Costa Rica Real Estate Market Archives

5 Signs the Costa Rica Real Estate Market is Poised for a Rebound

June 2, 2024 by Costa Rica Guy Leave a Comment

Let’s face it, so far 2024 has been a bust for the Costa Rica real estate market…

Writing as a full-time Costa Rica realtor, when you go through one of these luckless downturns, it’s easy to start thinking, what the F am I doing wrong?

And believe me, that thought has been entering my mind too damn much lately. And we all know that such negative thinking rarely brings positive results!

I was having a conversation with the Coldwell Banker national director the other day. He told me that sales were down 40% nationwide, year over year. Also, that inventories were up some 20%…

There you have it, sales dramatically down and inventories surging upwards. Or, in economic terms, flailing demand and rising supply.

That translates into what has amounted in 2024 to the Costa Rica real estate market doldrums. At least that’s what most of us have been experiencing lately. Oh for sure, there are some “lucky ones” out there who would take issue, but let’s face it, overall 2024 has SUCKED!

Ok enough of all that negative talk…

I do believe there’s a flicker of light shining at the end of this 6 month-long tunnel and hopefully it’s not a freight train called total market collapse!

Nah, I believe there are some signs popping up that the Costa Rica market might be poised for a rebound…

Like what?, you ask…

Sign 1 – Activity on the Rise

Well, for starters, showings have increased as of late. That’s not to say that there was zero activity during the high tourist season, that lasted from Christmas 2023 to around mid-April. That was immediately followed by a period of stagnation of activity, which is fairly normal. But those so-called buyers were more along the lines of what we call in the trade, “looky-loo’s.”

My experience has always been that “low season,” or even “shoulder season,” buyers are more serious than the high season ones, who are basically on vacation and looking for us realtors to give them a free tour.

Showings do seem to be picking up recently and hopefully for buyers who are, well, actual buyers!

Sign 2 – Improvement in Dollar to Colon Exchange Rate

Another positive development as of late is that the dollar has finally begun to rebound against the Costa Rica colon.

Now, granted the expat real estate market in Costa Rica is exclusively in U.S. dollars. So, the dollar-colon exchange rate really doesn’t matter too much in terms of real estate pricing. That being said, the surging colon has motivated some Costa Rican sellers (ticos) to raise their prices.

For the last 5 months the colon has been bouncing around at levels of 500 (or less) to the dollar, which is absurdly low compared to recently historic levels, which at one point surged to almost 700.

The end of May has seen the colon rise to around 520 per dollar. That’s a good thing because it makes living in Costa Rica a bit less expensive for folks who earn their money in dollars, as most expats do.

Costa Rica has been gaining a bad reputation as being too expensive place to live in compared to other Latin American countries. A weak dollar to colon exchange rate only adds to that perception.

Sign 3 – Election Year Social Turbulence

I predicted in an earlier post from last year that as the probability of a Trump election in 2024 goes up, the demand for Costa Rica real estate will correlate positively. So far, I am batting under .300 on that prediction. Once thing I predicted wrongly is that Trump would not go to trial before the election…

Well he has and he’s now a convicted felon – a 34-count convicted felon. However, has that decreased his chances of winning in 2024? Nope, quite to the contrary. It seems to be increasing his chances.

That’s not exactly how I predicted things would shake out, but it does follow my basic reasoning that the turbulence of the 2024 election season will ultimately inure to a trend of rising Costa Rica real estate demand…

I truly believe it will and soon!

Sign 4 – Lower U.S. Mortgage Rates

Inflation and high interest rates have been a problem, both for the U.S. housing market and for Costa Rica real estate demand. You see, Costa Rica for the most part is a cash market. Maybe the wealthiest have the cash to buy, in whatever economic climate. But most of us poor saps don’t. Unless expats can sell their homes in the U.S. to raise the cash to buy, they can’t feasibly purchase real estate in Costa Rica.

