Costa Rica Real Estate

“Few people actually stumble into wealth.”
- Smith Barney (although I couldn’t determine if it was Mr. Smith or Mr. Barney?)

In Part One of this article, I outlined how million dollar houses fit into the Costa Rica real estate landscape, specifically in the southern Pacific zone (The Zone).  There are a few obvious reasons to buy a luxury home in Costa Rica—

*  It’s A Buyer’s Market (Prices are down approx. 50% from the peak in 2008.)
*  Desirable Area (International Living Magazine rated The Zone as, “one of the top three real estate destinations in 2010.”)
*  Stable Prices For Construction Materials And Labor

The three-year Costa Rica real estate trend has reflected a significant drop in value, including property in the luxury home category.  Although there are some very nice million dollar homes in the area, this young market enables another popular strategy— Buy-And-Build.

Buy and Build

The majority of buyers who come down to the greater Dominical area with a plan to purchase a house, often end up purchasing raw land instead.  The reason is the area has a relatively small inventory of quality homes with floor plans and finishes that appeal to most North American and European home buyers.  So, they end up buy raw land or a lot in an established development, design their home with the help of a Costa Rican architect, select a builder, and then start the building process. Read the full story

Hydroelectric power is BIG in Costa Rica.

The Costanera Highway, The Caldera-San Jose Highway, The Cortez Hospital, The International Airport and The Diquis Hydroelectric Dam… it is easy to see that Costa Rica is serious about improving its infrastructure and securing a bright future.

Over the past decade, the dramatic increase in tourism and investment has sparked a bit of a power-struggle between proponents of economic growth and socio-environmental protection groups.  In this case, the “power” is the proposed billion dollar hydroelectric project called “El Diquis” near Palmar in the Osa Peninsula.  This isn’t recent news, but I believe it is worth mentioning as it will affect life in various ways in the southern Pacific zone of Costa Rica.

The Zone Is HOT

This large-scale project, facilitated by I.C.E. (Instituto Costarricense de Electricidad), is calling for the construction of a dam on the Térraba River in the greater Boruca Canyon. The dam will create a lake equaling approximately 25,000 surface hectares (over 6 million acres), the largest of its kind in Central America.  By comparison, Lake Arenal is roughly 8,500 hectares.

This station will generate up to 630 megawatt units capable of providing over one million families with electricity!  This project is about Power, both electric and economic.  According to a Continuum report commissioned by the Costa Rican government, Read the full story

While browsing the storefronts of Quepos the other day, I saw this Hurricane History Map in an office window.  What caught my attention was how Costa Rica was completely free of any direct hurricane/tropical storm trajectories.  People ask us if we get hit by hurricanes, and now it’s nice to have a chart showing just how ideally located Costa Rica is, especially on the Pacific side.  Clearly, the vast majority of tropical storms and hurricanes are born in the oceans to the west and especially the east of Costa Rica, and then almost always track north.  In recent years, only Hurricane Cesar and Hurricane Mitch (1996 and 1998, respectively) traveled all the way across the Central America landmass.

Even though Costa Rica is Hurricane-free Zone, it still feels the effects of heavy rainfall from time to time.

During the hurricane season, June 1^st – Nov. 30^th, Costa Rica will occasionally feel the effects of these major hydro-meteorological events.  Tropical storms are more common than hurricanes in Costa Rica, and it is important to note that heavy rain isn’t the same as heavy rain AND 100+ mph winds!

According to this NASA webpage, “Tropical cyclones are like giant engines that use warm, moist air as fuel. That is why they form only over warm ocean waters near the equator.” The small towns in our area (e.g., Dominical, Uvita and Ojochal) are located at approximately nine degrees north of the equator.  The benefit of being at this latitude, and on the Pacific side of Costa Rica, is the wind is significantly lighter than along the Caribbean storm corridor where hurricane winds can rip off your roof.  I suppose that’s why the famous Portuguese explorer Ferdinand Magellan called the Pacific Ocean, Tepre Pacificum or “Peaceful Sea”.

What Does This Mean For Pacific Zone Residents and Investors? Read the full story

Seller Financing Open The Door in Costa Rica

The Downturn… (cue ominous music)

It would be easy to label the decline of the Costa Rica real estate market (since the peak in 2007) in a negative light.  In truth, there is no such thing as “negative light” only the opportunity for change, and if our market has seen anything over the past three years, it is change.  The shift from bank loans to seller financing is one of the primary changes that has (pardon the pun) opened the door to prospective home buyers, as well as, land and commercial buyers.

