Real Estate Downturn in Costa Rica

Perhaps the reason you have seen nothing written about a difficult market in Costa Rica is because it is not a difficult market. The Central Pacific area continues to be strong with many developments still selling a large percentage of their inventory before they even break ground. From what I have read and the people I have talked to, the Central Valley area, especially the Escazu and Santa Ana areas continue to be strong as well. While it is true that prices are not going up 50% to 100% in 6 to 12 months as they did a couple of years ago, the market still is experiencing at least a 10% to 20% increase over that same period. The market increase is perhaps more realistic now, but definitely is not difficult. I would disagree with the blanket statement that the US market is in the toilet as well. While there are still many areas that have leveled off and prices in some areas have come down, there are still many areas that are still experiencing strong sales. On a recent trip to California I recieved a real estate flyer in the mail listing 20 homes that had recently sold in that area. 75% of the homes sold for more than the asking price. There is still an incredible amount of disposible income that many people have and a good portion of that is still finding it’s way into Costa Rica. When you have a feeding frenzy during a “seller’s” market, anyone can sell real estate. The majority of the complaints I hear about the market here is from people that are finding it difficult to unload a crummy piece of property that they over paid for 2 years ago expecting to double their money. They refuse to invest anything in improving the property or invest anything in marketing it properly.

First, it is absolutely not the case that “real estate cannot be financed in Costa Rica”. Quite the opposite is true. Every bank operating here does, in fact, offer mortgage financing and some U.S. lenders are beginning to also. So financining is available.

Second, it’s important to put the two real estate markets in perspective. The U.S. market size is over 300 million people and fifty states (many quite large). The Costa Rican market is some 4 million people (1/75th the size of the U.S. market) and the physical size of the state of Vermont. Writers above are absolutely correct that, while the overall U.S. real estate market may be on a serious downturn, there are still plenty of homeowners who can sell their properties, gain access to their equity, and move it into this very small arena. And plenty more have access to other wealth. Has anyone checked the Dow Industrial Average’s performance for the past year?

Fact is, it doesn’t matter to buyers or sellers what the market in either area is doing. The only thing that matters to you or to me is what’s happening to you or to me. If I have a property to sell, I need only one buyer. If I’m buying, I need only one property that fits my needs. The market is irrelevant on an individual level.

When we sold our home in the U.S. there were competitive listings that had been on the market for over a year. Ours sold in seventeen days because we had the house the buyer wanted and he had the money. It didn’t matter that the stock market or the real estate market was down that week.

Costa Rica’s real estate market should continue to be strong for a long time because a relatively few Americans, Canadians and Europeans can make a big splash in this very small pond. Even in the worst of times, somebody has money.

I echo what David has said, the real estate market has weakened in portions of the US, but as a broker in Manhattan I can tell you it is still on fire. Why? Because the US economy is good, interest rates cheap and the desire to own is stronger than the desire to rent. And of the millions of Americans that do own homes many have for 10 years or more and many boomers for 20 or more, so there is plenty of equity to tap into at very attractive rates. We don’t have the “perfect storm” effect quite yet in the US and I don’t have a crystal ball but as many wiser people have pointed out; “Markets go up and markets go down” and that has not lead to the end of the world.

I forgot about the increasing maturity of the banking and financing system in CR. That is a huge factor as far as real estate appreciation is concerned. When some the other factors are taken in to consideration as well (increasing boomer retirement money, multiple nationalities in the market and limited size of CR, it seems probable that CR real estate
values will grow at a positive pace. This would be especially positive relative to U.S. geography right now. In the absence of good market studies, I am encouraged to hear the anecdotal evidence from Scott about values west of San Jose.
Whether it is speculation or investment, one is usually putting money into a guess. ANY information is always welcome.