Real Estate Investing in Manuel Antonio. January 2011 market update.
As the president of the USA gets ready to give his State of the Union address to let the world know how the first two years of his term went, I thought it was a timely moment to reflect on the state of our market here in the Manuel Antonio area after what have been some of the more turbulent years on record.
The founder of this site Scott Oliver suggested it was time to give his readers an update about the Manuel Antonio real estate market so here are my thoughts:
- What sort of decline/increase have you see in the number of potential buyers who have contacted you in the last six months in comparison to the previous year?
Compared to 2009 the overall number of leads and inquiries which we are seeing today and a firm is considerably higher. 2009 was a time where there was very little movement in any sector of the market as there was so much volatility in USA and other world economies, which combined with our micro market in Manuel Antonio put most of our sellers and buyers into a holding pattern. The Manuel Antonio market is one which has traditionally been largely cash driven, solid supply and demand dynamic and very low holding costs.
While sellers in many parts of the world were dropping prices dramatically in 09, here in Manuel Antonio many of the sellers were holding on hoping that the markets would turn due to the fact that their properties oftentimes still cash flowed nicely or even in the worst case scenarios are incredibly inexpensive to hold, led to scenarios where our market correction took longer to take hold.
Buyers from the USA, Canada, Europe and Central Valley looking to take advantage of the financial conditions to pick up fantastic deals were oftentimes surprised that values here had remained strong.
As the crisis lingered and still does, 2010, particular the last two quarters, brought many sellers to the reality that if they wanted to move properties in realistic time frames pricing had to be adjusted. With those adjustments and the opportunity to secure an address in this very unique location, our inquiries and sales increased immediately.
Buyers are now fully aware that there simply has not and likely will not be a better time to secure a fantastic deal on properties here in the area and in most areas.
This combined with an increased number of investors looking to diversify assets out of the USA and the volatile stock markets, or out of low yielding IRA or savings accounts are real driving forces in the amount of inquiries we are seeing.
- How has the number of sales declined or risen in the last six months in comparison to the previous year?
Sales in the last 6 months in total volume are nearly double from where we were during the same time period last year. That said, the first 6 months of 2010 were still quite slow, so over the course of the entire year, our total volume is about the same as in the past.
I think that despite the bad market, which has definitely pushed the entire volume of sales of the country down significantly, the challenging times have also forced a lot of marginal Realtors and developers out of the market place.
As a firm dedicated to honest and transparent service, we at times suffered financially during the boom days by encouraging our clients to be deliberate in their research rather than employing the hard sales approach. Those hard salesman and teams who say “anything” to close a transaction are being forced out of the business as their promises were not sustainable and buyers are much more savvy now in their analysis.
In short, while overall volume is down, our market share has improved in large part due to clients responding to finding professionals here to guide them rather than sell them.
- What is the easiest real estate sale for you in your area right now?
There are still and I think will continue to be for the next 6 months, sellers who have held out as long as they can and NEED or MUST sell their properties in compressed timelines and are offering amazing deals.
We have sold several properties at or below replacement values in recent months and have several deals available now which meet those same parameters.
Buyers with cash can quite source deals that were not even imaginable, so the easiest sales are those sellers who simply can’t wait and are willing to get out what they can.. not what they might want.
- Where do land prices stand now in your area in comparison with this time last year?
Land prices and raw land sales are arguably the most challenging part of our market. In the years from 2000-2007 upwards of 75% of our coastal business was on raw land sales. This is especially true in the Manuel Antonio area due to the fact that there has been such little vertical development here in comparison to areas like Jaco and Guanacaste.
The premium which buyers were having to pay to purchase a finished home or condo was so great, that the value proposition of buying raw land to build, albeit on spec or for personal or rental use was simply too lucrative to pass up. With housing prices still on the decline, making an ideal market for house and condo buyers, the incentive to buy land to build has dwindled significantly.
Selling raw land requires very aggressive pricing and buyers in the raw land market can secure amazing deals as the supply and demand dynamic has never been tilted farther in their favor.
- Where do finished home/condo prices stand now in your area in comparison with this time last year?
Pricing for homes and condos varies greatly and it has more to do with the seller, their financial solvency and the income production of the property (if any) rather than the market.
