This entry is part 1 of 1 in the series Understanding Costa Rica Real Estate

Costa Rica History in knife metaphorI’d say that about 1/10th of my time spent with people looking to buy property in Costa Rica’s Southern Pacific zone is spent in the actual buying/selling of property. The other 9/10ths is a mix of conversations regarding what’s involved with living here, as well as discussing the business of real estate in Costa Rica.

At its core, the lack of an actual MLS (Multiple Listing Service) colors all aspects of the business here, and I’ll go into that later on in this series. To really understand the business of real estate here, I have found it helpful to go back in time and see the progression of events up to the present. This helps to not only understand the current market but also, to project what is to come.

Early days:
I got into real estate in Dominical in 2004. It felt like the day I got into real estate was the day that someone threw the on-off switch on the market. Since then I’ve heard some tales indicating that the market was already simmering and poised to boil.

I made a sale on my first day in the business. A $60,000 gorgeous ocean view property sized at around 2 acres.  The property featured Uvita’s Whales Tail front and center. That property has gone on to have a lovely home, guest house and pool built on it. It has been re-sold and enjoys a stellar vacation rental history (link to rental page on HomeAway)

Quick overview of The Zone:
The Zone is made up of a string of 3 towns with Dominical at its northern end. The northern boundary is not a hard line but is decidedly fuzzy, easily extending up to Hatillo and at times, up to Portalon. (link to Hills of Portalon Development).

From Dominical heading south on the coastal highway you get to Uvita and then further south, to Ojochal. The area between Dominical and Uvita has a nicely laid out mountain range that runs very parallel to the ocean. Hence the handle “coastal mountain range” This means that you can travel inland from the beach just a short way and get to elevation where it is breezy and cool and offers expansive views of the ocean and coastline, attributes which make this area extremely desirable to investors, relocators and migrators (part-of-the-year residents).

More History:
Before the incoming press of foreign interest in The Zone, the Ticos (Costa Ricans) owned all the land, and their land holdings were always in the multi-hectares (1 hectare = 2.48 acres. Think 2.5 to make it easy).

There was a time in the not too distant past when land in Costa Rica was nearly value-less. There were land-grant programs whereby a man simply had to be willing to take responsibility for a property and the government would “grant” him the land, with conditions.

At that time it was not known that “nature” had a lucrative aspect to it. Instead nature was largely viewed as “in the way” and needed to be tamed, subdued or eliminated. So, one of the conditions to receiving a land grant was to cut the trees down and raise cattle.

I suspect that this era may have coincided with the “McDonalds” explosion. This is an arguable point, so let’s just say it coincided with an extreme demand in the U. S. (and world) for beef.

After some time of cutting down enormous canopy trees and attempting to raise cattle in former rain-forest environs, there was a shift in our world’s appetites; nature became an important commodity. Granted, beef has continued to be an active commodity, but it was also learned that former rain forest land doesn’t necessarily make for the best pasture land.

Raising cattle in Costa Rica was a daunting struggle. The farmers found themselves up against nature. Having to maintain former rain forest jungle land in “pasture” condition presented its trials, as well as the fact that the beef business (exporting meat, bureaucratic inefficiencies, and 3rd world infrastructure or lack thereof) made a guy scratch his head and wonder if having all this land was such a good idea.

The Tico culture was/is multi-generational. These large, granted tracts of land, would end up being populated by the man who acquired the land, his now grown sons & daughters and their families, and the grand kids (soon to also have families.)

So despite having lots of land, a condition that in first-world countries equates to being wealthy, these farmers were subsistence. They lived off of what their land produced. As a child would grow to adulthood, Abuelo (abuelo = grandfather) would simply build them a house and apportion off some land (or not) and they would continue on contributing to the sustenance of the family. The land itself was not thought of in lucrative terms.

Abuelo just happened to acquire a land grant on, let’s say, 60 hectares of land that reaches from the inland side of the maritime zone on the coast up to the highest point of the coastal mountain ridge. He’s not thinking “oh boy! I’ve got some ocean view land here.” No, he’s thinking: “man I hope this land is fertile.”

Enter foreigner:
One day Bob, a tourist, is exploring the area and decides that he’d like to buy Abuelo’s property. Bob offers Abuelo $60,000 for the land. Abuelo has never even considered the remote possibility of maybe someday having such a sum. In fact, he’s never even seen that much money. He talks it over with his family and they (very understandably) feel that this would be a wonderful thing for them to do. So, they sell their land.

Bos is a visionary. He sees what is likely coming and so he stakes his early claim. Now, keep in mind that there is no electricity to this property, the access is horseback and the water is from a nearby spring that is bubbling out of the ground. Abuelo has run a pipe from the spring to an elevated storage tank near the family homes. Bob’s a visionary in that – what foreigner in their right mind would possibly want such a remote and forbidding piece of land?

To understand this is to understand the element that is credited with making the world go round. We all have different likes and dislikes. I wonder at the likes of Steve Jobs, Bill Gates and Paul Allen’s level of focus on the personal home computing idea at the time that they had that focus. I’m not of this ilk and so my hat is off to such ones. I view the early investors here in The Zone as being made of the same stuff.

In looking back over the history of the first wave of investors here, I marvel at their foresight. My then wife and I looked at some Whales Tail view property in Uvita around 2002 and, despite its being gorgeous and nicely priced, I felt that it was simply too remote. This was in the same area where 2 years later I sold my first property.

