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Southern Zone Monthly Market Report for June 2018

 A second home in a tropical country is about leisure time.  It needs to have the amenities that the buyer wants, and be an oasis where they can have peace and get away from everything.

Forbes Magazine has been recently touting Southern U.S. destinations as good investments, particularly in Texas and Florida.  But thanks to the increase in tourism to Costa Rica, largely due to a government-run campaign to advertise Costa Rica to North America, Europe and Mexico, potential U.S. investors are finding their way further down south and falling in love with the change of pace in the land of pura vida.

Why do people choose to visit the Southern Zone?

According to InternationalLiving.com’s 2018 Global Retirement Index, Costa Rica has taken the top spot for the first time in the index’s history, topping the categories of healthy lifestyle and healthcare while scoring well in the fitting in, governance, entertainment and amenities, and climate categories, all of which are abundantly praised by the expat communities in our region.

The Southern Zone of Costa Rica is located on the South Pacific coast and has a diverse range of climates and amenities.  Many of those who move to the Costa Ballena – where the mountains meet the sea – are looking for a quiet area with a warm but breezy climate.

Younger buyers are drawn to this region for the many different options for schools in English and Spanish. And yet another priority that brings people to this region is the ability to buy land big enough to have privacy, room to garden, and to keep animals, both domestic and for farming, on rich, fertile land.  All of this can be found for a much lower price than in other more touristically developed regions of the country, as well as other comparable tropical destinations.

More than a few new buyers to this region operate their own foreign businesses, such as IT consulting in the U.S., meaning that they are able to work from anywhere and are choosing Costa Rica to raise their families in a simpler, more natural environment.  The internet service in the Southern Zone is fast catching up to world-wide standards, and you can get 6 mbps even in rural areas.

Our region is big enough to find pretty much whatever you need but small enough that you don’t feel overwhelmed by your daily routines. Many people who move to Costa Rica say that they mostly enjoy the human element of living in this here. It’s pretty much all small shops and when you go in, they really treat you like they are happy to have you there.

There’s state-of-the-art healthcare at about one third the cost of the U.S. and the cost of living reflects that reduction in expenses, too. Costa Rica is laidback and slower-paced and there’s none of the drama that’s coming out of the United States right now.

The increase in tourism is affecting the local real estate market

US buyers are driving up property demand in Costa Rica, with an increasing number of buyers from Canada, France, Germany, and Belgium according to Rodolfo Herrera, a real estate lawyer based in San Isidro, San Jose.  “They come here to vacation, fall in love and want to buy,” he says.

Higher median prices in the U.S. markets are now driving buyer interest in higher priced and luxury real estate properties, particularly for ocean view, beachfront, and near beach properties.  Buyers from hot markets in the U.S. like California and Florida see Costa Rica as offering great value in comparison to similar beach real estate in the United States. We still have luxury condos for under $200 per square foot, pricing that is rare in the USA.

Aside from its scenic beauty and lower cost of living, many Costa Ricans, foreign investors and High Net Worth Individuals (HNWIs) are increasingly attracted to this country mainly because foreigners are entitled to the same ownership rights as Costa Rican citizens, and there are low property taxes and no residency restrictions.

The principles of supply and demand dictate that when there are more options available, people can be choosier and know that even if they lose out on what seems like the perfect property, something else will likely come along that ticks off all the boxes. In our market, looking back to more than two years ago, buyers were more emotional then than they are now, and were a bit more selective.  These days, we are seeing more tourists (and potential buyers) reaching our slightly more distant destination (than others within Costa Rica) and buying up the inventory in the under $400k ocean view homes.

Guanacaste, which was once the most sought after destination in Costa Rica, has seen the biggest decline in residential property prices since 2017, with prices of both houses and condominium units in the province plunging by about 30% y-o-y in November 2017, according to the online marketplace Encuentra24.

Today, the most expensive and fastest-selling properties in Costa Rica are in the Central Valley, the greater metropolitan area where most businesses are, and in the North Pacific coast. The least expensive properties can be found in new developments in the Costa Rica’s southern region, such as the Osa Peninsula.

  • In Ojochal (Southern Zone), a similar property might cost around US$265,000.
  • In Tamarindo (North Pacific), 3-bedroom houses are priced at US$375,ooo.

Tourism has a huge impact on the real estate and rental market

The first half of 2018 shows a growth of 6% in tourists from this country to Costa Rica, according to the National Tourism Board (ICT).  This increase is also present in visitors from other regions such as Europe (14.2% increase on 2017) and South America with an 11.4% growth.  At the start of this year, ICT had already confirmed an additional 95 thousand plane seats, thanks to the arrival of new airlines and the increase in flight frequencies.

Costa Rica is the most visited country in Central America, capturing more than a quarter market share. Americans account for about 40% of all visitor arrivals in the country every year. It is estimated that about 100,000 American citizens live in Costa Rica and more than 1 million visit the country every year.

As a direct result of this increase in tourism, Costa Rica’s economy is expected to expand by 3.8% this year, according to the International Monetary Fund.  Gross rental yields on residential property in Costa Rica remain generally healthy, at around 5.6% to 8.6% at end-2016, based on the most recent Global Property Guide research.  These are quite good returns, even when costs such as taxes and other costs are subtracted from the gross figures.