Before defining the effects, basic models, and legal structure of seller financing, let me back up just a bit to clarify why we now find it present in about half of the Costa Rica real estate deals we facilitate.  Like most lending institutions around the world, Costa Rican banks are better described as “institutional holders”.  Banks are not lending for a few reasons— falling real property values, the recession, and they are not lending to each other (e.g., no credit to leverage).  In Costa Rica, the debt-to-income ratio required to obtain a loan is as ridiculous as the double-digit interest rates being charged (often twice the rates in the United States).  The banks’ parsimonious response has opened the door to seller financing, and Costa Rican property owners have embraced the new paradigm.

Sellers Get Creative

“What do I need to do to sell my property?”  We received this common question too many times to count over the past few years.  Our answer typically included these answers— Read the full story

Have we hit bottom?

In the movie “Back to the Future” we saw an example of how beneficial it would be if we could tell the future. The character Biff Tannen gets his hands on printed results from some race track and other sporting events, before they happened, and went on to achieve phenomenal wealth.

In real world economics, the trick seems to be the ability to identify trends and accurately guess what is going to happen prior to it happening.  Here in Costa Rica, the real estate market is no different.  Discussion and speculation about the future run rampant.  Hints & clues are analyzed in a constant effort to make wise buying (and selling) decisions.

It caught my attention this morning when I received the following in an e-mail from an agent in one of the local real estate agencies. He was writing to update us on a client of ours that we had asked him to help with. Without trying, our associate provides a clue as to what the current state of the market is, and perhaps, where it is going.

*Hello [Guys],

Thank you for giving me the opportunity to assist you with the property interests of the Schmegerworgs (names changed to protect the innocent).

I feel it is of the utmost importance to give your potential buyers the Tico Times of today, Friday, Sept. 10 newspaper that explains in detail the past and current real estate market place that will back up exactly what I mentioned to them about the market picking up right now and that 2009 was a slower year (click here to read the article online). I feel it is important that the wife understands if we show them a property at a price point that makes sense and feels good in their heart, they need to move forward with a purchase as good deals are selling and we cannot always replace a fire sale or “perfect property” that one lets go by.

I truly feel our BOTTOM market has passed us and current activity with all us of can only prove that.

Whether we sell them something together or if you sell direct, that is all fine with me as I feel there is much business for all of us survivors right now.

Please take care and have a great weekend.

(Its noteworthy that this e-mail is from a “competitor”.  One of the really promising aspects of the real estate industry here in Costa Rica’s southern zone is the amount of cooperation between all the agencies.)

The ability to identify “bottom” is the hallmark of a successful investor.  It is extremely difficult to do, which explains why so many of us speak in terms of “would’a, should’a ,could’a” when talking about our investment history.

So how can we identify the bottom in the market now?

Indicators:

One of the more prominent factors are that there are less Fire Sale properties on the market now than there were before.  All the reports that we are getting from the other real estate agencies in the area are that they are busy.  This is not just under $100,000 ocean view lots.  It seems that the $300,000 home is a hot item now that won’t last long on the market.  There are also a number of larger, more removed parcels, selling.   Some of these have topped the $1,000,000 (USD) mark.  There is a growing interest in “off the grid” and “community-style” living.

We had one of our favorite developers approach us some months ago and indicate that the recession was finally affecting him, and that he really needed to sell some property.  Long story short, since that time he has sold a house and two lots, making him well.

All of the above activity was stimulated by the market ebb & flow.  The market was and is down.  The inherent quality of the properties that are available in Costa Rica’s southern pacific zone is compelling.  The low prices on these properties has caused enough action here to cause us to wonder what all this talk is about a recession – (well, not really, but almost :0)  Savvy buyers are here snapping up the deals.

No one knows what the future holds.  Things are changing on the global scale, some of which is unprecedented, causing insecurity.  We really have no idea what to expect in the future.  There is the unmanageable deficit in the U. S. There is China.  There is talk about the “double dip” recession.  There is global warming and other environmental concerns.

So have we seen the bottom?

