We are in high season here in the southern pacific zone. The months of November through April are typically when there are more tourists here than during the rainy months.

There is another type of “high season” happening right now as well. This has more to do with world conditions. I know, those from the States are going to think that Mr. Trump is pushing many to look elsewhere. And I suspect that this is true to some extent. I think that Mr. Trump has been good for my Costa Rica real estate business. I think Mrs. Clinton would have been as well. Such is the world that we live in.

However, our property buyers here are not just from the States. We’ve got buyers from Canada, despite their currently weak currency. These people are buying property and essentially paying 30% – 40% more due to the exchange rate on their currency. One has got to wonder – why?

France, Germany, Great Britain – all are providing us here with buyers. Again: why? There are economic, political and security issues happening in various areas of the world. I suppose that greater analytical minds would come up with the cause and effect links in trying to answer the question. But I find that there is one common thread when I talk with these people.

The Reason:
Stress
is pushing, and the promise of less stress, is pulling people to consider a life in Costa Rica. Simpler living is highly attractive. Costa Rica offers this and it (simple living) seems to be the antidote to whatever may be happening in one’s home country.

Uvita, Dominical, Ojochal and the surrounding areas that make up Costa Rica’s southern pacific zone are all seeing an influx of buyers. But there is more. There are some big-money players who are making some moves here that are notable. There are condominium complexes being constructed, and sold at a good clip. There are town homes, urbanization projects and upgrades to some of the antiquated infrastructure in some of these areas.

There is some talk of giving Uvita a facelift. This is much needed. With both Dominical and Ojochal, you turn off the coastal highway and drive into the town. In Uvita, the highway passes right through the town. Up till now its growth has happened with hardly any attention to the aesthetic and it is essentially a strip-mall, Costa Rican style.

This is a pity since Uvita could really have been (or be made to be) one of the most beautiful towns on the planet. So if these well funded entities see the beautifying of the town as in their best interests, great! Although it’s hard to imagine what can be done, short of tearing the whole thing down and starting over again.

The Envision Festival is going on currently. This has become one of the largest events of the year. Kudos to the organizers. I’ve heard that 7,000 people attended last year, but that about half that number are here now.

Uvita Costa Rica's Crunchy Envision Festival

2017 Envision Festival Uvita Costa Rica

Some of the Ticos complain a bit about Envision, claiming that the drugs, nudity and general licentiousness is disrespectful to their culture. I suspect that there is some truth to these allegations, but for me, I’ve never met an Envisioner I didn’t like and the festival provides a time of some fascinating people watching.

I’ve not  personally ever attended. I can hear the music from my home well, the bass notes anyway, and I routinely provide rides to those thumbing to the grocery store and back. There is also the complaint of them being a bit odoriferous, but I can’t speak to this having lost my olfactory sense some years back. So I get along fine with them in my car and always enjoy their upbeat spirit.

So between the time of year and world conditions, sales are good here in the Zone’s real estate market.

About Property Prices:
During the recession, there was not much of a market here. It hit hard and us realtors languished waiting for the anomalous inquiry that might result in a sale. I actually got into brokering hard money loans during this time in an effort to not only make a little commission, but to also help some land owners to not lose their properties.

Prices plummeted during the recession. This was an interesting time. The pre-recession time was a “boom”. The biggest challenge for a buyer then was being able to find an available real estate agent. I felt like I should put a Baskin Robbins “take a number” device at the door. Some of these buyers were our good-old bread and butter retirees, looking to retire to Costa Rica. However, there were lots of folks who refinanced their homes and then found themselves cash-rich and wondering what to do with it. The causes of the recession helped to fuel some of that heady boom and resulted in pushing prices up to a rather silly level.

So the fall of pricing some 40% – 50% during the recession could appropriately be called a correction.

Much of our land here is still at recession pricing. There hasn’t been a big upward push on prices since then. The demand for houses is strong and so we’re starting to see some upward movement there – all very rational though. This is no heady boom. Its simply that the inventory which was glutted post-recession, is finally starting to get mopped up. This was inconceivable in the years following the recession due to the glut.

I still get asked sometimes why it seems that everything is for sale. I find this interesting since I have to really work to find properties for some of the criteria lists I build for my clients.

Yes, I suppose everything is, in fact, for sale, at some price. However, finding what you want, finding that screaming ocean view with good access and amenities nearby, and all this in your budget, can sometimes be a bit daunting.

And then there is that wonderful amenity “simplicity”. I wonder if this could be put at the top of the list. Right up there with “ocean view”. I’m thinking that this one amenity is the primary mover of the current strong market we’re seeing here in The Zone.


