Projections

State of the Market June 09

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The e-mail copied below is representative of several such that we have recently received asking about the condition of the Costa Rica real estate market. This one was sent to me, Ben, and I decided to write my own answers to Deb’s questions, I have asked Rod to do the same, without discussing it between us, to see what we came up with from our own respective points of view.

Hi Ben and Rod!!
Summer has arrived in the northlands, vacations are beginning. Would love to hear from you with impressions on the season past and the coming summer–generally your impressions of the market in Costa Rica and what activity levels you might be anticipating for the summer season and following high season. (Besides I am dying to get something other than spam at this email address!!)

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Thanks, in advance, for taking the time to fill me in on your thoughts.
Deb A

It is time for another episode of the Guys In the Zone Costa Rica Real Estate “State of the Market” report.

Impressions on the past season?
Rod Says: Initially, I wanted to write, “the past season has been slow.” However, this is only true with regard to the number of buyers, offers, and deals closed. Those numbers have been down; however, due to the economy, there have been a record number of sellers who have approached us to list their property. I estimate prices have come down between 25-50% across the board and generally speaking only those properties that are priced to sell (i.e.- “firesale” meaning 40% decrease or more) have been moving. Unless they need the money, I would encourage most sellers to hold their property for at least a year…. even if sellers have a rare and unique piece of property (a nice ocean view or creek nearby doesn’t qualify as unique).
Ben Says: I’d characterize the past season as being busy with sellers – working more cooperatively with other real estate agencies – and a smattering of buyers coming through.

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The Question on Everbody’s Mind

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How would you describe the current “crisis” impact on the local economy and on Costa Rica real-estate in general?

Yesterday I made the trip up to San Isidro de el General to take care of some things. I was to meet Rod and Lindsay for lunch at “Mexico Lindo”, an amazing genuine Mexican food restaurant there, run by a bona fide Mexican Armando and his lovely wife. I have known them for years and used to frequent their little taco hole in one of the off-the-beaten-path streets of San Isidro years ago. Now they are located right on the central square and my, how things have changed since those days of long ago. I don’t think that there was a single empty table there, and at least 50% of what I heard was English – my, how things have changed.

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Running the gauntlet of greetings as I made my way back to Rod and Lindsay, I looked up to see a couple who are particularly good friends, but that I have not seen for awhile. I greeted them with something like “how are you guys doing in this new world in which we live?” (reference to the economy), to which they responded, “what is going on?”. Working in real estate provides one with an interesting position in life. I didn’t realize it for a long time, but it is now clearer than ever. This industry is at the very foundation of life. We all need to live, play, and work somewhere. I received the above question in an e-mail from one of my clients just yesterday, so I heard the question a total of 2 times over the course of the day, and that wasn’t an unusual day.

Here’s what I think

We have lost a lot of buyers due to the economic crisis. We are gaining some buyers that we wouldn’t have otherwise had. It may look something like the graphic there to the left. It means a slow down for us here in Costa Rica, but not death. I have a client/friend/partner that is a high output kinda guy. I’ll call him Steve, a lawyer in Florida. He purchased a piece of land from me 3ish years ago. Subsequent visits have given us the opportunity to forge a friendship. Steve had a plan.

  • Sell his beach condo that he bought for investment
  • Sell his main home
  • Let the lease on his Porsche run out
  • Finish up obligations at the firm
  • Set up some means of income in Costa Rica
  • Move to Costa Rica

Steve LOVES Costa Rica. This is home to him. Every visit here confirms it to him. He just needed to get the ducks all lined up in a neat row prior to making the move. This is a common scenario. Life was fine. Plans were being made. Then, it all changed.

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A Brief History of Real Estate in The Zone

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“The Zone” is made up of a stretch of coastline starting from Hatillo in the north, and stretching south to Palmar Sur.  Included in that zone are the following towns, noted from north to south:

  • Hatillo
  • Dominical
  • Uvita
  • Ojochal
  • Palmar Sur

The inland portion of The Zone is a leg that runs from Dominical to San Isidro de el General, also known as Perez Zeledon.  In between Dominical and San Isidro is the town of Platanillo.

A word about pricing:
When dealing with ocean view properties in Costa Rica’s southern zone, the usual criteria of looking for a “per square meter” pricing fails us.  This becomes evident quickly as one familiarizes themselves with the market place.
Evaluating an ocean view property in this area is a combination of attributes, or virtues that come together to give the property its value.  Based on observing land buyers over the years, I rank these virtues in roughly the following order:

  1. view
  2. access
  3. size
  4. infrastructure
  5. amount of usable land
  6. proximity to the beach or a river
  7. privacy
  8. air motion

As an example of this, I once had a 10 acre property that had a window view of the ocean.  Of the 10 acres, perhaps 1 ½ were usable, the rest falling away in jungle covered hillsides. Price: $115,000
Across the way from this property, perhaps within 500 meters, I had another property of 2 acres with a sweeping ocean view,

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Ben’s Predictions

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Wouldn’t it be nice to have a crystal ball that you could rely on to foretell what was going to happen? In the present “down” condition of the world’s economy, everyone is guessing what is going to happen. If one were to guess correctly, there is no doubt some opportunity out there. It is interesting to hear Nobel laureates in the media using the now well worn phrase “we’ll see”, ad nauseum.

I am having daily discussions on the current state of the market with regards to Costa Rica real estate. I suppose that my position in the Costa Rica land marketplace makes my opinion of value to some. But really, nobody knows what it is that is going to happen. There are just so many factors at play now. But, having said that, I’m going to stick my neck out and make some concrete predictions about what we’re going to see here in Costa Rica’s southern zone.  But my prediction disclaimer remains in force… we’ll see.

I think that this coming season, which is starting now, we’re going to see some land banking (see below) sales, some of which will likely be higher end, and I think that we’re going to see some determined relocation buyers here. Here’s why.

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US Economy Effect on Real Estate in Costa Rica

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Perhaps the most common question I hear in recent months is: “how has the recent economic downturn in the U. S. impacted real estate in Costa Rica?”

As a broker of real estate in Costa Rica, I work with investors from all around the globe as they search for their property in Costa Rica. In working with these people I get to hear what their concerns are and watch how they respond as they learn and experience the Costa Rica real estate marketplace.

One of the San Buenas Golf Resort (SBGR) partners is Duane Halverson, retired COO from the well known dairy company “Land ‘O Lakes” in the United States. Duane and I have struck up a rather unlikely, synergistic relationship that has resulted in some pretty interesting dialogue: Duane being a long time, firmly anchored, North American business executive, entrusted with the financial well being of a large U. S. company (he also sits on the board of numerous other corporations there in the States), and me being a jungle tromping real estate agent in the wilds of Costa Rica.

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The Current Market January ’07

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Click here for part 2 of this article. Our main web site www.Dominical.biz has a sort of Dominical-centric perspective to it, and so it is from this vantage that I view things here. Its kinda funny though, this perspective, because really, what the heck is Dominical? It’s a fun question. People travel here like they … Read more