Published on Monday, September 6, 2021
By Garland M. Baker
Exclusive to A.M. Costa Rica
Nosara, Santa Teresa, Malpais, Flamingo’s Potrero, Arenal and other areas are now sellers markets. Costa Rica’s real estate market is heating up again. The areas mentioned are exceptions, but many areas around the country are showing increased interest from buyers.
Will Costa Rica boom, or bust?
It is time for it to boom again, from its bust in 2007–2008. Here is a recap of the article “Nation confronts a sizzling market,” published in 2005.
There are a number of theories to explain the growth cycle that tourism destinations go through over time. As a destination matures and attracts differing types of tourists, its growth process is likely to change.
This has happened since the time of the Romans. New-found paradises go through a defined cycle. The phases to the cycle are: exploration, involvement, development, consolidation, stagnation, and decline and/or rejuvenation.
Tourist attractions grow out of the exploration phase, like Nosara, which was just a dream back in the 70s. Little by little the drifters and explorers, common to this phase, involve locals into providing tourism services. Over the years, more and more visitors arrive, and there is more and more development.
Time passes, and at a point, the market begins to consolidate and visitor numbers slow, or a major event causes the economy to crash as it did 14 years ago when financial markets collapsed around the world.
Real estate analysts believe property markets run in around 15- to 20-year cycles. Four to five of the years are in recession or a downturn, and in the rest values slowly creep up again. Costa Rica is probably at the very beginning of its upturn cycle because the market has been pretty stagnant for around 15 years.
Some Costa Rican notaries specializing in property transactions have stated in interviews that they have made more money in the past year than over the past five years due to the increasing in property sales.
Many elements are contributing to the real estate market heating up. Here are a few of them:
• The United States government has been doling out money to people in the form of grants, low-interest loans, and other freebies to assist people through the pandemic. Some of that money is flowing to this country.
• More U.S. citizens are traveling to Costa Rica to escape COVID-19 restrictions in their home country.
• The financial markets around the world are mostly pretty stable and doing well.
• Costa Rica is enacting new laws to entice people to extend their visits to the country or retire here.
Is it a good time to invest in real estate in Costa Rica? Is the market going up?
Property is mostly a good investment over time, but like any other asset, great care needs to be taken in its acquisition, and maintenance. The adage, “You make money when you buy, not when you sell,” is so true. Common sense is the main factor that determines property value later on. No one should rely on an appreciating market and wishful thinking to create a profit margin.
Costa Rica has many advantages: It is a friendly country, has a stable government, is close to the United States, has ample connections to the rest of the world, a great and diversified climate and the list goes on.
However, investors need to watch out for the shark-infested waters. Many people came to Costa Rica during the feeding frenzy 20 years ago to invest in property. Some of them are still licking their wounds because they jumped into the real estate market unprepared and paid too much money for something.
The secret to investing into anything is good homework. Now days, more than ever, it is easy to get the details on any property from the Registro Nacional online. Several years ago, this was not the case. Most had to rely on attorneys and notaries to do the due diligence for a property purchase. Now savvy investors can do the investigative work themselves.
People also need to remember that Costa Rica is not the United States or Canada. Laws are different here. So many foreigners come to this country thinking the laws are similar, when they are not. The words spoken by a person coming to invest in Costa Rica, that says, “. . . but in North America, we can do this or that,” just shows ignorance, and those people should shy away from investing in this country.
Now for the bad news: with the real estate market heating up, so are the scams and the dream developments in the middle of nowhere. Next month's article will review those of the past so people interested in investing in Costa Rica can avoid the headaches and nightmares.
Editor’s note: Garland M. Baker solves problems for expats in Costa Rica. He is a 49-year resident and naturalized citizen. Reach him at firstname.lastname@example.org. Baker has undertaken the research leading to his articles with A.M. Costa Rica. Find the collection at crexpertise.net. A free reprint is available at the end of each piece. Copyright 2021. Use without permission is prohibited.