The current state of international real estate in Costa Rica
Between 2005 to mid-2008, property developers in Costa Rica witnessed enormous increases in property launches and sales as vacant land on the ocean and in the highlands was developed into second homes for North Americans and Europeans.
There were three key factors supporting the boom:
- Political stability – Costa Rica has had over half a century of uninterrupted democracy, making it one of the most stable countries in the region.
- Its long-standing as an Eco-tourism destination – Costa Rica’s express commitment to environmental conservation and it’s rich biodiversity have enabled it to develop a unique “eco” travel product.
- US retiree haven status – With more US citizens venturing abroad, Costa Rica has benefited enormously from its retiree haven status.
The morning after
But since the global economic collapse the Costa Rica real estate landscape has changed. Large scale, ultra leveraged properties have suspended operations, others have stalled or cut-back on the more ambitious aspects of the master plan, and prices have been cut for the first time since the boom.
Still, asking prices in the luxury end of the housing market (ie: master-planned communities, resort developments and condo projects catering to the international buyer) have held up relatively well compared with the sharper declines experienced in the developed world. Our year-on-year numbers to September 2009 show relatively modest fall of 8.75% for serviced lots, 3.73% for condos and 8.92% for single-family homes across the main master-planned communities.
So what are the takeaways from this?
Optimists will find some solace in the fact that Costa Rica has been shielded somewhat from the collapse in house prices witnessed in the developed world. It’s relatively underdeveloped mortgage market, formerly considered a weakness, has meant that it has avoided the rampant foreclosures that have tugged at the bottom of the market in the US.
But property pessimists will doubtless point to the high profile project suspensions such as the St Regis Project, the Rosewood Residences at Costa Carmel and La Punta Papagayo in Gunacaste. They may also insist that with re-sales (sales from end-user to end-user) continuing to undercut developer direct prices, the data under-reports the extent of the decline and there are more falls to come.
We’d love to hear your views. Leave a comment below.
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Scott Williams
Dec 04, 2009
I am flying to Costa Rica Monday to close on my purchase of a small failed condo development. Begun during the boom, units were originally priced at or above $400,000 for large 2 bedroom flats. The developers lost their equity partners and bank financing to complete the now half finished project. Purchasing this this small, 18 unit, 3 building development seems like a golden opportunity to benefit from the downturn. We are buying this property cheap enough to sell the units when they are finished for $200,000 USD and still make a tidy profit.
We are naturally concerned about our ability to sell these units in 12-18 months, and wonder if any of your other readers have tried this approach with success?