Costa Rica Construction – Coastal projects slow

Coastal projects lose momentum due to lack of investment. Even though Costa Rica real estate growth is generally good, certain areas are beginning to feel the consequences of the economic crisis the United States is going through.

A situation like this affects mainly the coastal areas, the focus being the province of Guanacaste, a location that in the last few years has had a huge economic boost due to foreign investment. However, investment today appears to have declined significantly.

According to data provided by the Cámara Costarricense de Construcción (Costa Rican Chamber of Construction), since the first half of 2007 to the present day, the province of Guanacaste has only grown by 0.1%, whereas San José, Alajuela and Cartago grew by more than 30%.

Also, this phenomenon has already reached the Central Pacific area where new construction for the first six months of this year has decreased by 15% compared to the first six moths of 2007.

In these areas a few multimillion dollar projects have been put on hold due to lack of investment from their developers, as well as the uncertainty of the international real estate market, like the St. Regis Resort at Playa Coyol de Puntarenas, designed by Zürcher Arquitectos.

This project was supposed to be finished this year. It is planned to rise over an area of 100 hectares and would have 130 rooms (in the hotel section), as well as 49 condominiums, 42 private villas and nine houses in the residential area, according to project plans.

Ronald Zürcher, owner and architect of the mentioned construction company, affirmed that the project’s progress was on hold and that the developers still don’t know when they will be able to continue the construction. Up until now, they have had “little progress”.

“Velocity of investment has clearly decreased, but I feel that people are scared more than they need to. In other countries where we also have projects going on, everybody keeps pushing forward”, he said.

The deceleration was confirmed by the Executive Director of the Costa Rican Chamber of Construction, Randall Murillo.

“We cannot hide that we are facing a very complex situation, but we also cannot pretend that we will stay below the high rates of growth of past years, the problem arises because some construction permits and the keys to credit have been refused, so the rhythm decreases”, exposed Murillo.

It was announced on July 22nd 2008 the Banco Nacional said it would start to dose its loans.

Economist Alberto Franco assured that even if the recent frivolity of the North American economy warms up soon, the credit conditions will not, given that banks will continue a more restrictive position due to the massive losses they’ve had.

It is because of this reason that the specialist deduced that “developers should re-think the original project (possibly with a re-design) or even assume a higher risk, that is to say, stick their hand into their own pocket, because banks will not”.

Affected. With this situation, the principal victims are definitely heavily financed investors, that is to say those who do not have their capital at immediate disposal, and need to sell the project beforehand, so they can apply that money in order to develop the project (this system is known as pre-sale).

This is because if investors do not have the money to develop a project, much less will the clients have to buy a house or initiate the cycle. Without demand there can be no intention of construction.

“Another thing that we’ve noted is that many developers are asking us to separate the budgets of the hotel area, from the residential area, because this is being asked by their financial entities, given that they will not finance the residential area”, added Zürcher.

A few days ago, the president of the Federal Reserve of the United States, (FED), Ben Bernanke, admitted that that country is facing important difficulties like the real estate crisis, the weakened labor market and he ever rising price of oil, foods and other raw materials, economic growth is clearly affected. This can be reduced to problems liquidating capital (little offer, and higher demand of dollars), given that people are now preferring to save money.

Finally, this is reflected in a credit restriction (banks will not give out loans), which will not let people invest, to build or even buying real estate property. Tourism (hotels), on the other hand, is not very affected.

Even so, there are those who continue to see a “half full” glass, given that they rest assured that when the general panorama stabilizes, commerce will be reactivated with a greater dynamic.

“This can be utilized as a good strategy to prepare the structural product much better, and commercially speaking, when the crisis is over and the market is re-stablished, the sales will be much higher”, concluded Zürcher.

Nonetheless, Franco qualified that notion as “pretty aggressive and risky, because even though they have a certain probability of success, during times like these companies prefer to be cautious”.

Our thanks to David Goldberg J. and our friends at La Nación – Costa Rica’s largest Spanish circulation newspaper for their permission use this article.

Andrew Makarik

to@welovecostarica.com

Andrew 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.