Lately mortgage rates have dropped a bit and are now under 7% in the U.S. Inflation seems to be somewhat tamed – although still spooking the Federal Reserve from lowering rates. The downward move in the U.S. mortgage rate is a positive sign for Costa Rica. However, like most of what I’m saying in this post, the jury is still out.

Sign 5 – Lower Costa Rica Real Estate Prices

Costa Rica real estate prices surged as a result of the post Covid real estate boom of 2021 – 2023. That boom has largely dissipated and now prices are coming down, dramatically. Rather than seeing a constant barrage of “sold” notices, my email inbox is repeatedly filled with notices of new listings and price decreases on older ones.

Now, that’s of course a sign of the fact that the market currently SUCKS. But it’s also a reason for buyers to start taking notice that now might be the time to pounce…

If the market rebounds the way I’m (hesitantly) predicting it will later this year, this might be a short window of opportunity for you would-be Costa Rica real estate buyer to take advantage.

It might be finally time to get off that fence and into the ball game!

And I’ll be here to welcome you with open arms!!

Current State of the Costa Rica Real Estate Market

January 1, 2024 by Costa Rica Guy Leave a Comment

We all had the momentum; we were riding the crest of a high and beautiful wave…

So now, less than five years later, you can go up on a steep hill in Las Vegas and look west, and with the right kind of eyes you can almost see the high-water mark–that place where the wave finally broke and rolled back.

Hunter S. Thompson, Fear & Loathing in Las Vegas

As 2023 comes to an end, I feel an apt way to describe this past year would be somewhat akin to how Hunter Thompson described the end of the summer of love…

For sure we’d been riding high on the crest of a mighty Costa Rica real estate wave during 2021 and 2022. However, that wave seems to have crested, broken and is now receding back to normality —

Or is it?

Granted that my real estate practice is focused exclusively in the “southern zone”, so my opinions will of course be biased by what is going on in my market. Nevertheless, I would surmise to say that what’s happening in our zone will at least be reflective of the rest of the country to some degree.

I’ve always regarded the southern zone as being two distinct markets – mountains and beaches. The beach market is much like other beach markets across the country and is largely driven by tourism and second or vacation home sales. The mountain market is less touristic driven and buyers attracted to it are generally moving lock, stock and barrel to Costa Rica.

I do deals in both of these markets, but honestly I am more focused in the mountains, as that is where I live and socialize. Most of my personal listings are in the mountains. A typical year for me will usually be divided between mountain and beach deals, with a slight majority of those deals favoring the mountains.

2021 and 2022 were record years for me, as they were for the agency I work for (Coldwell Banker Vesta Group). I believe that many agents from other agencies would tell you the same thing about those 2 post-Covid years.

2023 has also been a good year, but not a great one – at least not stacked up against the outliers of 2021 and 2022.

What drove the market to stratospheric heights in those post-Covid years?

Several factors, among them being red hot U.S. and Canadian real estate markets, a soaring stock market, historically low interest rates and basically folks having more cash than they knew what to do with. Coupled with that was the Covid-related phenomenon of folks switching from working in an office to working at home.

Then in 2023 all that red-hotness came to a head with soaring inflation and as a result soaring interest rates. That put a damper on the real estate markets in the U.S. and Canada and with Costa Rica being a predominantly cash market, folks all of a sudden didn’t have the wherewithal to buy that they had in 2021 and 2022.

Things were a bit different in the luxury markets, which remained pretty strong throughout 2023. But mid-market sales did slow down and the slow down intensified in the 3rd and 4th quarters of 2023 as inventories rose dramatically while demand cooled. I have been seeing a lot of price reductions throughout our southern zone market lately.

What’s likely to happen in 2024?

While I am concerned that the slow down will continue into the 1st quarter of this new year, overall I’m optimistic…

And here’s why —

The reasons why folks wanted to move to Costa Rica that drove the market to dizzy heights in 2021 and 2022 haven’t gone away. And the political division that many were trying to escape in those years will only reach its zenith in 2024 with a presidential election looming.

