, bi-lingual facilitators (they’re also gringos), bi-lingual real estate agents, etc. etc. you get the picture. No one here is comparing any prices to “back home”. Everyone here knows what the local rate is because that’s all there is.
 

Now, in 2007 International Living and others, started pumping the best city to retire in the world.  Note, they did not say “the best country in the world” to retire to.  They did not pick “Ecuador”.  They chose, TAH DAH…CUENCA.  That right there throws your chart out of whack.
 

In contrast to the foreigner free areas of Ecuador, Cuenca is inundated with foreigners.  So much so, that International Living apparently decided to change the flow and name LOJA the best city to retire to.  Someone decided there were too many foreigners already in Cuenca.
 

DISPELLING THE 1% MYTH....Again
 

We wrote about the actual figures of foreigners in Cuenca here. (please read that post and then come back to this article.)

I don’t think anything needs to be added, except that, as the song goes: One bad apple spoils the whole bunch.  Not trying to say foreigners are bad, not at all.  Just making the point that it’s not the number that matters, it’s the result of who they are and what and how they do things.
 

Hence the comparison above between foreigner infested areas like Cuenca, and let’s call the other areas, virgin areas. I have to ask:  why would anyone waste their time defending “gringos”. As if they’re on the witness stand?  Figures don’t lie but liars figure.  

Why is it that there seems to be a persistent attempt at dispelling all the facts by simple statements like, gringos are not to blame; or its only 1% it can’t be so.  They say, "You’re wrong".  It seems that there are some that have a vested interest in doing this.  And low and behold, they’re usually in the real estate industry.  They’re pretty easy to spot.  Moving on…moving on...moving on...

Some quick math:
Local rental price in 2011= $250-$300
(we’re still paying that in 2016)
Gringo (Furnished) prices 2011= $600-$800 and up to $1000


Local rental prices in 2016= $500-$700
(A 100% increase or more in five years, which translates to 20% per year rental inflation from local pricing.)
 

Gringo (Furnished) rental prices 2016= $700-$1400
There are lower prices but usually for very small apartments

The “average” gringo price in 2011 was $800 (these figures are approximate taken by adding the lower and highest listed above and dividing by two)
 

The “average gringo price in 2016 is $1050.
 

An increase of $250 which is 31%.  Divided over five years, is roughly 6% per year. So you see, statistics tell a picture, but…not the whole story, see?  Even though prices have receded recently about 5%-10%, that’s a minuscule amount from the lofty prices foreigners were/are naively paying.
 

Did you know it was only 5 years ago (2011) when the N. American could come to Ecuador and rent a nice three or four bedroom home with a yard for just $250 dollars!  Yes, with a small yard! In fact this is what we paid and now pay for a one story (yes ones story) 3-bed 3-bath, detached home, plus office, dining, living, kitchen, patio and yard, views of Mountains and river very near and we still pay $250. Cuenca’s rents (value comparisons) have gone past the double mark….and we’re shaking our heads.

***disclaimer***the above figures are approximates and are listed for the purpose of conveying the idea of the article. There are many variables that go into the price of a rental including but not limited to, whether bldg. has an elevator, square footage, foreign owners or local owners, etc. etc.  We find that houses are more expensive than apartments.

Until we write again, take a look at these educational articles to help you get an idea, before you get here, of what to expect and then be prepared for life abroad! These articles could apply to living anywhere abroad, not just Ecuador. 

We're an Expat Family of Five, Living Frugal, Healthy and Happy Abroad. We live in Cuenca, Ecuador and travel the Ecuador coast whenever we get a chance.  Come along and enjoy some of our experiences with us!

2 comments:

  1. Hi , as a native cuencano and some one that built a house a few years ago (2010) i have to say that construction prices are the ones to blame for the rise on rent. Back in that year the Cost for a Square meter was $400 today it is $620 also the Cost of urban land it Almost doubled the 2009 price. So any investor had to rise the rent of apartments or houses
    Francisco

    ReplyDelete
  2. Thank you Francisco. Your comment is consistent with the article. Constructions costs up 55% in five years is an 11% yearly inflation which is higher than the average inflation logged for Ecuador over a five year period. However rental inflation has outpaced construction costs by a 100% margin, starting from locally priced rents not gringo rents.

    ReplyDelete

Your comments are welcome. Talk to us!

Note: Only a member of this blog may post a comment.

Powered by FeedBurner