Real Estate Climate in Costa Rica

Costa Rica’s real estate market is stable and attractive as a direct result of the Costa Rican government's commitment to promoting the property sector by allowing foreign ownership, providing low property taxes, and in general lower property acquisition costs. Costa Rica is an exceptional place that presents a diversity of attractive development opportunities; with land that is increasingly valuable with its breath taking views of nature at every turn. For all of these reasons, it is no surprise that Costa Rica is becoming a more popular and exciting destination for many international investors.

Costa Rican real estate is in demand. In addition to Costa Rica’s natural beauty, mild year round temperatures, relatively  low crime rates, and low cost of living,  its strategic location with many convenient direct flights to several international destinations has made Costa Rica an irresistible haven for adventure seekers, vacationers, and retirees.  Many of these people come looking to purchase a second or vacation home in Costa Rica.

Additionally, with all of the major companies  such as Proctor & Gamble, Acer, Microsoft, GE, Abbot Laboratories, Dole, Continental Airways, Hewlett Packard, Intel, Western Union, L.L. Bean, Amba Research , Maersk Americas, Amazon, Citi Group, Global Financial Group,  and Gerber, coming down they bring several of their upper level management employees who are also in need of housing whether temporary or permanent.  This allows Costa Rica to capture more foreign direct investment. This trend is likely to continue with more major businesses calling Costa Rica home to take advantage of lower operational costs, quality/educated/bilingual employees, and the Costa Rican government’s support of free trade and international competition.

With the technological revolution more and more jobs are becoming easier to do from just about anywhere in the world of wireless. With Costa Rica’s recent updates in technology and wide range availability of telephone, cellular phones, faxes, and internet, many people are drawn to work remotely from Costa Rica if possible. Nearly half the population in Costa Rica has at least one cell phone and line and access to the internet from their home. [1] Costa Rica also has several thousand internet cafes mainly located in rural areas, beach destinations, or educational centers, making access even simpler.

Many of the newest real estate projects in Costa Rica are in fact more geared to North American standards to try and attract buyers from this ever increasingly strong market of Baby Boomers.  The baby boomer group is responsible for purchasing or renting large sections of raw land, houses, condominiums, villas, apartments, and warehouses.

Below is a great report put out by NAI Global in August of 2010. Click Here to read all about it.

Table No. 1

Source:  BCCR Research Report .Inversion Extranjera Directa (Foreign Direct Investment in Costa Rica)  pg 16.

Table No. 1 demonstrates the total amount of foreign investment into the real estate sector in each province from 2004 to 2007, shown in millions of dollars.

This graphic proves to be a very accurate depiction of what has happened in Costa Rica. The Guanacaste region has now been over saturated with real estate development and is now on w down turn. The Puntarenas area continues to experience rapid growth and significant investment that is not likely to slow for the next 5 to 10 years since the southern area has still not been exploited. The San Jose area will always remain stable constant climber with many people needing to live in the metropolitan area for work.

Alajuela has seen a large investment in areas around the Juan Santamaria International Airport and also in San Carlos near the Arenal Volcano where many developers have begun creating communities geared towards foreigners looking for a relaxing, peaceful place to retreat. Heredia has also pretty much reached its peak leaving very few places where real estate can be built. Cartago still has plenty of room to grow, but because foreign investment in the last several years has been concentrated on beach developments or metropolitan they have not received very much attention thus far. Limon has experienced rapid investment due to the cruise ships that are required to dock there.

The Costa Rican real estate market is very dynamic and individuals are not the only ones making real estate investments in Costa Rica, large businesses and hotels have been too. Some of the largest hotels that have made their mark in Costa Rica thus far and have plans for expansion are: Marriott, Reserva Conchal, Hacienda Pinilla, Four Seasons, Hilton, Hyatt, Riu, OHL, among others.

Graphic No. 1

 

Source:  BCCR Research Report .Inversion Extranjera Directa (Foreign Direct Investment in Costa Rica)  pg 18.

 

Graphic No. 1 demonstrates real estate investment in percentages of participation broken down by the origin country of the buyers.

US – 55.2%

Europeans (combined) – 18.7%

Other  – 14.4% (China, Middle East)

Canada – 7.5%

 

 

As for the countries of origin in investment for the real estate sector during the period 2004 –to 2007, the United States emphasized a greater importance.  In fact, the United States originates more than the half of the resources oriented to the real estate goods acquisitions; while Europe and Canada constitute the following regions in order of relative importance.

The recent expansive monetary policies implemented by the Federal Reserve in the United States and followed by the Central Bank in Costa Rica has enlarged the level of leverage on the part of investors in its projects of investment and real estate development.[1] The leverage is a financial tool that increases the quantity of debt in the structure of financing of a project, this with the objective to achieve the growth of the business.  This permits the investors to accelerate its processes of expansion, to enlarge the value of its operations and to elevate the profit value, whenever the cost of the debt be smaller that the profit value of the business on the net assets.

