There is no doubt that 2020 was the year of unpredictability, from dramatic stops and starts to multiple offers on properties that had sat on the market for years, as well as significant lifestyle changes in both work, home, and play. As we look to the trends for the first quarter of 2021, the excitement has boiled over and people are making real estate transactions faster than ever.
As a 15 year old independent real estate brand in South Pacific Costa Rica, making history comes with the territory. Our website and newsletter are a primary source of trustworthy real estate data and analysis of our local markets in Dominical, Uvita, Ojochal, Tres Rios, and Chontales. Even during one of the most paradigm-shifting modern events on record, we continue to remain committed to delivering this data to luxury real estate professionals and their clients all over the globe. We never miss a beat and we continue to move forwards. We dig into the stories behind the numbers and people are taking notice of our region thanks to these stories. We center our data around our agents’ experiences in the field, showing us the trends and what’s driving them. This report seeks to answer these questions.
Since March 2020, when much of the world declared a state of emergency and we saw one of the most dramatic stock market crashes in history, real estate investment has become a more popular option. People are looking for real assets in growing markets and Costa Rica is delivering. Owning real, tangible assets in a hot spot in today’s uncertain world provides huge gains by generating income and providing less volatility. The right piece of real estate can make you rich and you can live in it.
They say that fortunes are made during uncertain times and we are certainly seeing a growing number of people ready to capitalize on Costa Rica. Read on to learn more about what makes us feel so confident.
Market analysis for first quarter 2021
Forget the slow start to 2020 where all the unknowns of the pandemic outbreak had home buyers and sellers feeling a bit shy to pull the trigger. Real estate agents have had a full year to adopt new ways to respect social distancing guidelines when necessary. And with super low inventory in South Pacific Costa Rica, pent-up buyers are clamoring to enter the market.
The number of sales transactions and average sold prices in our market are increasing. 2020 was slated to be a strong year in Costa Rica real estate and after a dip in the middle of the year, the market picked back up when borders reopened. These numbers have continued to grow in 2021 and sales are skyrocketing. Even compared to the first quarter of 2020, before the borders closed, our website views are up almost 300% and the number of transactions has doubled. “There are a lot of people shopping online these days and dreaming about a new life,” says OTP agent, Richard Owens. “Even though the consequences of the pandemic are being felt in the global financial markets, many buyers are ready to pursue their dreams.”
Prices for listings that have been on the market for a while are staying fairly static but we are seeing new listings coming onto market with higher price tags than historical comparisons. Every property has its own story and situation and while there are no “apple-to-apple” comparisons between properties, there is a formula for how to price properties in Costa Rica. Room to negotiate on price is dependent on what buyers are looking for, how rare those qualities are and motivation of the sellers.
Many experts are predicting a strong housing market in 2021. They are forecasting increased demand from buyers who delayed purchasing homes because of the pandemic. The ability to tour homes and close on purchases virtually will make buying a home simpler in 2021. And Costa Rica is pinging on people’s radars for a number of reasons.
Why people love Costa Rica
There are many tropical destinations where people can move or invest. But there are few that tick as many boxes as Costa Rica. Buyers today are looking larger spaces with more distance from neighbors and Costa Rica presents some intriguing options. It is far less expensive to live here and buy real estate than more traditional destinations like Hawaii and it is one of the most politically stable nations in Central and South America with one of the lowest poverty rates.
The beauty of Costa Rica is mesmerizing and the more time that people spend here, the more confident they become in their goal to move here. In our more remote Southern Zone, you can watch the setting sun dip into the Pacific horizon while lush, green mountains tower behind your back. Ocean and mountain breezes rotate to refresh us in the always warm weather. Swaying palm fronds and flowering tree limbs wave to us gently while birds and bugs sing a symphony, lulling us into a continuous state of tranquility. The feeling of this place is unique and the people who come here are quickly entranced by the magic of Costa Rica’s nature.
Half of the region’s environment is protected by national parks. The rich ocean waters are warm all year and home to whales, dolphins, and turtles. The coastline is a long stretch of sandy beaches, natural, unspoiled, and uncrowded. All this is why the Southern Zone is compared with Hawaii and Tahiti by some folks — without the high price tag.
Road improvements mean the Southern Zone is now easily reached, yet restrictions on development mean it will stay boutique. By owning the right property, you can tap into an already large and growing demand for rentals. Costa Rica’s South Pacific has long had a powerful lure for travelers from the United States and Canada, as well as a strong tug on adventurous types from Europe who are attracted to spectacular beaches, lush rainforests, and incredible wildlife.
