Osa Tropical Properties’ mid year market report for Costa Ballena real estate includes current and projected trends in our local real estate markets that include the towns of Dominical, Uvita, Ojochal, and the surrounding neighborhoods.
Real estate sales in South Pacific Costa Rica continued to set record highs in the months of April, May, and June of 2021. The first half of 2021 in our Costa Ballena real estate market showed strong signs of recovery in travel, leisure, hospitality, and real estate. Airlines from all over the world are returning and confidence from investors in Costa Rica has seen growth beyond anything our office has seen in the last ten years.
Today, we are seeing an unprecedented amount of people interested in purchasing Costa Rica real estate thanks to the newly found freedom for many to live somewhere that suits their lifestyle more than their career. Our website traffic is up by 240% in the second quarter of 2021 as compared to same time in 2019 — our previous busiest year on record. As a result, Costa Rica real estate has been a highly performing asset in 2021 and it doesn’t appear that there will be a slowdown anytime soon.
Our Osa Tropical Properties team is confident that property will continue to be a crucial asset in 2021 and beyond. Real estate in Costa Rica that evokes sustainability, privacy, space, and is in a welcoming community will continue to be coveted, even after the pandemic.
Costa Rica real estate trends in the first half of 2021
This year has seen unparalleled activity as compared to years past. This big increase in activity has turned the market from favoring buyers in a lot of segments into a seller’s market. It continues to be a very strong market in May and June — a period when showings and sales would normally slow down — and yet sales activity continues to be much stronger than normal.
Our office expects this volume to continue in the coming months based on the number of clients we know who are booking trips and come in the next few months and others who are remotely contacting our team regularly. Several deals closing in the coming months are from clients from countries such as Canada who have made purchases virtually because of strict quarantine requirements.
Increase in travel to Costa Rica
With the successful rollout of the vaccinations and lockdown barriers easing up, more buyers are making their way to Costa Rica with confidence. Costa Rica’s official vaccination tracker shows 2,440,385 vaccines have been administered. President Carlos Alvarado reported that 89% of people 58 years of age and older have received at least one dose and 85% of this population has received the full two-dose regimen.
The soaring highs in our tropical real estate market amid a pandemic have posed a challenge for those looking to predict when and what factors will cause this demand to slow down. Every market has its own nuances and our Costa Ballena real estate market has been able to sustain itself thanks to a high number of foreign retirees and digital nomads living in this region who have been consistently spending money despite the year-long decrease in tourism.
According to Osa Tropical Properties broker, Kevin Champagne, he has noticed that “in the past three months, the market has been looking better than what I predicted at the start of the year and I think that the momentum will keep going. Here, in Costa Rica, we are in the right place to help people get what they want most right now, which seems to be to get out of their current jobs, cities, lifestyles, and come to an easy-going country like this one. For this reason, I see the next couple of years in Costa Ballena real estate looking really good.”
Types of people investing in Costa Rica
It is not only retirees and developers looking to invest into Costa Rica. Many professionals and business owners who have found themselves able to work remotely in the last year are now looking to Costa Rica and other tropical destinations as a potential place for a second home. They may not be ready to invest a large amount of capital immediately but they do want to make a secure investment that they can increase over time.
With more than 6.5% of the world’s biodiversity and over 50% of the country forested, those investing in Costa Rica tend to care about their living environment. According to a recent report by ICT, Costa Rica’s Ministry of Tourism, the majority of visitors to Costa Rica tend to be cultured, with a high educational level, and a higher than average income. They are typically interested in a destination for the nature and culture more than attractions like nightlife and tours. Local gastronomy is another major factor in a visitor’s choice for where to travel in Costa Rica — and Costa Ballena serves well on all three fronts.
Those who are not yet ready to set down roots in Costa Rica may still be coming here with the intention of spending a fair bit of time and money living the local lifestyle. Looking at vacation rental blogs, forums, and platforms, there are a large amount of people who stay in Costa Rica for months at a time with their families. Many of these long-term renters come with big budgets, ready to spend thousands of dollars on rent alone every month.
New realtor, Nelly Reusse, says that she has been working with many young families in the last three months who are mainly seeking the quintessential three-bedroom tropical home with an ocean view. These small families are from a mix of ages, with either pre-teen children or older kids who have just graduated high school.