Hard to say.  However, if you were a fly on the wall of the Guys In The Zone office (or any other real estate office in the zone), you’d hear conversations that would make it seem so.  We’ve had a number of folks come through during the down time that have found what they were looking for, but then felt that they had time to decide, to “think about it”. Or perhaps they think that prices will even come down a bit more.  Our feeling is that the time to buy has been here now for some time, and may well be passing.

What we do know is that we haven’t seen prices this low and on such a great selection for some years.  So, whether “bottom” is behind us, or lies yet ahead, we’re pretty confident that now is a decent time to buy a piece of property in Costa Rica.

Shameless Plug: Click here for all Guys In The Zone real estate listings

* Keith Schenkel of Costa Rica Real Estate Services

Half of my family is from Canada, eh.  My mother grew up in Newfoundland until the age of 13 when my grandfather found work in California.  The extended family that stayed behind, some later moving to Ottawa, would frequently visit us in the San Francisco Bay Area, especially during the cold, winter months.

A few years ago, when I moved down to Costa Rica full time, I realized there are a lot of Canadians visiting (102,471 in 2009*) and living the area.  One of the main reason Canadians (virtually all nationalities for that matter) visit, buy land, and in some cases, relocate to Costa Rica is the weather.  As one client put it, “Shoveling snow sucks.”  I have only experienced it a couple of times in Lake Tahoe, California, and I’d have to agree.

Canadians in Costa Rica

Shorts, No Shoes
The Southern Pacific Zone (The Zone) is the tropics.  Those living near the beach are rarely (if ever) cold here, and most people walk around in shorts 365 days out of the year.  For those who “melt in the heat”, The Zone’s unique geography offers many cooler locations up in the mountains, most offering spectacular views, waterfalls, and close proximity to the beaches and/or San Isidro, one of the fastest growing cities in Central America.  It rains 6 months out of the year, but even in September most mornings begin with blue skies and sunshine.

Active Adult Communities
The landscape and its wildlife are spectacular.  In fact, I’ve seen it written that the Corcovado National Park on the Osa Peninsula is “home to more plant & animal species than all of North America combined.”  Add in the many outdoor activities available in the area— world class sport fishing, whale watching, bird watching, hiking, golf, tennis, and surfing to name a few — and retirement in Costa Rica is actually when many expat residents really start living.  In fact, I just left two clients who were headed to a waterfall, then to the Whale’s Tail in Uvita for a low-tide beach walk and snorkeling session.

Another reason Canadians love Costa Rica is the cultural adventure.  It starts with the ticos.  On the whole, the polite locals are family and community-focused, and even the toughest-looking hombre will break into a smile if you smile.  Yes, there are a few cultural nuances to adapt to—“yes” doesn’t always mean “yes”, “tico time” means being late, strange driving habits— but ultimately these are all opportunities to take a deep breath and grow a little.  The Zone has a safe, laid back feel to it… add a hammock and a good book into the mix, and it is relaxation-defined.

A “Lot” For A Little
Foreign investors continue to visit and invest in The Zone.  Add in the fact that annual property tax in Costa Rica is .25% and there is no Capital Gains Tax, and the investment picture is even more appealing.  Canadian citizens who claim non-resident status and have residency in Costa Rica are not double taxed by the Canadian government on their Costa Rica income.  If you’ve always wanted to make Costa Rica your home, please consult your tax attorney for more details.  But, in summary, to be a non-resident Canadian you must—

1. live in Canada for less than 183 days in the tax year
2. not have any residential ties (e.g., cars, houses, a spouse or dependents) in Canada.

We see a lot of people visiting, buying and relocating to The Zone.  There is so much room for growth here, success only requires imagination, a little research, and some good connections.

Beautiful weather, abundant wildlife, friendly people, and good investment opportunities… no wonder so many Canadians are buying real estate in the Southern Pacific Zone of Costa Rica!

*http://www.visitcostarica.com/ict/paginas/modEst/estadisticas.asp?idIdioma=1

Talk Show – Episode 7

Talk Show – Episode 7

Pura vida, compadres! With a focus on Costa Rica real estate, Episode 7 features our impressions on topics like–

The Rainy Season
Property Prices
Seller Financing
The NEW Forum

Thanks for watching and following us on Dailymotion, Facebook, Twitter, and our websites– www.GuysInTheZone.com, www.hotcostaricarealestate.com, www.Dominical.biz, and www.Uvita.biz.

Water is a necessity.