Ok, so I said that to understand the real estate market here in Costa Rica, it helps one to know a bit of the history. Granted, we’ve gone back to what I appropriately call the first-wave of intrepid and visionary investors – The Visionaries. We’ll continue on in the next article with Bob’s next steps and incredible gains on his visionary act.

State of the Market – October 2012 3

What is the current market like in Costa Rica real estate?

I get asked this question quite a lot these days. Well, actually that is probably the question that characterizes the life of a real estate agent anywhere – and probably at any time, except when it is clearly known that there is a recession or a boom, neither of which describes the time we’re in right now.

Houses at San Francisco's Fisherman's Wharf

We are currently in the depths of the rainiest time of the year here in The Zone (read: Costa Ballena), the area of the towns around Dominical, Uvita and Ojochal. For some reason this is the “low season” for tourism here. For those of us that live here, it is a delightful time of year. Sure, there are lots of days filled with rain, and at times unbelievable rains. But this is part of the appeal that brought us here in the first place. These rains are also what make the rest of the year so appealing. The southern pacific zone of Costa Rica is one of the lushest areas of Costa Rica, largely due to the fact that it truly is rain forest.

If I were to shop for property here in The Zone, I think that I would consider looking in October. You’d have no problem finding an available realtor, and you’d get to see what life is really like here, as well as be able to see how a potential property handles the rain.

Current Market:
The months leading up to October saw a surge in house sales. There was considerable activity in real estate, almost all of it in the house sector. Lots, on the other hand, not so much.

My crystal ball says that the coming season is going to be quite active and that we are going to see a reduction of house inventory due to sales. I see the coming season as a great time to buy an undeveloped lot. There are lots of lots, and many of them have been on the market for a long time, and many of these are high quality. Some of these sellers are needing to sell, and so are very flexible on their price.

A Little History:
I have written about this a number of times, so if you are a regular reader of The Guys blog, please pardon, but it bears repeating. To understand the real estate market here in Costa Ballena, all one has to do is look back in history wherever you may live. Go back a hundred, or a couple hundred years. Back to the time when all land was large, and probably farmland. Then, as people were drawn to the area, the large parcels got cut into smaller parcels. And then again, and again. Along the way in this cycle the occasional house is built, and so there is the occasional sale of a house.

Take the cycle out to the extreme.  The extreme of this can be seen in the picture of some houses at Fisherman’s Wharf in San Francisco at the start of this article. Houses built out to their property line.  The properties are miniscule and valued in the stratosphere with just inches between the homes.

So for a while in the cycle, the majority of land is in its “raw” state, and this type of property makes up the majority of what is available on the market. A house buyer has limited choices and so, despite their desire to buy a house, they end up opting for a lot and building.

This is where The Zone has been up until just recently. Most of the real estate business done in The Zone were sales done of raw land.  Now things have changed. For the first time in history there is now a selection of houses in all price ranges here.

I started in real estate here in 2004, which was clearly towards the beginning of a boom in the real estate market of Costa Ballena. The market was so ripe that buyers were, at times, hard pressed to find an available real estate agent. We used to joke about the (at that time) Baskin Robbins take-a-number approach. We would say that we needed one of those little devices that dispenses   with the sequential numbers so that we could manage the prospective buyers in order.

I would say, without any hard empirical data, that four out of five buyers would state their desire to buy an existing house, but that essentially all of them who bought, bought a piece of raw land. There simply wasn’t enough inventory to allow for finding a suitable house for their needs and taste.

The early arrivals to The Zone were a unique bunch. I think that all of them/us would agree that there was an out-of-round quality to them/us. And the houses they built were frequently expressions of their individualism. This makes for a difficult-to-sell house. Bright colors, turreted towers, inexplicable designs – the having to walk through a bedroom to get to the kitchen sort of thing.

Now things are different. The cycle is moving on. There aren’t many of the old Costa-Rica-formula of buying a larger piece, cutting it up and selling off part of it to make your resulting lot free. But the upside is that there is now a relatively nice selection of houses to choose from.

Its still a bit of work to find a house that suits your taste. But there are certainly middle of the market house designs, nicely situated, most with ocean views to pick from.

My suggestion for the investor (buy and hold to re-sell later), potential re-locator (planning to live here in their retirement, or some other, in several years), migrator (planning to spend part of the year here and part elsewhere,) is to consider an undeveloped lot. I suggest that the coming season will be a limited time to take advantage of truly low priced lots.
The Fear of Building

There has been, and for good reason, a fear of building a house in a foreign land. Early on in the cycle, it was, for obvious reasons, difficult to know much about the fellow that was going to build your house. Not to mention the difficulty in communicating with him. His English was likely not so good.

Now this too has changed, for the definite better (is that good English?). There are now builders here who have a track record of happy clients whom they can refer you to, and examples of their work that you can see. These all speak English well and have plans where you can even build in absentia with a reasonable amount of control over the progress of your building project.

OK, so I’ve exceeded my 1,000 word objective with this article. If you are coming down to Costa Ballena this season, and would like to know a reputable realtor with whom you can confidently work, you can consult me here, or you can go direct to my partner Rod who is happily working with United Country here in Uvita. Rod is the prevailing authority on available properties in Uvita, and is well versed in the areas all throughout Costa Ballena. Either of us can speak knowledgeably about construction options as well.

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