Luxury buyers of Costa Rica real estate
Costa Rica has developed a mature luxury market with a wide range of high-end properties in a variety of settings to attract foreign buyers. The country has become a haven for yachting and sailing communities as well as for surfers and sport fishing enthusiasts.
Costa Rica is known as the Hawaii of Central America because of its safety, comfort, accessibility, and tropical climate. Properties here are pricier than in neighboring countries because you have more luxury amenities and services here but it is still a bargain by California standards. A new wave of luxury buyers, for instance, are coming from large tech companies who were liberated to work from home. They are opting for the value of Costa Rica over more expensive homes in California with similar qualities. High-income families can still have a hard time affording homes in California and they get a lot more for their money in Costa Rica, including far lower property taxes.
The affluent are expected to continue to realign their priorities so that they are able to spend more on real estate and provide their families with a sense of security, health safety, and privacy. For the wealthy, this will mean that work, school, socializing, and entertainment will take place in their homes through much of the upcoming year and they have the means to make that space the best it can be.
Market driving factors in 2021
Work/lifestyle balance became cemented in 2020 and people now recognize that they have a need to de-stress their lives. Remote and resort locations have been the beneficiaries of this new set of priorities.
Strong buyer demand is coming from low interest rates, low inventory levels, new wealth from sectors that benefited from the pandemic, a millennial population that is ready to find a safe haven. This has resulted in a lot of second home buying, upsizing, and upgrading to more modern amenities. And as the fallout from this pandemic is causing an increase in taxes, people are accelerating plans to move to tax friendlier locales like Costa Rica.
The big question is whether current sales levels and price increases can be sustained indefinitely. There is always a point at which prices do become too high and demand levels off but for communities where inventory levels are at an all-time low, this trend may well continue far into 2021.
The events of 2020 highlighted real estate’s resilience. Agents became even more highly valued as clients relied on our expertise to guide them through their transactions. Efforts to safeguard wealth led people to cast wider nets into real estate, stocks, art, technology, gaming and other niches. Ideas about wealth itself also shifted as the affluent set sights on intangible luxuries like family health, safety, security, and space. The search for intangibles created a new group of buyers who are looking to find small town hidden gems in friendly and peaceful locations.
Intangibles are the new luxuries in 2021 as people realign priorities in the face of the pandemic. The intangible advantages of home are increasingly sought-after as people rethink their lifestyles. The value of their investment is in how they will spend time at home and taking those needs into account. Things like a pool, office space, and workout room are more important now, as are additional citizenships, on demand healthcare, etc. People have reevaluated their lives and decided that they want quality of life. Home is at the center of that.
Design Trends of 2021
A big design trend in 2021 is to bring the outdoors in and the indoors out, minimizing the distinction between inside and outside. We have learned the value of fresh air and open spaces and people are choosing their next real estate move based on which property offers the best indoor-outdoor flow. Time in nature can significantly support mental health and well-being, prompting people to look for properties in more rural locations offering access to outdoor recreation. Large yards are the top priority for buyers.
Home gyms and yoga/meditation areas a hot amenity for those who are actively working towards maintaining their health. Water purification and air purification are also becoming important amenities for health concerned, who want to live more sustainably and self-sufficiently.
Privacy has always been an important consideration in Costa Rica real estate and that is true now more than ever. The trend for ‘less is more’ was reversed in 2020 as more people listed mega-mansions, gated homes, family compounds, ranches, farms as the ultimate social-distancing retreats. And these are the types of properties that people are inquiries about more frequently. Homes with extra bedrooms and high square footage were challenging to sell previously but are now in-demand, as are resort-style properties with multiple dwellings.
The demand for turnkey homes is higher than ever this year. People who have a lot on their plate while spending more time at home do not want to add a remodel to a move. Renovating and remodeling during such a complicated time detracts from a property’s appeal. People don’t want to take the chance of having workers in their homes during a pandemic and buyers who are moving to Costa Rica want to get into their new homes as soon as possible.
Although modern styles are still the most popular, traditional homes appear to be making a comeback. Rustic cabins and Spanish colonial homes are making a comeback for their warm aesthetic, large rooms, and segregated spaces.
Buyers today love a great yard and everything that goes with it — the birds, plants, rivers, and weather. They are most happy with tranquil spaces that are away from neighbors and noise. They love being able to get out of the house without freezing, and even more that they can enjoy into their pool all year long.