Costa Rica government looking to boost foreign investment
In response to this year’s growth in real estate closings, a new initiative to attract more investment in Costa Rica has nearly been made into law. Costa Rican legislators have just passed a new initiative to grant residency for investing $150,000 into real estate, registrable assets, shares, securities, and productive projects (the minimum investment used to be $200,000). The arrival of more foreigner investors in the country will increase consumption and generate jobs.
Another bill showing high favorability with Costa Rican legislators right now is also designed to promote added foreign investment in the country. This bill aims to attract digital nomads who seek to work remotely in Costa Rica and proposes to offer an up-to-two-year visa as well as tax incentives. The projection is that some 10,000 families of digital nomads will inject into the country with about $600 million a year if put into law.
Still, some people who have lived in the South Pacific region of Costa Rica for some time are not entirely excited about expansion in this region. OTP realtor, Richard Owens, says he sees real estate trends changing in our growing Costa Ballena communities. “There are two types of people here,” he says. “Those who came before it was busy and those who are arriving now; who are happy with the fast pace of development. This has not resulted in less buyers but rather buyer preferences changing.”
Influential factors creating high demand for luxury properties
Since the start of the pandemic, there has been a global increase in the number of wealthy individuals and the growth of the wealth of high net worth individuals. White collar industries like finance and technology quickly adjusted to the idea of working from home, with industry-leaders barely missing a beat and many making huge profits from new opportunities in their markets.
So far, 2021 has seen more retirees and young families cashing in on high stock prices and high real estate prices. A number of our new clients in 2021 are using the sale of these booming assets to purchase property in Costa Rica. Pre-pandemic, luxury estates in Costa Rica commonly remained on the market for many months, if not years. In today’s market, the demand for larger homes, estates, and mansions with land is so great that previously less desirable properties are also selling quickly.
Time on the market is at a record low
Buyers who have been looking for at least a year and expecting new listings to come on to the market have been disappointed by how few there have been added to our MLS in recent months. Buyers today are also contending with the speed at which the good listings get snapped up by other eager buyers. Our clients in 2021 are learning that when a good listing becomes available, the key is to go after it and not wait for better opportunities down the road, which may or may not arrive.
Supply in our real estate market isn’t just being reduced by affluent buyers. It is also being highly impacted by seniors, baby boomers, and empty nesters who have decided to stay in place. Each year, we typically see a large number of listings entering the market from this demographic as they choose to downsize or relocate.
We are predicting that the 2020 and early 2021 “stay in place” trend will start to change and homes are slowly trickling back on to the market, although this has yet to occur in a significant way. Nevertheless, as more homes are being listed, buyers will need to take a more critical and analytical approach to weigh if the price of a property will continue to be right if demand declines in the future.
Current housing trends in Costa Ballena
With priorities shifting, buyers of real estate in Costa Rica are looking for three key factors in a property, which include sustainability, privacy, and space.
Added features like solar panels, food gardens, and a private water source are big drivers for people looking to live more sustainably, who want to live connected with nature and off-the-grid as much as possible.
Others are looking for lots of space and privacy, with big, fenced-in lawns popular with buyers who have children and pets. There are more multi-generational families moving to Costa Rica in 2021 and they want the room to live comfortably but still in close proximity.
Broker Kevin says, “right now, the primary features I see clients looking for in residential real estate are privacy, views, and lots of land. People also want big bedrooms and I have had recent clients who surprised me by choosing a home with bigger bedroom sizes over a property with a superior view.”
Realtor Rebecca Rowntree says that most of her recent clients looking for land to purchase want an acre or more. “The most important thing I’m finding with my clients is privacy. It’s not even necessarily about ocean view but it’s privacy that people are looking for.”
Current owners of Costa Ballena properties are also thinking ahead and buying land that surrounds their property so that they can have more of a buffer from future construction. They are looking to solidify the privacy they have and to secure their views.
Co-housing communities are also a growing trend, with groups of friends and like-minded people living together. They are looking for companionship and economic benefits and are most likely to be in search of big acreage farms.
