Costa Rica Real Estate Market Report, Third Quarter 2021

May 13, 2023 in Tips for Buyers, Real Estate in Costa Rica, Tips for Sellers

Our July to September Costa Rica Real Estate Market Report shows that homes and land are both hot on the market in Costa Ballena, Costa Rica in the third quarter of 2021.  There are almost no homes left on the market with an ocean view under $400,000-$450,000, say Osa Tropical Properties agents in October of 2021. In fifteen years of representing the Costa Ballena real estate market, these are the highest prices for listings that our office has seen in that time. "Turnkey, two-bedroom, ocean view homes with land and privacy and prices of more than $500,000 are selling right now," says Kevin Champagne, the owner of Osa Tropical Properties. And homes in Ojochal, Uvita, and Dominical today are selling for more than 93% of their list price with the majority of properties selling in under three months. These are just a few of the signs of a very strong seller’s market in Costa Ballena, and this is in the traditionally quietest quarter of the year. Read on to learn more about how and why today’s real estate market in South Pacific Costa Rica is so strong.

Seller Confidence is Growing in 2021

Potential property sellers are contacting our office in growing numbers asking if now is the right time for them to list. With supply so low in the area and an influx of new interest in Costa Ballena properties, “it has become a seller’s market,” said Kevin. Inquiries from foreign buyers remained steady in the third quarter, even after the borders were shut last year. They have since increased exponentially, with many more buyers putting in offers 'sight unseen' if they are unwilling or unable to travel at this time. There is an almost desperate demand for Costa Rica properties from buyers looking to escape big population centers and severe quarantine measures. Increased attention on Costa Rica as an escape destination is coming from people in high-pressure societies looking to move to a place with more natural beauty, peace-loving ethics, and a great sense of community. This attention has new sellers of in-demand properties in Costa Rica feeling encouraged by the amount of very quick solds in the area, despite only experiencing about one third of the tourism traffic of 2019. One of Osa Tropical Properties’ newest realtors, Katherine Apsey, has seen seller confidence grow in the last year that she has worked in our office. She has had dozens of would-be sellers approach her asking if she thinks that now is the best time for them to list or if they should wait for the market to grow.  Katherine, a savvy investor who has owned real estate in multiple international locations, including Ojochal, Costa Rica, says “we learned a huge lesson with Covid that you don't know what the future is going to bring, so if you are interested in listing, do it now. People are experiencing more of a sense of urgency to buy than ever before.”  But she is hesitant to say that sellers should wait to get top dollar. “I would say that it depends on their situation,” says Katherine. “If they want to sell and buy something else here, they will get a premium price and they will also pay a premium. If you are going to move back to Canada, don't sit around and wait for predictions. If you are thinking of moving elsewhere and want to get the max price on your property, you may be able to wait it out but the market may also take a sudden correction if situations change.”

Costa Rica’s Natural Assets a Big Draw For Investment

According to a study by the Biodiversity Finance Initiative (BIOFIN) of the United Nations Development Program (UNDP), the total annual value of Costa Rica’s natural capital is roughly around USD $14.5 billion, which equates to about 23% of the country’s entire GDP. Ecotourism is the main source of foreign exchange in the country. Costa Rica's Minister of Environment and Energy (MINAE), Andrea Meza, says, “more than a million people visit Costa Rica each year to observe biodiversity, generating an important contribution to the Gross Domestic Product. Certainly, ecotourism is just one of the many uses for biodiversity.” The latest data shows that Costa Rica maintains 4% of the planet’s total biodiversity in a territory that represents 0.03% of the earth’s total land and water mass.

Tourism in Costa Rica Slowly Rebounding

Costa Rica welcomed around 30,000 fewer international arrivals in August of this year than in July, ending a five-straight month increase in tourism numbers. This is not a big surprise because August through October are generally Costa Rica’s slowest months for receiving visitors. However, comparing August 2021 to the same month in 2019 shows that the country is down around 34% in tourists entering — an ongoing impact of the coronavirus pandemic. Interestingly, though, nearly 22,000 Europeans arrived in Costa Rica in August, marking the highest number of visitors from Europe so far in 2021. “Despite the travel restrictions established by the European Union for its citizens, these figures are encouraging for the gradual recovery of the Costa Rican tourism sector and generate positivism for the end of the year and the beginning of the high season. It also commits us to be vigilant in the application of health protocols,” said Gustavo Segura, Costa Rica’s Tourism Minister. The United States continues to be Costa Rica’s top tourism market. Of the 114,227 international arrivals, two-thirds arrived from the U.S. From January through August 2021, Costa Rica has received nearly 800,000 tourists. This is a far cry from the 3.1 million who visited in 2019 at the peak of Costa Rica’s international tourism. Tourism is one of Costa Rica’s principal economic drivers. Before the pandemic, it contributed to 8.2% of the country’s gross domestic product (GDP) and created 9% of the nation’s jobs, according to the Ministry of Tourism (ICT).