Large residential developers in Costa Rica, particularly those with luxury builds, have chosen to include wellness amenities, private and separate spaces, as well as touchless technology has meant a considerable adjustment to many plans. The affluent want to invest in properties that prioritize their demand for health, safety, and mental wellness.
Good News For Sellers
As the distribution of Covid-19 vaccines increases, international travel will once again bring tourists and visitors back to Costa Rica by summer. This should have an even more positive impact on the purchase of vacation properties. For homeowners currently looking to sell, now is the time to work with your agent to prepare the home so that it’s turnkey to get as close to relatable asking prices.
Most real buyers think they will find huge reductions, but we have seen that at least in our luxury market, huge reductions in Costa Rica real estate are not a reality. There may be rare situations that a home or property in Costa Rica has a serious issue but those are isolated cases. We have seen motivated sellers willing to negotiate but most don’t want to negotiate much. Price negotiation will depend on property location, characteristics, days on the market and that special unique situation that buyers simply can’t say no to.
What our agents have to say
“So far this year, I am seeing a lot more high-end buyers of homes and luxury lots. Realtors, lawyers, and escrow companies all over the coast are extremely busy as a result.
“I’m noticing more interest in our home community of Ojochal. People who stay here on holiday are converted after experiencing the strong sense of community of this well laid out village. This is the place to be if you want to be on quiet, relaxed roads where you can walk your dogs with friends and see lots of people doing the same. It’s something you don’t see everywhere on the coast and people feel good here.
“A lot of my clients are waiting to sell their homes in the U.S. before buying here but others are seeking out investor partners to help them speed up their timeline. Some sellers are also able to offer short-term financing to help a deal along. This means that people are looking above their budgets just in case because they may have alternate sources of finance to draw on in case they don’t find what they are looking for in their price range.”
“Several of my sellers are taking their properties off market because they think Costa Rica is the place to be right now. And new buyers want to get here ASAP but those who cannot fly here right now are missing out on the prime listings, which are selling fast! Even Canadians with their weaker dollar and no flights to Costa Rica until at least July are buying remotely!
“Prices are going up and will likely keep doing so at this rate. Homes are regularly selling for close to asking price, which is something our market has not seen for a long time.
“Good lots are getting hard to come by and it seems like everyone wants to build a retreat center near a water source these days.
“People who weren’t serious before about buying are now feeling the pressure of not wanting to miss out. They feel done with their high-pressure lives and want to find a decent place to get away from strict regulations and high taxes.”
“Most of my inquiries and showings have been in the mid-range, between $500,000-$800,000. People want to get out of the cold and out of lockdowns and here, we feel much more freedom, like life is 90% normal vs elsewhere in the world. We still have mask mandates and people still gather in smaller groups than previous, but we spend so much of our lives living outdoors, dining in open-air restaurants and in this region a much less dense population than elsewhere in the country.
“I am getting a lot of leads from Canadians who feel frustrated with how the government is responding to this pandemic. There are new and increased capital gains taxes and the affluent are especially looking to invest their wealth elsewhere.
“Most of the clients I am working with are not yet willing to travel but they are starting the conversation and I am doing a lot of virtual tours over WhatsApp and Zoom. It’s still rare that people are making offers without coming down but they are seeing all of the sold listings in our weekly newsletters and they are feeling the pressure to bump up their time frames.”
“I have clients who extended their stay in Costa Rica because of new travel restrictions and strict quarantine measures. They have decided that they want to make their stay more permanent, or at least to secure a place for the future. They like the laid back vibe here and can’t imagine being back home based on stories they are hearing from friends and family or reading in the news.
A lot of people are looking for a great vacation home that they can rent out when they are not in the country. They may not be ready to make the move permanently but they know that they haven’t been anywhere like here and they want to make a life in Costa Rica a goal that they can work towards.”
“I am relatively new to Costa Rica real estate but the market seems really exciting now. People really want to be here. I get land inquiries regularly that I have to answer by telling them that the lot has already sold. This makes is difficult to share properties with potential buyers who are not in the country because by the time they make it down here, that property may likely already be off market.”
“We appear to be in a seller’s market and buyers are still catching up. I am working with many buyers who are trying to find homes in Costa Rica and I have partnered with a great buyer’s agent who has a huge database of International Living readers so I’m seeking out the best deals for his investment group. They know that Costa Rica’s South Pacific has a really strong rentals market and they are looking to buy the best turnkey homes — sometimes site unseen.”
“As a native French speaker and fluent in Spanish, I am working with a lot of clients from Europe and some from within Costa Rica. Those outside of the country want to come as soon as possible as soon as restrictions are loosened.”