Renovated, turnkey properties in high demand in 2021
Osa Tropical Properties ‘recently sold’ data shows a record number of sales, increased prices, sales over asking price, and all time low marketing time on properties that fit the most popular criteria. And trends from this year show that homes that sell are those that are turnkey ready, with very little needed for renovation or furnishing. As a result, property owners in Costa Ballena are renovating older and dated properties to capture the current market opportunities.
Rebecca says that “for clients looking for houses, I have had clients with budgets for the most part between $400,000-$800,000 this year, although I am working with some who have over $1m budgets. Almost all of them are looking for turnkey houses that they can just move into that need almost no work done to them.”
Construction trends in Costa Ballena in 2021
The properties with the finest architecture and design are the quickest to sell today — if they are priced well. Homeowners cherish large and private landscaped lots with plenty of tropical foliage for privacy.
Long-time Osa Tropical Properties realtor, Marcia Oro, says that she is supportive of the idea of building in Costa Ballena right now. She has three architects/builders that she is talking to on behalf of her own future construction and that of her clients. She says that the local professionals she is working with have shown her elegant, modern constructions and the people they work with love the results.
However, vacant lots have been more difficult to sell in 2021 because of the increase in construction costs and timelines. Realtor Keith Richman says that he avoids trying to persuade clients today to purchase a vacant lot to build on because building costs and materials are all at record high prices and because construction schedules are slow due to the number of projects going on. “It is still less expensive to build a house than it will sell for,” says Keith. “However, it is recommended that someone building be here to manage the construction to ensure that the finished product is what they agreed upon.”
Keith also says that he would personally “rather go with a house already done with a driveway, water management in place, and landscaping. Most of my clients would also rather buy a turnkey home.”
Tourism and rental properties in Costa Rica
The idea of another pandemic happening again in the future has prompted many buyers in 2021 to consider securing a getaway in a remote and more tranquil destination.
In our South Pacific Costa Rica tropical vacation destinations, demand far outpaces supply for vacation real estate. Vacation rentals, BNBs, hotels, and hostels are a way to complement and enhance a residential neighborhood. They allow for a diversity of interests to be cultivated in a community and for development to progress. Dominical, Uvita, and Ojochal are all seeing an increase in the amount of tourism coming in from around the world and we expect this growth to go beyond pre-pandemic numbers in the near future.
The start of 2020 saw tourism and real estate in Costa Rica very busy and trending to continue growing throughout the year. Hotels and vacation rentals in Dominical, Uvita, and Ojochal were close to full in January, February and March of 2020, with many businesses reporting around 90% occupancy in the first quarter of last year. The same time this year, occupancy is closer to 50%; however, rental vacancies are steadily decreasing and rates are rising.
In August 2020, Costa Rica became one of the few countries in the world to open totally. Visitors to Costa Rica do not need a PCR test nor quarantine to enter. The Costa Rican government created a path towards tourist reactivation in March of 2020 in which seventeen health protocols were implemented for tourist activities to operate safely. These measures cover things like business capacity, the opening of beaches, and compliance with safety and health protocols. With these measures in place, Costa Rica was able to open all maritime and air borders for international visitation in November 2020.
Costa Rica’s Tourism Minister, Gustavo Segura, says that “we estimate that with the measures we have implemented we could receive up to 1 million tourists in 2021, which would allow many companies to operate at a balance point.”
This figure of one million tourists is expected to increase after the recent agreement with Iberojet, which will provide new direct weekly flights from Madrid to San José as of July 13. This is in addition to other European airlines’ regular direct flights from carriers such as Iberia, Lufthansa, KLM, Air France, and Edelweiss. These flights are vital to the reactivation of the tourism industry, which is one of the main drivers of Costa Rica’s economy.
Commercial developers and builders marketing to future rental property owners are seeing that their new home builds are experiencing a shorter list time and due diligence period. They are wisely focusing on second homes and vacation rental-style constructions (two to three bedrooms, modern, good amenities, and privacy) as this type of listing has been the biggest sales trend in the last six months. Those who purchase these properties can enjoy them for extended periods of time and also rent them to others for good returns.