Meanwhile, the economy in the U.S. isn’t really as bad as political opponents of Joe Biden say it is. Inflation has come way down from nearing almost double digits in early 2023. The Federal Reserve is signaling a series of rate cuts in 2024, which will bring mortgage interests rates down. That should shore up the U.S. housing market. And the financial markets are at record highs.

Unemployment is at record lows and the phenomenon of work from home is only growing.

I know many “economists” have predicted recession in 2024, but from my vantage point, it seems that prognostication is becoming less and less likely – barring some unforeseen event like a major shock in the energy markets.

Therefore, if the motivation for moving to Costa Rica remains strong and may even increase and the wherewithal to actually make that move actually gets stronger, why would 2024 be anything but another “good” year for Costa Rica real estate?

Of course, as a realtor I tend towards an optimistic outlook (in order to maintain my motivation and sanity). There are a multitude of ‘risks” looming out there that could create havoc in the world and in Costa Rica, which, last time I checked, is still part of that same world – even though sometimes it’s easy to forget that fact down here in paradise!

One particularly bothersome trend has been this year’s historic appreciation of the Costa Rican colon against the dollar. This is a bit of a head scratcher for me to figure out, but suffice it to say that Costa Rica’s central bank needs to step in and stem the downward slide of the dollar. Otherwise, this will weigh against the prospect of continued growth in both Costa Rican tourism and foreign investment. I don’t think the Costa Rica government wants that to happen, so I’m pretty confident that in 2024 the exchange rate will find more stability.

Oh and another positive development in the real estate world down here is that more and more Costa Rica banks are offering conventional mortgage loans to expats or nonresidents. I know of three banks who have gotten into that game with fairly decent loan terms: ScotiaBank, Lafise, and BCT. If interested leave a comment and I’ll be glad to provide more info.

The ability for nonresident buyers to actually get a loan in Costa Rica, on acceptable terms, (outside of the historically limited availability of short-term “seller-financing”) would be a major boon to the market here.

So, while I’m cautiously optimistic that 2024 will be another good year for Costa Rica real estate, I am also painfully aware that there are risks looming that could result in “flat surf.”

The Costa Rica Real Estate Market – Past, Present, & Future

June 25, 2023 by Costa Rica Guy 6 Comments

The Costa Rica real estate market has witnessed significant changes over the years, driven by foreign investments and evolving market dynamics. In this post, we will explore the historical background, current state, and future prospects of the Costa Rica real estate market.

The Past

One word I would use to describe the Costa Rica real estate market of the past is “inefficient.” Inefficiency in any market is a double-edged sword, giving rise to both risks, as well as opportunities.

While the current Costa Rica real estate market can hardly be described as wholly efficient, in terms of readily available information to help guide your investment decisions. It’s not the “wild west” that it used to be.

Long gone are the days when gringos could take advantage of “poor” Costa Rican farmers who were more in need of cash than dirt. Buying properties at pennies on the dollar might still be possible in today’s market, but those opportunities are rare to find. These days the really cheap stuff is usually that way for legitimate reasons.

The Costa Rica government has in large part wised up to the shady shenanigans of unscrupulous foreign real estate investors and developers. These days the laws related to property ownership and development are for the most part enforced in areas where foreign real estate investment is rampant.

That’s not to say that attempts to cut corners and build or develop in ways that don’t fully comply with the rules isn’t still going on. But it’s not common practice like it once was. And foreign buyers these days are expecting you to have followed those rules when they consider your property for investment. Skirting the rules and not dotting your i’s and crossing your t’s can come back to haunt you upon resale.

A lot of folks who bought in the past have seen substantial appreciation, with values doubling, tripling, quadrupling, and so on. Do those opportunities simply not exist anymore? Probably not. As the market becomes more efficient, highly speculative opportunities generally tend to dwindle.

The Present

The word I’d use to describe the present Costa Rica real estate market is “semi-efficient.” As the market has matured over the years, better information has become available. I wouldn’t say it is now “readily” available in the sense of a highly efficient market like in the U.S. However, there is information out there, often hidden from plain view. That’s where experienced professionals can really help.

