Sunday, January 13, 2013

Canada's Influence on Development in Honduras

This blog looks at real estate related issues from a Canadian perspective.  It's a theme that will continue to play out this year while we look at a variety of topics such as: Belize's real property assessment program; large format development sites in BC; Appraisal pitfalls; title and ownership in Canada vs. the United States and more.  Our previous entry examined foreign ownership of land restrictions internationally and here in Canada, particularly with respect to agricultural land.  

This month we look south to Honduras where Canadians are having a marked effect on that country's development.  This entry has been kindly brought to us by Kimberley Player, an economic and real estate consultant currently calling Seattle home.  Kimberley's website is:

Canadians faced with mixed signals and varied investment prospects within domestic real estate markets have increasingly been looking outside their borders for international opportunities. In some cases, this demand is having a significant impact on landscapes in other countries. It might be surprising to some that a nation known as one of the world’s most peaceful has had considerable influence on the development of a country notorious for its drug trade and homicide rate, Honduras.


Canadian interest in Honduras predates recent headlines around corruption, enforcement issues and violence, which often belie the beautiful places and people found outside of a few big city hot spots. Roatan, one of the Islas de la Bahia off of Honduras’ north coast, was the initial draw. This idyllic island, best known for its world-class scuba diving, offered something that many more-established Caribbean destinations could not –inexpensive real estate and a lack of foreign ownership and development restrictions. It’s true that being somewhat off the beaten track came with its challenges, such as a less-than-optimal infrastructure and a bit of a “wild west” mentality, but in some ways, these quirks also served as attractions for more adventurous investors seeking authenticity and a unique environment, not to mention substantial appreciation prospects.

Over the last decade, Canadian tourism and real estate investment on Roatan has skyrocketed, driven in part by growth in cruise ship visits and flights. Sunwing, CanJet, and Air Transat all offer direct flights from Toronto and Montreal (in some cases, seasonally). Developers and vacation home buyers have jumped at the opportunity to invest in what has been advertised as an “undiscovered, relaxed, and inexpensive alternative to other Caribbean islands”. Canadian-operated resorts, restaurants, bars, and dive shops have also proliferated. This growth has spread to the Honduran mainland, most notably the north coast cities of La Ceiba, Trujillo and Tela along the “Emerald Coastline”. Additional flights to La Ceiba are fueling occupancy at Canadian-owned resorts and delivering a prospective buyer pool to the doors of real estate developers.

Looking forward, one of the most controversial examples of the potential for Canada to shape development in Honduras is its prospective role in the proposed Honduran “Charter City”.[1] In theory, Canada would provide a governance model and expertise in a variety of sectors within a specially designated zone – essentially a newly-created city – in Honduras. Whether this improbable experiment will materialize has yet to be determined; however, the fact that Canada has been held up as an ideal partner for the venture speaks to an already strong connection and degree of influence.

Why Honduras?

Why is it that Canadians are driving a large proportion of Honduras’ tourism and development? The country is certainly not devoid of Australians, Americans, Europeans and visitors from other countries. However, one doesn’t often see American flags flying off a floating bar or dive boat, or rousing games of cricket being played on the beach. Instead, “Hockey Night in Canada” is on TV in bars like Sundowners (Roatan) and Expatriates (La Ceiba). West End, Roatan has even hosted several road (or rather sand) hockey tournaments.

·       Perhaps most importantly, the Canadian economy and housing markets have remained relatively robust during the recent US recession. While the pool of potential US homeowners has dwindled in the face of the financial pain associated with overleveraged, speculative second (and third and fourth) home investments, a larger percentage of Canadians remain in the vacation home market. 

·       Although it’s true that a relatively low price point has driven interest from all nationalities, marketing of Honduran property in Canada has been particularly aggressive. RE/MAX Bay Islands claims that 50 additional RE/MAX agents are promoting Roatan’s Canadian-funded Oceano project across the Great White North. Canadian company Life Vision Properties holds events across the country (often during the cold winter months) and lures prospects with dreams of sun, sand and sea, as well as dramatic forecasted price gains for their Trujillo developments. Incredibly, over two-thirds of Life Vision’s buyers reportedly invest sight unseen, without ever setting foot in Honduras.

·       The seemingly contradictory draws of familiarity and adventure also play roles in drawing Canadians. On one hand, there’s a level of comfort associated with having Canadian company in a foreign land; on the other, Canadians seem more willing to travel to places that have an element of risk, perhaps because they are subject to fewer over-hyped State Department-type warnings than their American neighbours.

For Better or Worse?

As a Canadian who has spent a fair amount of time in Honduras, I’ve developed my own strong connection with this wonderful but often misunderstood nation. I also have mixed feelings about the larger influence of my home country in a foreign land. On one hand, the economic benefits of tourism and development are clear. Expanded employment opportunities for Hondurans have translated into improved education and healthcare, as well as other positive community impacts. There’s also no question that the provision of Canadian aid in the form of regulatory, infrastructure and public service expertise could help Honduras deal with their very real issues of weak governance, corruption, and poverty.

The caveat is that we need to make sure to export the best of Canada and not treat Honduras as an inexpensive vacation playground. Cultures, communities, landscapes, shorelines and reefs must be respected. The downside to limited ownership and development restrictions can be land rights conflicts, poor planning, and environmental damage. Life Vision Properties’ Trujillo projects are the subject of indigenous Garifuna land claims; land title issues and questionable environmental practices are also too-prevalent in projects where Canadians have been prime demand drivers.  Construction and expansion of cruise ship terminals in Roatan have not only damaged a reef that is the island’s main attraction, but violated the environmental provisions of international free trade agreements. Perhaps even more concerning are the effects of a growing social inequity problem – in the form of crime - which tourism can exacerbate.

A sound economic business case can be made for planning that facilitates smart, sustainable land use and development, something Canadians do relatively well at home. This expertise is sorely needed in developing countries like Honduras. Tourists and second home owners don’t have to be real estate experts; however, awareness and support of projects that encourage community cohesion; environmental standards and green building; local business retention and jobs; and equitable rights and services can ensure that their favourite vacation spots continue to be vibrant, healthy, beautiful places to visit and live.

Kimberley is an economic and real estate consultant with experience in strategic planning for developers, landowners, investors, public sector agencies, NGOs and corporations. She has an extensive market research background and expertise in development and feasibility analysis; demand forecasting; and market assessments. Her previous work experience includes assignments ranging from the benchmarking and optimization of real estate portfolios, to community and resort planning, and public-private strategies for economic growth. A member of various professional organizations including the Urban Land Institute, Kimberley has a Finance degree from the University of British Columbia and a Certificate in Sustainable Tourism Destination Management from The George Washington University.

Kimberley’s passion for travel has led to a strong interest in tourism and related development. Her goal is to ensure sustainable growth that celebrates local character while promoting holistic community planning.

[1] Fuller and Romer, Success and the City, How charter cities could transform the developing world (Macdonald-Laurier Institute, April 2012)

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