Projections

“El Diquis” Hydroelectric Dam in Costa Rica

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The Costanera Highway, The Caldera-San Jose Highway, The Cortez Hospital, The International Airport and The Diquis Hydroelectric Dam… it is easy to see that Costa Rica is serious about improving its infrastructure and securing a bright future.

Over the past decade, the dramatic increase in tourism and investment has sparked a bit of a power-struggle between proponents of economic growth and socio-environmental protection groups. In this case, the “power” is the proposed billion dollar hydroelectric project called “El Diquis” near Palmar in the Osa Peninsula. This isn’t recent news, but I believe it is worth mentioning as it will affect life in various ways in the southern Pacific zone of Costa Rica.

Hydroelectric power is BIG in Costa Rica.

The Zone Is HOT

This large-scale project, facilitated by I.C.E. (Instituto Costarricense de Electricidad), is calling for the construction of a dam on the Térraba River in the greater Boruca Canyon. The dam will create a lake equaling approximately 25,000 surface hectares (over 6 million acres), the largest of its kind in Central America.  By comparison, Lake Arenal is roughly 8,500 hectares.

This station will generate up to 630 megawatt units capable of providing over one million families with electricity!  This project is about Power, both electric and economic.  According to a Continuum report commissioned by the Costa Rican government,

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Costa Rica Real Estate – Have We Hit Bottom?

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Hitting the Costa Rica real estate market bottom

The ability to identify “bottom” is the hallmark of a successful investor. It is extremely difficult to do, which explains why so many of us speak in terms of “would’a, should’a ,could’a” when talking about our investment history.

So how can we identify the bottom in the market now?

NEW-Old Plan for the International Airport in Costa Rica

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The list of rumors regarding the southern zone Airport is long and varied— operational for international flights by 2010, moving to a new site in Sierpe, moving south closer to the border in a joint venture with the Panamanian Government… to name a few. The reason I am sharing this news story released by La Nacion a few days ago and forwarded by a reputable broker in the area is it actually sounds like the government has a (more) realistic plan.

A New-ish Strategy on Investing/Developing

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Costa Rica – 1999:

The year that I arrived here with my family. There just weren’t that many Gringos, or foreigners of any flavor really, in Costa Rica’s southern pacific zone. Many of the foreigners that were here shared a similar idea. Land was so cheap that you could buy several hectares (one hectare = 2.47 acres) of land, cut off a piece, and sell it for nearly what you put into the whole piece. I used to call this “The Costa Rican Formula”.

Costa Rica at Sunset
Highly Desirable Lifestyle

If you think back over any real estate cycle anywhere on planet earth, lets say San Francisco, or Denver, it started out with families owning large tracts of essentially valueless land.  Governments typically gave land away at this stage of the cycle.  Homesteading laws had some rather liberal restrictions that, if followed, enabled a family to take possession of the large tract of land.  These families then used the land to live on and sustain themselves.

Costa Rica real estate was in that part of the “the cycle” a surprisingly short while ago.

I say this to help establish the paradigm here.  We are early in the cycle.  The majority of my career has been selling raw, undeveloped land.  To this day there isn’t a large selection of houses, but there are getting to be more all the time.  We are simply heading into that phase of the cycle.

“The Costa Rican Formula” is the obvious way to develop and make money on land.  Buy a larger piece, cut it into smaller pieces and sell them.  It is so obvious in fact that it enjoys a very brief period of the real estate growth cycle.

For the purpose of this article, I’m not writing about big developers that buy and develop large parcels. I’m referring to your normal joe, back in the day, slopping into an 8-ish acre piece of land.  Then, they find out that they can cut off 3 of those 8 acres and bahdah-bing bahdah-boom, they own their 5 remaining acres for free.

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Did Taxes & Tourism Blow Costa Rica Real Estate Out?

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Costa Rica Real Estate Listings

I just received an e-mail from a reader that shamed me into sitting right down and writing.

I have read your face book page and articles on the tax issue there.

I had been planning to take a trip in March in the hopes to travel to Domincal and Uvita nd look at some land that over looks (has view of) the playa. But with all this discussion of election and no tourism and the tricky tax factor it sort of puts a damper on it.  Was this a major blow to the real estate and tourism market, and did it blow you out?

I’m sorry but I’m not aware of the negative effect that the election could have on a land purchase in Costa Rica so I’m not able to address that.

As for tourism – well now that’s an interesting topic.

Tourism has been as hot here over this last holiday season as I have ever seen.  With the new road from Dominical to Quepos, I think that we’re really in for it here.  I understand that the status of tourism is currently anybody’s guess.  Around here it feels like we are in a growth mode. Granted, I haven’t read a lot of media recently and I don’t have a TV, so as a news source I’m limited to what I see and feel.

