The big question of the day seems to be, is Costa Rica real estate being affected by the topsy turvy current global economy? In a word: yes.
In a previous article dated December of 2007, (click here to read) I had simplified the possible affect of the economic downturn in the States. I wrote that the affect can be negative, neutral, or positive. My conclusion at that time was that the affect had been positive. I’m modifying (please note my choice of word there) my position now that we’ve been in “the change” for some time. Please note that I’m not changing from my position, but as you will see, I am detailing out the affect of the global changes. I am still of the mind that, overall, the change is in the “positive” column.
The Change: The economy was amazing for a long time in the States. There were some bad lending practices that came out of that economic climate that have resulted in some pretty devastating events there, not the least of which has been some huge, multi-billion dollar aid packages to salvage long standing, pillar financial institutions there. Money, once so readily available to all, is now hard to come by in the U.S.
The dollar is weak. All one of us Gringos has to do is travel to Europe to really grasp the impact of this. Conversely, the Euro, Sterling, and the Canadian dollar are strong. Oddly enough, even the Costa Rican colon is gaining ground against the dollar.
Our real estate market here in Costa Rica’s southern zone has been, for the most part, cash on the barrel head. Our single family lot buyers over the last years have been made up of buyers that have the money on hand that they need to acquire their land. Oftentimes this money came to them by way of an equity line. The equity buyers are pretty much gone. So, there is a negative affect in that we have lost what was once a rather large stream of ready buyers.
The compensation of this change, effectively offsetting the negative affect of the absent equity buyer is: more Canadians, Europeans, and yes, even Costa Rican’s inquiring into available land here in the zone. We are busy here, but things have definitely changed, and there are opportunities to be had, and this is largely due to a new kind of seller.
I get asked if prices in Costa Rica are coming down. The short answer is no. The long answer is this article.
The changes that we are talking about here are resulting in some of these properties coming available. So one of the changes that we are feeling here in real estate is that the quality of our inventory is improving. I can’t say yet that prices are any lower than where they have been in recent history, but the selection is the best I’ve seen since the land-grab of 2004 and 2005. The reason is that distressed sellers are selling what they have here in Costa Rica, to preserve what they have in the States. These are sellers that never intended to sell their property, or they wanted to wait until the felt the prices had topped out, but now are willing to do so to keep what they have up in the States, and to hopefully be able to ride out the storm there.
There is a glut of lots in Costa Rica’s southern zone. Not so much in the Dominical to Uvita zone. This is where the mountains come down to the sea, and the ocean views are spectacular. We have some lots in this zone that feature views that touch the soul. These are available for a price, and I don’t think that we’ll be seeing those prices coming down any time soon. They are rare and desirable.
In my office in Uvita, we are approached on a daily basis by people that want to list their property for sale with us. Due to the lack of an MLS here, this can be a formidable task for these sellers. (Click here for an article on how to sell a property in Costa Rica) . We are getting a lot more “selective” in taking these listings on.
Over the last 5 years, there has been some pretty amazing price increases on land here. Realistically we can talk about 20-30% annual increases. Many of the sellers have this in mind when they decide to sell. I think that we are early enough in this new phase of the cycle that we are still seeing sellers that project what their property may be worth in a year, and ask that for it so as to optimize their take on the sale. So we aren’t seeing that many “deals”. But I think that understanding the market and what’s going on can yield some decent results now.
We are now able to work more with our sellers in establishing a realistic price so that the property will sell, and the sellers are listening.