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 call the first-wave of intrepid and visionary investors – the Mavericks. We’ll continue on in the next article with Bob’s next steps and incredible gains on his visionary act.


A New Type of Property Buying Option in Costa Rica 1


Video done by Chuck Chastain of Aerial Media

Typically the type of property that I have sold over my years in Costa Rica real estate have been multi-acre, ocean view properties. These have been sold to hardy individuals that have deemed themselves up to the task of taming these jungle laden acres to their will – and then keep them that way.

There is a new trend popping up in various areas around The Zone that the term “urbanization” aptly describes. These are boulevards & lanes lined with single family home lots. The developer provides the services: water, electric and the road. The lots are 200 to 1,000 meters in size (1 acre = 4,000 mtrs). These bring to mind a common suburban residential area in other areas of the world.

These new developments to the area have made the thought of, and the ability to, buy a property in Costa Rica and in particular The Zone, a reality for a new breed of property buyer, not to mention the investors whose left eyebrow goes up when the concept is presented.

I was approached a couple of years ago by an investor who had a question. He was looking to pick my all-knowing Costa Rica realtor brain (OK, he was going around talking with various realtors.) He had purchased a large property just south of Uvita. Uvita was growing faster than any other growth that I have seen in my one-half-century-plus life. At that time we had 3 banks, 3 pharmacies, 2 Internet cafes, doctors, a dentist and numerous auto mechanics in Uvita. This was all just a few short years from a time when just getting to Uvita was a dubious bet. The growth was truly explosive.

When he bought, it seemed that there was no end in site. Uvita was a robust real estate market and the concept was blue-chip through and through. There would be a residential community behind a commercial center that fronted the coastal highway and – here’s the biggie – you can walk to the beach. It is located on the ocean side of the highway which made the blue of the blue-chip concept quite royal.

Then, 2008 happened. Someone turned off the lights on the world economy. The recession shut down the market so completely here that sellers who had repeatedly lowered their pricing were told: “you can lower your price to $5.00. It won’t matter. There simply are no buyers”.

This resourceful developer asked me what I thought about an urbanization idea. A walk to the beach neighborhood, complete with sidewalks and nice landscaping. The utilities are all underground and the lots themselves will be in the 500ish meter size range.

My response to him was “Michael, this has never been done here before, so we have to guess. My guess is that it will work, but it is just a guess.” To me the concept was akin to the early investors that bought land here in the area – I like to refer to them as The Mavericks – they bought land here in Costa Rica’s southern Pacific zone at a time when there was no rational reason to do so. It was so rustic and jungly that it required genuine “visionary” status to make a buying decision.

The Mavericks saw some insane returns on their decision. Turn a dollar into $120 and you’ll get an idea of the early days in the Costa Rica real estate market around these parts.

The spread for this 2nd tier investor is nothing like that. He is setting out to get his initial investment back and so with the bar set low, he has set out with an untried concept and voila! We have a neighborhood project just on the south side of Uvita where you can buy a lot for $40,000 and by the time all is said and done, you’ve got $200,000 into a beautiful home in a nice area with that oh-so-desirable walk to the beach component that so many are looking for.

Villa del Sol: 5 have sold so far. There is a lovely model home done and 1 house broke ground yesterday. I understand that one of the other sold lots is going to start construction soon.

Funny thing about this concept – others have had it as well. I am currently aware of at least 3 other such projects in the Uvita area. Two of which are being developed by Ticos (Costa Ricans) and one other by a US developer who has previously had some success with luxury homes. It appears that it is an idea whose time has come.

I can’t speak much about the other projects yet. I ran into one of the Tico developers the other day and asked him how his project is going. He has sold 15 lots in the $12,500 range. They are half the size of Villa Del Sol lots and the electrical wires are above ground, which is an important point. The net result, to my way of thinking, is that these won’t appeal to foreign tastes and will mostly sell to locals but… we’ll see. I assume that the US developer will go underground with his. I’ll post more as I get the data.

 


One thought on “A New Type of Property Buying Option in Costa Rica