Over the holidays Uvita was caught by surprise.  The grocery shelves were bare and we spoke with people everyday looking for a place to stay.  I think that everyone found a bed and it felt like one big party around here. I think that it is notable that the beer supply seemed to hold despite what appeared to be a gargantuan demand.

Although the crowds have left, the festive feel continues with a good strong tourist presence.  So, without reading an article to the contrary, I’d say that tourism is alive and well in Uvita and Dominical Costa Rica, and that the prospects for the future are bright, especially with the two new segments of road making the drive from San Jose to Dominical a 2 hour and 40 minute affair now, instead of the former 4+ hours and some of that on teeth loosening dirt roads.

I have not seen an article written from your blog or website in February on your website so I want to know if you are still in business down there?

Well, I thank you for getting me off of my butt to get this article posted.  I sure don’t want to give the impression that we’re out of business.  Our lack of posting is a testament to our being busy.  Rod and I have been doing quite a bit of real estate business.  We’ve done some deals, and more are coming our way.  All of the agencies are reporting the same, some with best ever numbers – (I heard this last part through a third party, but I hope to confirm it shortly.)

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2009: In The Rearview Mirror

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Rod & I have decided to write a few words about the year just past. We did so without consulting each other or giving any clues regarding what we’ve written.

First off is Rod

If you subscribe to the idea that life is a series of ups and downs, then last year was a harsh reminder of how challenging the “downs” can be.

  • “Unemployment soars to highest level in 16 years.” – New York Times
  • “U.S. Foreclosures to Reach Record 3.9 Million in 2009.” – Bloomberg.com
  • “New car sales a ‘disaster,’ says Sergio Marchionne, CEO of Chrysler/Fiat.” – NY Daily News

While people were losing their jobs and houses in record numbers, they still had the time and interest to search for Britney Spears and WWE (World Wrestling Entertainment, which is fake wrestling, right?) making them the top two search terms on Yahoo! for 2009.

Although I have no idea what Britney was up to in 2009, I do know that most of us here in Costa Rica felt the impact of this economic downturn.  After a decent start to sales in January and February, most real estate companies saw offers dry up during the following 8 months.

Like many people around the world, the Guys In The Zone shifted gears to “beans & rice mode” (luckily, we both like beans and rice). We tightened up the expenditures and found new streams of income. [Ben deserves some kudos here for his quick mastery of the hard money lending business.  He, (leveraging his experience, contacts, and bilingual-ness) saved more than a few local families from economic disaster.  This lending experience taught us that putting good food on the table is important, but to literally save someone’s table (and house it sits in) from foreclosure is a genuinely rewarding experience.] While we didn’t sell any property during the middle of the year, we did put a lot of time and energy into new listings, our websites, and the Talk Show feature which we will continue to work on in 2010.  Ben also started writing articles for Montana al Mar, a new monthly magazine focused on health, sustainability, and community.

The old adage “When you love what you do, the money will follow” proved true in 2009.  The end of the year found activity picking up noticeably.  Three excellent deals

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Kicking Tires in Paradise

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We’ve had a week full of working with buyer-type clients, but they definitely fit into what the “Man Says There’s No Market here” article says below.  I’ll call them the Schmuggerdoos.  They are intent on buying some land, they came here to buy land, they found land that will suit their needs and budget, but that extra spark of “I think I’ll buy this property now” is lacking. They are going back home so that they can return in a few months, maybe, and buy something then. It’s been a great week though.  Rod & I enjoyed getting to know the Schmuggerdoos quite a bit and hope they realize their dream of moving to Costa Rica.  We also are enjoying the ever expanding cooperation between the real estate agencies here.  It is proving to be a real value-add for both buyers & sellers, and it’s improving the quality of life among us real estate professionals. Prior to the Schmuggerdoo’s arrival I had sent their criteria to the other agencies in the area, who responded by sending links to listings on their websites that fit the criteria.  Here is their criteria:

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The Man Said – There Is No Real Estate Market Here

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Costa Rica real estate during the recession

The effect of the statement on me has been: enlightenment.  Interesting, how a single expression out of an entire conversation can have such an effect.  The rest of the conversation simply served to establish the credibility of the man, and that two people, coming from two very different points of view, can arrive at the same answer to the questions:

  1. What’s going on in Costa Rica real estate?
  2. Where are we headed?

“The man”, (for the purpose of this article I’ll call him Mr. Steenburf ) has a property listed with me – quite a nice one actually.

Mr. Steenburf appeared during last weeks Farmer’s Market in Uvita. He migrates between the US and Costa Rica.  So when we bumped into each other at a booth selling car safety kits, we started to converse.

Steenburf: “How are things going”? This is perhaps the number one question on all peoples mind when they first start talking with one of us real estate people.

“How are things going”?

Vaughn: “Slow.  We’re not dead, but we’re slow”.

Steenburf: “There is no real estate market” he said.  ZING! He’s talking about my market, and he’s saying that there’s no market.

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