Let’s Talk Value in Costa Rica Real Estate 1


“How much is my property worth?”

Right from the Guys in the Trenches. Here is how we evaluate property, and where we/I think property values are going. Please note that this article is written by me, Ben, and that these ideas can vary from one real estate professional to the other, even within a single office. Rod may have contrasting ideas on these points.

Replacement Cost:

Costa Rica real estate

Appraising a Costa Rica Property.

The starting point the Costa Rica real estate professional uses in order to evaluate a property in today’s market is to calculate Replacement Cost.

Raw Land: We assign a value to the land. This value is based on market knowledge – ongoing efforts to sell, and of course, actual sales of land in the area. The value of a piece of raw land will get a surprisingly consistent evaluation amongst various agents polled. However, I’ll be putting a bit of a challenge on this point in a bit.

Construction Value: After establishing the value of the land as though there were nothing on it, we then measure the square footage of the house and assign it a price per square foot. Such is the life of a Costa Rica expat real estate agent. We live in a world where land size is referred to in metric (square meters – hectares) and houses in U. S. units (square feet).

The square foot value of a house is going to be bracketed somewhere around the $100.00 (USD) per foot. Contributing factors to this evaluation are: finishes, distance up the hill, steepness of the hill.

We are assuming that the basic foundation, drainage, and wall construct are dictated by universal laws that aren’t negotiable from one house to another. In Costa Rica you’ve got a few material choices, but the prices don’t really vary that much between them.  Concrete block is likely the most common. Cement panels are gaining some traction. Structural insulated panels are used by a number of builders. The use of wood in building is growing with Balinese architecture enjoying a fashionable presence in the market.

The construction of the roof can vary quite a bit and consequently can affect the per foot value. I know of one house in the zone that has a poured cement roof. This is cool stuff – absolute quiet during heavy duty rain storms, but we are talking HEAVY.

Less expensive roofs vary from the poured cement, to insulated sandwich layers, to tin with a dropped ceiling (the noisiest).

It is, arguably, the finishes that have the most direct effect on the value of the house. Granite counter tops – really fine plumbing fixtures, tiles and the details of the pool will push the bracket into the “over $100 per foot” range.

A pool adds $20,000 to $30,000 to the price.

Here is an example evaluation that I just did yesterday in my offce:

Raw land, $110,000

A 2,600 square foot house at $120 per foot. This particular house is located in an area that requires four wheel drive, so the shuttling of materials increased the per foot price quite a bit –
$312,000
+ $110,000
$422,000.

Pool – $30,000

Replacement cost – $455,000

So, what do we do with this number? These people have dedicated a year of their lives to building this house.  They flew to Costa Rica every 6 weeks to check in on the progress and of course, make the innumerable decisions that need to be made in such a project. What is that worth?

Merciless Market:
Well, frankly, this is the part that the Costa Rica real estate market doesn’t really pay much heed to. The big consideration at this point is, do we offer to sell your house at replacement cost, above replacement cost, or below? In today’s world, pushing the price above replacement cost is a function of the real estate Guy’s market insight. We are in a Buyer’s Market.

The agent will consider the desirability of the property. The view, the access, the privacy, the air motion and so on – the general niceness of the property are all considered.  Based on this criteria, there can be some upward movement from the raw replacement cost.

Perplexation:
Here is where it can get a bit strange. There are some houses that are priced below replacement cost.  How can this be?!? The land has an asset value, and the construction costs are fixed and don’t vary too awfully much from one source to another.

I am working on a new theory about this phenomenon in evaluating Costa Rica real estate

In my ruminations of this topic, I have come to conclude that there are two rational areas that we might have misjudged the value of a property. There is a third that can simply be explained by the seller being intensely motivated by desperation.

The Rational Considerations

Consideration #1 – The seller ran amok with making their construction and design a declaration of their personal individuality with the result that nobody in their right mind is going to want to live in such a structure. In order to buy the property and then live in it, the buyer will be taking on some serious expenses in order to make it livable for their purpose. The sale price is going to have to be adjusted down to accommodate these expenses.

Consideration #2 – I got the value of the land wrong. It’s not really worth what I said it is. This is the one that gets me, and brings about some interesting questions. Is land value here in Costa Rica really lower than what we are willing to admit? Hmmmmm…

What is NEVER factored in:
How much the seller has into the property.

I’m going to write more on the evaluation of property in our Costa Rica real estate market place. We have had some interesting discussions as of late with the vibrations of increasing buyer activity here in The Zone.


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