In the area of construction growth rates always fluctuate depending on new trends and decisions made in other sectors if the economy. Growth in construction has remained solid from 2002 to 2007 with about a 6% increase each year, continually boosted by expansions, new shopping malls, hotels, infrastructure, and a large increase in private housing. [2]

Table No. 2

To Dec of each year

Variation

Annual average

Variation

1983

597,2

0,0

569,6

0,0

1984

673,3

12,8

643,3

12,9

1985

736,5

9,4

725,2

12,7

1986

808,4

9,8

782,9

8,0

1987

946,8

17,1

892,2

14,0

1988

1.160,5

22,6

1.123,4

25,9

1989

1.378,7

18,8

1.319,7

17,5

1990

1.806,9

31,1

1.580,8

19,8

1991

2.215,1

22,6

2.097,1

32,7

1992

2.866,2

29,4

2.629,8

25,4

1993

3.209,3

12,0

2.996,7

14,0

1994

3.718,5

15,9

3.455,1

15,3

1995

4.594,6

23,6

4.240,2

22,7

1996

4.964,2

8,0

4.462,9

5,3

1997

5.652,7

13,9

5.344,4

19,8

1998

6.111,2

8,1

5.953,6

11,4

1999

6.806,6

11,4

6.464,6

8,6

2000

7.478,9

9,9

7.185,4

11,1

2001

8.012,7

7,1

7.929,4

10,4

2002

8.983,0

12,1

8.612,2

8,6

2003

9.871,6

9,9

9.571,2

11,1

2004

11.786,0

19,4

11.177,4

16,8

2005

13.133,7

11,4

12.700,4

13,6

2006

15.544,7

18,4

14.642,8

15,3

2007

18.514,3

19,1

17.328,3

18,3

2008

22.046,3

19,1

21.213,9

22,4

Source: Instituto Nacional de Estadisticas y Censos (National Institute of Statistics and Census).

Table No. 2 demonstrates the prices of supplies for construction related to housing from 1983 to 2008 in millions of dollars which displays constant increases in investment to the construction sector each year.

Table No. 3

Type

Floor Area
(in million sq. ft.)

Floor Area
(in million sq. m.)

Residential

51.47

4.78

Commercial

22.56

2.10

Industrial

8.40

0.78

Other

20.55

1.91

Total

106.51

9.90

SOURCE: Costa Rican Association of Engineers and Architects (Colegio Federado de Ingenieros y Arquitectos). Data collected from all construction permits registered during 2008. These statistics include new constructions as well as remodeling projects. http://www.cfia.or.cr/

Table No. 3 demonstrates construction statistics by sector and in areas for the year 2008. This table shows that Residential  is the most common closely followed by Commercial.

Table No. 4

Residential

Floor Area
(in million sq. ft.)

Floor Area
(in million sq. m.)

Condos/Apartment Buildings

28.83

2.40

Houses

197.3

1.83

Other

5.70

0.53

Commercial

Businesses

12.36

1.15

Commercial Buildings

4.39

0.41

Offices

2.94

0.27

Other

2.94

0.27

Industrial

Warehouses

6.67

0.62

Factories

1.08

0.10

Other

0.65

0.06

SOURCE: Costa Rican Association of Engineers and Architects (Colegio Federado de Ingenieros y Arquitectos). Data collected from all construction permits registered during 2008. These statistics include new constructions as well as remodeling projects. http://www.cfia.or.cr/

Table No. 4 demonstrates the number of square meters built or remodeled in each real estate sector in Costa Rica during 2008.

Table No. 5

 

County

Province

Floor Area
(in million sq. ft.)

Floor Area
(in million sq. m.)

Alajuela

Alajuela

8.10

0.75

Santa Cruz

Guanacaste

8.08

0.75

La Union

Cartago

7.13

0.66

San Jose

San Jose

6.80

0.63

Escazu

San Jose

6.08

0.57

Garabito

Puntarenas

5.14

0.48

Heredia

Heredia

5.11

0.47

Liberia

Guanacaste

3.73

0.35

Nicoya

Guanacaste

3.59

0.33

Santa Ana

San Jose

3.55

0.33

 


[1] Inversion Extranjera Directa (2008), page 25.

[2] Delivering Tomorrow: Customer Needs in 2020 and Beyond (2009). Pages 62 and 63.

- CNBC "CEO of Century 21 Tom Kunz, On top second home markets in the world: COSTA RICA.”

- House Hunters International – Costa Rica is an unspoiled getaway.


[1] Inversion Extranjera Directa (2008), page 10.

[2] Country Profile: Costa Rica (2008), page 30.


[1] CIA World Fact Book Costa Rica 2010, Communications section.

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