I believe that my job as a real estate agent in Costa Rica will not be taken over by AI anytime soon. I can’t say the same about my fellow realtors in countries where the market is much more efficient in terms of easily accessible online information. In Costa Rica human interaction with a live real estate agent is a valuable asset for any would-be investor navigating the lingering market inefficiencies that still exist.

Around June of 2020 the short-lived COVID-19 real estate downturn (largely due to the country closing its borders to the outside world) turned on a dime. What had been a buyer’s market since the crazy days before the 2007 world-wide crash, suddenly became a seller’s one. That phenomenon has lingered basically up to the date of this blog post. However, there are signs that it is starting to turn back.

The COVID inspired buying craze is somewhat subsiding as market pressures are making it harder to find the cash to buy in Costa Rica, which is largely an all-cash market for foreign investors. Listing inventories are on the rise and demand is not keeping up. I predict that while the market will remain a vibrant one, since many of the reasons that drove the COVID craze still exist, a better equilibrium between supply and demand will take hold as we move into the future.

The Future

The future is where things get more interesting. The Costa Rica real estate market will become increasingly efficient as time moves on. The licensing of real estate brokers and agents will likely be mandated, ensuring a higher level of professionalism. The national registry may become more accessible to foreigners, potentially available in multiple languages. The ability to demand that realtors provide a reliable “CMA” (comparative market analysis) will likely become a reality for both sellers and buyers.

Costa Rica will likely have an actual nation-wide multiple listing service, accessible to foreigners and their out of country agents. This has actually already been developed, but the bugs are still being worked out. It will be a few years before this new MLS achieves the widespread use necessary to make it an essential tool for the Costa Rica real estate investor.

There’s also the question mark of the U.S. dollar retaining its position as the world’s reserve currency. The strength of the dollar against the Costa Rican colon has been another driver of the incredibly strong market we’ve been experiencing. However, this year has seen a downward slide by the dollar. Some smart investors are warning that slide may continue and even gain momentum as large holders of the mountainous U.S. debt seek safer havens. While the U.S. dollar is not likely to collapse anytime soon, a continued slide would make buying with cash in Costa Rica an even more challenging proposition than it already is.

Costa Rica has always been an all-cash market for foreign investors. There just aren’t any legitimate opportunities to obtain conventional-type mortgage financing in the country and U.S. banks won’t lend on foreign properties. Could this change in the future? Probably, as Costa Rican banks seek to exploit the opportunities stemming from ongoing strong foreign investment interest. There’ve already been a couple banks launching expat lending programs, but not in any aggressive sense that makes them viable for most investors.

Conclusion

The Costa Rica real estate market has experienced a significant transformation from its early days of exploitative practices. As the market becomes more efficient and information becomes readily available, investors will be drawn to the safety and transparency it offers. Costa Rica continues to provide affordable options compared to other countries with similar amenities. Moreover, the appealing factors that attract visitors and residents to Costa Rica are likely to remain unchanged in the foreseeable future.

Costa Rica Real Estate Market Forecast 2022

January 4, 2022 by Costa Rica Guy 2 Comments

On April 11, 2020, less than a month after Costa Rica closed its borders on March 16, I posted that there could be a “silver-lining” with regard to the effects of the pandemic on the Costa Rica real estate market.

Did my prediction come true?

You betcha it did!

Granted, it wasn’t until the latter part of 2020 that the market started turning around. Then in 2021 all hell broke loose as Costa Rica experienced one of the strongest bull real estate markets ever!!

How about 2022?

Will the bull continue to buck strong in the Costa Rica real estate market??

Before getting right to the prediction, let’s address a few questions that could lead to problems in the coming year (or years)…

What Will Happen to the U.S. Dollar (and Economy)?

One of the phenomena noted in that 2020 post was that although the COVID crisis had and would take a dire toll on the U.S. economy, the stock and real estate markets there had stayed relatively strong…

Why?