Costa Ballena real estate market report by community
Our sales data for the Costa Ballena region that includes Dominical, Uvita, Ojochal, and their surrounding communities shows a total of 41 closed sales in the months of April, May, and June of 2021, equalling more than $20 million in sales. This is nearly equivalent to the total sales of the first three months of this year (traditionally the busiest time of year in Costa Ballena real estate). Sales for the month June have been the second highest of the year ($10+ million), which is unprecedented for this period and total sales for the year are nearly double what our office experienced in the same period in 2019.
In key holiday home communities in our South Pacific coastal region of Costa Rica, the level of highly-prized properties for sale has reached a historical low. Some developments, like Dominical’s stunning Costa Verde ocean view estates, have no listings currently left for sale.Sixty-eight new listings were added to the market in the second quarter of 2021 and 34 properties were put under contract (on top of the 41 sold).
The town of Dominical includes the smaller communities of Escaleras, Dominicalito, Lagunas, San Martin, and Punto Nuevo. Dominical has many new developments pop up in 2021, plus the opening of hip new stores, restaurants, bars, and lots of outdoor/adventure culture. The neighborhoods around Dominical are predominantly single-family luxury homes, condos, and high-end boutique rentals and hotels.
Rentals in the most upscale part of Dominical, in Escaleras, receive an annual revenue of $46M alone, with an average nightly rate of around $400 and average occupancy of 57% in 2021.
There were thirteen property closings in the Dominical region in the second quarter of 2021 and the average property sale value for this period was $820,000.
Uvita continues to be the commercial hub for the Costa Ballena in 2021, although the surrounding towns have greatly advanced in services and amenities available. This has allowed Uvita (which includes Playa Hermosa, San Josecito, and Ballena) to develop at a more casual pace than in years past. As a result, this area has seen a subtle decline in the amount of new development, although sales continue to track well in 2021. Many new boutique stores and restaurants have cropped up, supplying the existing community with a fresh influx of products and services in recent months.
Ten properties were sold in Uvita between April and June and the median home sale price was about $400,000. The average nightly rate for a rental in Uvita is $270 with an expected occupancy of about 48% during this time period.
Ojochal and the surrounding area that includes Pinuelas, Cinco Ventanas, Tres Rios, and Chontales are the most affordable properties in the region. Located at the southern end of Costa Ballena, the average sale price in the second quarter of 2021 was $244,000. This district had the highest number of closings at 21 properties sold in this quarter.
The average daily rate for a rental property in Ojochal is around $150 with a 43% expected occupancy rate for the month of June.
What Costa Ballena properties are worth right now
Compared to previous years, there is not much inventory on the market. There are definitely more deals occurring off-market or even pre-market, with buyers ready to pull the trigger on the right property as soon as they hear about it. This housing shortage is pushing home values up and the most popular properties are getting top dollar in a matter of days to weeks, rather than months, after listing.
But there are still a notable amount of properties that have been on the market for significant periods of time. Those that sit on the market are not unwanted. Despite all of the frenzied buying, today’s buyers are savvy and will rarely buy a property they consider to be overpriced. The majority do not have the time or interest in purchasing a home that is not move-in ready. This has resulted in many price reductions on homes that have been on the market for ninety days.
For properties listed right now that sit on the market for more than a month, there is likely a disconnect between what the sellers think their property is worth and what the buyers think the property is worth. Sellers currently have a number in their minds that is more than they paid but it may not be its true value to the market.
This is not a cut and dry definition of the current state of the Costa Rica real estate market, though. There are so many more new inquiries about Costa Rica properties this year than there have been in at least 10 years, if not ever, and these new buyers are still learning about our local market. Replacement value is difficult to calculate on older properties and the price and timeline of construction continues to go through the roof as more and more people choose to build new rather than buy an existing home.
Sitting here in the second half of 2021, right now feels like a prime opportunity for rental investors to find cash flowing properties in Costa Rica. We live in a land that hardly needs to be presented and promoted anymore. There are endless photos, videos, and blog posts touting the majestic beauty of the natural scenery that is so prevalent across this tiny nation. We know that people want to come here as soon as possible. And we have seen that those brave enough to invest in this time of relative uncertainty are feeling secure in their Costa Rica real estate purchases.