When it comes to buying and selling property in Costa Rica, you’ll notice that there are a lot of similarities as the real estate markets in the U.S. and Canada. However, there are some stark differences, too. So it’s important that you’re well versed on how business is conducted if you plan on buying a house, condo, plot of land, or even an existing business in Costa Rica. We’ll go into depth in this section, but here is a quick overview and some notes on the market there.
Price ranges for Costa Rican property:
You’ll find properties listed for as low as less than $120,000 USD in Costa Rica, and as high as $8 million or more. The good news is that prices are generally still more affordable than for comparable land and dwellings in the United States.
While not dirt cheap by any means (in fact, over the last few years, 80% of Costa Rican property sales were for $200,000 and up), I think you’ll find fair value in the Costa Rican real estate market. And in rural, inland, and less touristy areas, you can still find a lot with a simple house on it for far less than $120,000.
In a recent article about the Costa Rican housing market in the Tico Times, one longtime real estate agent summed it up like this:
“I see hundreds of homes being built between $600,000 and $1 million; thousands are being built between $350,000 and $600,000, and [I can’t even keep track] the number of units being built between $100,000 and $350,000.”
Who is buying in Costa Rica?
The vast majority of new housing projects are bought by foreigners, not Ticos. Of course, there are plenty of well-to-do Costa Ricans with family wealth or thriving businesses, but real estate purchases are still out of reach for the average citizen of this country.
These days, the biggest demographic for home buyers in Costa Rica is actually U.S. Baby Boomers, who are retiring and looking to downsize or simplify, live a better quality life, or just move to a warmer climate. With many decades of savings – as well as equity from their home/home sale in the U.S. – they are looking for comfortable but affordable housing options in Costa Rica.
Likewise, expats, visitors, and vacationers from the U.S., Canada, and Europe often come down to Costa Rica for a holiday, fall in love with the place, and look to purchase a vacation home here.
In general, retirees tend to enjoy the cooler, spring-like temperatures and convenience of living in the hills of the Central Valley, while others like the sun, sand, and fun of the coastal regions.
Lastly, many large foreign companies have flocked to Costa Rica’s Central Valley, with their execs and high-paid foreign workers looking to buy property.
How was the market affected by the economic collapse of 2008?
When the mortgage market, real estate market, and economy collapsed in the United States in the mid-2000s, it hit Costa Rica especially hard. Up until then, the market had been white-hot in this country, with developers unable to break ground and finish projects fast enough for eager foreign investors and vacationers to gobble them up. But all of that came to a screeching halt when the mortgage market imploded in the U.S. circa 2007. Soon, second loans, home equity lines of credit (HELOCs), huge profits on home sales, and sending casual investors and would-be buyers of vacation homes into a panic.
The bubble had burst, and it didn’t just trickle down to Costa Rica but slammed it like a hurricane. All over this country, you could see the shells of half-finished real estate developments. Bankruptcies, legal battles, defrauded investors, and disappearing principles became the norm.
For many years, the housing market was near rock bottom, with most new construction at a standstill.
How has it recovered?
An interesting exception to the real estate swoon in Costa Rica was that the micro-market in the Central Valley – in and around San Jose – wasn’t affected as adversely. After all, most big developments and vacation home sales were taking place in the coastal communities by the beach, and San Jose was/is still the business capital of the country.
In fact, the number of foreign companies that moved to Costa Rica and started hiring only went up in the years of the Great Recession in the U.S., as they looked to outsource and save costs.
Now, there is cautious but healthy growth in the Costa Rican real estate market again. You’ll find more new development and cautious growth across the country. While U.S. lenders aren’t throwing loans and cash around like they used to (and that’s a good thing!), more people have equity and are looking to invest in a piece of paradise in Costa Rica.
Prices have stabilized, but aren’t skyrocketing by any means like before the bubble burst. No matter your price range and what you’re looking for, there is probably plenty of inventory in Costa Rica, as it’s a true buyer’s market with plenty of good deals to be found.
What’s the biggest challenge for foreign buyers in Costa Rica?
Here’s the drawback of a buyer’s market – it’s harder to get financing to purchase a property, and that’s especially true in Costa Rica. In fact, the majority of foreign investors either pay cash for their properties in Costa Rica or have to arrange financing through a bank in their home country.
While Costa Rican banks do lend for home purchases, the rates are much higher, the terms less favorable, and you’ll have to put way more money down than for comparable mortgages in the U.S. For foreigners, the process of getting approved for a home loan in Costa Rica can be so lengthy and arduous that it doesn’t make much sense – or outright impossible. Seller financing is sometimes available – but will be even more expensive and unfavorable than a bank loan, and can sometimes be a scam.
So if you don’t have cash to buy in Costa Rica, sell your house, take out some equity, borrow against your 401K, go in with friends, or approach a U.S. bank for a loan, because those are probably your only options.
What’s the long-term outlook for real estate in Costa Rica?
There are many factors that point to the long-term health and stability of the real estate market in Costa Rica.
After taking a dip during the dark days of the world’s financial collapse, tourism is back with a vengeance, with nearly double-digit growth year over year since 2012.
To help all of them arrive and depart efficiency, a massive new international airport is planned to open by 20025 in Orotina, just west of where the international airport is now.
Not only will this heat up the surrounding real estate markets, but attract new foreign businesses and jump-start commerce in the region on par with Panama City.
There is massive investment in improving infrastructure around the country, including roads, highways, marinas, and even communication networks – something that’s vital to decentralizing good jobs and the business community in the country.
Furthermore, while most of the popular tourist hot spots are on the Pacific coast, growth in the Caribbean side of Costa Rica is primed to take off, creating fantastic opportunities for foreign investors, retirees, expats, and Ticos.
In whole, the future is bright for development and real estate in Costa Rica!
Want more information on buying real estate, property, or opening a business in Costa Rica?
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