Mainly because the U.S. Government and its Federal Reserve Bank made sure it was so. How? By printing money and lots of it!

Now 2022 has come along and we are beginning to see inflationary effects rising for the first time in decades as a result of all that stimulus. Could that weaken the U.S. dollar going forward? Well, so far it hasn’t, but it certainly might.

If history shows us anything it’s that even though a country like the U.S. (with the world’s reserve currency) can get away with printing money to solve its economic woes better than other countries that don’t enjoy the luxury of a reserve currency, sooner or later the rooster has to come home to roost.

In order to tame the beast unleashed by washing away its problems with newly-minted greenbacks, the government will ultimately have to put on the brakes to avoid run-away inflation. That could in-turn put downward pressure on the portfolios of my would-be Costa Rica buyers and cause them to rethink their expat plans.

What Will be the Ongoing Effect of U.S. Internal Political Strife?

I just finished Ray Dalio’s new book, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail. Dalio, who is widely regarded as one of the word’s greatest investors, says that the U.S. is at Stage 5 of the 6 stages a country passes through before it succumbs to outright civil war. Dalio says this is so due to the unprecedented internal political strife that currently exists and only seems to be worsening.

There are some things in 2022 that could happen to accelerate this worrisome trend…

First, there’s the 2022 mid-terms. With Joe Biden’s popularity steadily sinking, mainly due to the never-ending pandemic, together with rising inflation, there is a good chance that the Republicans will take control of Congress in 2022. And if they don’t, you can bet your bottom dollar cries of “election-stealing” will be blamed for the debacle.

If the Republicans do take control it might calm those claims and fears, but it will also hamper Joe Biden’s ability to do anything about the economy and only insure 2 more years of absolute grid-lock in Washington.

The other question looming in 2022 is the specter of Donald Trump actually getting locked up due to the revelations of the Jan 6 commission, or any of the other scandals he is enmeshed in.

While I am not going to make predictions with regard to either of the above, I will say that all this makes the prospect for continued (and growing) internal political strife even more of a threat to America’s societal well-being, as well as its place as a bastion of democracy.

In my previous post I noted that the political strife was one reason so many people were wanting to move to Costa Rica. And if the U.S. inches closer towards an actual “shooting” civil war, I would think that would continue to be the case.

Will COVID-19 Finally Dissipate as a World-Wide Threat?

The advent of the Omicron variant might signal that the virus is mutating itself into nothing more than a routine common cold. And with the vaccines and other meds that have been introduced to help with the more vulnerable elements of the population, it might be that the world is finally poised to escape from this ugly situation, or at least there’s light at the end of the tunnel.

However, since COVID seemed to be such a factor in stimulating demand in the Costa Rica real estate market in 2020 and 2021, could an end to the pandemic have the opposite effect?

That’s a damn good rhetorical question that I really don’t have an answer to. However, I can say that the pandemic unleashed some genies that will probably be hard to put back into the bottle, like the increased desire to work from home, even in a home located in a foreign country!

Will Costa Rica Be OK?

Costa Rica continues to struggle with an ongoing fiscal deficit problem. The pandemic has certainly made things worse and in 2020 it basically decimated the very important tourism sector…

However, it seems that “things” are being managed. COVID-19 has hit Costa Rica hard, but vaccination rates are high and hospitalization rates appear to be under control. People are now visiting again, both for tourism and to explore the idea of actually moving to Costa Rica. So, the tourism industry seems to be on the verge of a comeback. And all those dollars of foreign investment in 2021 couldn’t have hurt. The government also appears willing to make legal changes that will encourage even more wanna-be expats to make Costa Rica home.

Yes, I think Costa Rica is going to be OK – gracias a dios – barring that the rest of the world (especially that part to our north) doesn’t completely go to hell!

Having said all of the above, I predict that the market will again be strong in 2022…

What will happen beyond that is much harder to predict due to the noted “dark clouds” that continue to loom on the horizon.