If you ask the World Bank or one of the mega-water corporations (e.g., Coke, Nestle, Vivendi), fresh drinking water is a commodity.  If you ask virtually everyone else in the world (including the United Nations), fresh drinking water is a basic human right.  Whether it is the encroachment of privatization or Nicaragua’s plan to divert the San Juan River[1], water in Costa Rica is an increasingly lively topic.

One of the most popular questions for potential property owners is, “What is the water situation for this property?” Most of these new investors come from North America and Europe, areas that have hundreds of years of infrastructure development.  However, this southern Pacific region of Costa Rica is still early in the cycle of development.  We continue to see rapid growth in communications (cell phones and high speed internet), power (high tension power lines), and roads (the newly paved Costanera between Quepos and Dominical).  That being said, cell phones are a luxury, but water… is a necessity.

Property In A Development

Most quality developments have a water system that has been installed by the developer.  The most common sources for these systems are high flowing springs, and in some cases surface water (e.g., creeks and rivers).  Some developments, like Osa Estates in Uvita, even have back-up systems and extensive water storage capabilities.  The interesting thing is very few developments actually have a concession (permission to extract water from the ground).  The good news is the majority of them are “in process”.  Either way, the developer usually provides the property owner a prevista (water right document) which guarantees use of water into the future (assuming the property owner is in compliance with established CC&Rs and other laws).  Proof of a water document, like a prevista, is also required by the local Municipality before they will approve any construction project on a property. Read the full story

I was standing in the outfield at the Saturday Softball game in Uvita, when the feeling hit me. It was the warm feeling you get (and I’m not referring to the direct sun variety) when you are with a group of people having fun. In a word: community.

We have a special one down here in the Southern Pacific Zone of Costa Rica. Perhaps it is the international mix of ex-pats— Germans, French, Italian, Swiss, Argentinean, Canadian, Mexican, African, Chinese, and the list goes on. A variety of backgrounds and personal stories better than any television series— the crazy Italian chef turned humble bread maker, the ex-radio personality turned successful bar owner, animal activists, people activists, retired couples from Atlanta to Ibiza…. the list is long and varied. It’s diversity meets adventure meets pura vida, and we love it.

For many investors, Costa Rica has been (and continues to be) primarily a smart place to put your money. And, that’s fine; investing is encouraged given the bright future of the country and region. But, for those people considering a permanent (or semi-permanent) move down to Costa Rica, the reasons stretch beyond democracy, economy and sunshine.

Variety evolves culture. This is especially true with the exotic cuisine found in the area; there is even a restaurant named Exotica, and it is excellent. In addition to numerous Tico restaurants, international options include—French fusion, organic Italian, Japanese sushi, Curry Night, and yes even elements of “the western diet” satiate the The Zone’s inhabitants.

In addition to these restaurants dotting the landscape, a staple of any conscious community is the farmer’s market. There are in fact two weekly farmer’s markets in The Zone—Thursday and Friday in the fast-growing city of San Isidro, and the Saturday Farmer’s Market in our sleepy beach town of Uvita. This relatively new farmer’s market offers an increasingly broad array of (mostly) organic produce, baked breads and pastries, homeopathic elixirs, and hand-made gifts. I consider all of these wonderful vendors “artists”, as you only need to grow or create something and share it with others to qualify. In fact, we have more photographers, painters, writers and musicians per capita than any place I’ve ever been. Perhaps it is this artistic quality that blends so nicely with the laid back, friendly nature of the Ticos.

Most of the people living here agree that the economic downturn is no excuse to lose sight of the importance of doing what we love. In fact, it compels us to re-adjust our sights on something uplifting and sustainable. Simply put, Ben and I love helping people invest in property in the Southern Pacific Zone of Costa Rica. We love every aspect of this service—putting deals together, hiking around large farms, chopping tall grasses with machetes, designing new websites…. all of it. In fact, work doesn’t feel like work at all. Experience tells us the recent drop in property prices will soon hit bottom (if it hasn’t already), and another long rise will begin.

This coastal area, as my friends in California like to say, is golden. The reasons are many—low population & construction density, great value, the Coastal Highway is almost paved between Quepos and Dominical, an International Airport in our future, it’s a tropical paradise. And, let’s not forget the original inspiration for this article—community. It’s not something you can put a price on. It’s something you feel.

Especially on days when you observe 20 gringos cheering for a Tico kid who hit his first home run.