As you will see when you browse the internet, pricing ranges from wildly overpriced to FIRESALES and everything in between. Giving a state of where pricing is can be challenging, what I can say is that actual sales which are closing on properties tend to be at prices which are 20%-50% off what the pricing was in 2008. Some sellers have asking prices which already reflect these huge reductions and their properties sell, and oftentimes quite quickly.
We have sold three homes here in the past 90 days which were not on the market for more than 60 days! Other homes retain higher asking prices, but allow buyers to purchase a significant discounts.
Make sure to work closely with your broker and agent to understand the market and how values line up from unit to unit. Every project, area and residence is different and with so much variance out there and the lack of a MLS providing an easy resource, selecting an agent who can not only tell you that something is a great deal, but show you how and why is crucial.
- What sort of real estate product is currently available in your area? What are you lacking? Is there an oversupply of any particular product?
Currently, there is a solid inventory of luxury homes, luxury condos and villas on the market. For buyers with a budget of $750,000 and up, there is ample product with first class finishes, luxury amenities and views.
This sector of the market, with a handful of exceptions, is largely controlled by owners or developers who are renting the units in lucrative programs and have no debt on the projects so despite the downturn in real estate values, many of these particular owners have not made any significant pricing reductions as their investments are still producing solid rental returns.
We are still seeing sales in this market when those sellers are willing to give good deals as it is not uncommon for these luxury homes and condos to produce 5%-10% returns on the purchase price.
At a time when stocks are so volatile, interest rates so low, and rents in the USA at all time lows, this kind of cash on cash return is very interesting for investors with the liquidity at this price point.
If there is a lack of product, it is an abundance of high quality finished homes or condos priced from $250,000-$500,000. Virtually every nice home or villa in this price point has been sold in the past 4 months and when new ones are listed they are of prime interest.
- Where are the best real estate investment opportunities right now in your area?
In my professional opinion finding the best opportunities is about knowing what your goals are for investing and lifestyle.
Telling a buyer or audience about the “best” opportunity without regards for their personal vision, goals, budget and investment strategy can lead to some of the fundamental mistakes in real estate investing.
For investors with short term cash on cash expectations, we have some very solid homes, hotels, and commercial properties which can offer investors real returns of 6%-10% per year on their investment.
Due to the strong financial performance of these properties, they are not often the firesale deals in terms of price, (though the market is still pushing their prices to the lowest points in years) they are some of the best “opportunities” for investors with short and mid term cash return as a goal.
For long term investors, we have some incredible deals on properties which can be bought well below their actual replacement costs. These properties usually are not performing as rentals and might need some minor repairs and remodel, but the equity upside for someone with a longer term investment goal in mind is unbelievable.
It is quite clearly the BEST TIME IN YEARS to be an BUYER here in our area and unlike times past where Realtors, developers and sellers were pushing buyers to move quickly or miss their chance, now is the time to work with diligent professionals, outline your goals and budget clearly and take advantage of this buyers market.
- How do you feel the real estate market will perform in your area for the remainder of 2011?
I think that the remainder of this year is going to see more of what we saw in the last two quarters of 2010. Buyers are there, and are ready to spend. That said, they want, demand and deserve great deals for bringing liquidity to the market.
Sellers who have not and will not come to terms with the reality that the boom time prices of 2005-2007 are not coming back soon, are going to be keeping their properties for some time.
That said, unlike in 2009 when even owners who were drastically reducing their prices and not selling, today, sellers who find the right value propositions for buyers move their land, home or condos quickly. Savvy buyers understand this and also understand that though properties likely will not be flipped or appreciating at the reckless pace of years past, purchasing at what is the bottom of the market is a great investment.
As a broker, though we don’t enjoy telling sellers the sobering realities of pricing, we are acutely aware of what it takes to make sales take place. You do not have to give your property away as there is real value and potential with Buyers can and do see, but it is a time for smart buyers not for sellers and my prediction for 2011 is that we see an increased volume as more and more sellers come to grips with the market realities, price their properties to move and buyers take advantage.
Real Estate Investing in Manuel Antonio. January 2011 market update.
Article/Property ID Number 2873
[custom_script adID=188]
Andrew Makarik
to@welovecostarica.comAndrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.
Are you into beautiful Costa Rica?
All interesting things you want to know about Costa Rica are right here in our newsletter! Enter your email and press "subscribe" button.