More Airlines Flying Direct to Costa Rica Again

Nine airlines are currently offering direct connections between Costa Rica and the United States: Delta, United, Alaska, American, JetBlue, Spirit, Sun Country (seasonally), Frontier and Southwest. All U.S.-based carriers that served Costa Rica before the pandemic have resumed service. In addition, Avianca announced new flights between Costa Rica and the United States that will begin later this year. By the end of 2021, all of Air Canada, Air Transat, Sunwing and WestJet plan to return to Costa Rica. They will offer nonstop service from Toronto, Montreal and Calgary with an emphasis on routes to Guanacaste.

Effects of Coronavirus in Costa Rica

With a population of five million people, Costa Rica has done its best to control the spread of the virus in the last year and a half. Travel advisories to Costa Rica continue to warn travelers of the spread of Covid-19; however, there are no specific measures stopping tourists from entering the country. The housing market in the capital region of San Jose has suffered considerably from the poor economy and a glut of inventory. The same has not been true of the market on Costa Rica’s southern Pacific Coast. This region of the country is far less developed, and is only growing with a number of new developments. Many properties went off-market in 2021 as sellers changed their minds about moving and traveling during this pandemic period, causing a further decrease in inventory. Former part-timers and investors in Costa Rica have decided to keep their properties this year because they have decided that they would rather stay in Costa Rica right now than be anywhere else.

New Developments in Costa Ballena

Road repairs are being done all over our coastal communities as the rainy season comes to an end. Numerous construction projects have been ongoing throughout the year, even in the more difficult rainy season, because of the sheer number of new homes, condos, hotels, and restaurants being built all over the coast. These projects require lots of big machinery, which takes its toll on our dirt roads in the mountains especially, and the municipality is paying for the much-needed repairs. Supplies for construction are becoming more difficult to procure and delays on projects are due to a lack in building supplies creating longer wait times than normal. Labor and materials have increased around 25% in the region according to local builder, David Lopez. https://www.youtube.com/watch?v=ls9ItRpnez8 Interview With A Builder In Costa Rica — Richard Owens Talks To David Lopez in Ojochal, Costa Rica New ASADA water pipes have been installed throughout Ojochal in the last few months, bringing legal water and building permits to developments that previously did not have official access to the aquifers. This development has brought many lots back onto the market and vacant property sales have really heated up in the third quarter because of the availability of legal water allowing for landowners to apply for building permits.

More Buyers For Costa Rica Real Estate

Americans were allowed back into Costa Rica last November, and the pent-up demand was such that it proved to be the busiest November in Costa Ballena real estate that our office has seen. But the end of this year is likely to eclipse last year with demand continuing to grow in our market throughout 2021. Digital nomads and foreign real estate buyers are driving the economic and tourism reactivation in the country, including the real estate and rentals market. Digital workers have become a social phenomenon that continues to grow on a global scale and many are finding their new home base in Costa Rica to be working well for them. The country has recently amended its previous requirements for residency applications to include a new investment minimum of $150,000 to apply (down from $200,000 up until August 2021). There are no restrictions on foreign buyers in Costa Rica and deals are commonly done in U.S. dollars. We have also noticed an atypical interest from locals around Costa Rica wanting to move out of the capital region, where the infection rate for Covid-19 is much higher. Some are looking for a second home, while others are looking to move down here permanently.  A significant number of Costa Ricans from the GMA have traveled to our Southern Zone region for the first time during the pandemic as international travel options have become more challenging. We have had a few Costa Rican buyers contact our agents saying that they didn’t know their country had such a beautiful, natural region with great cultural and community offerings, and some have decided to buy in the last year so that they can secure a more permanent escape for whenever they feel the need to get out of the city.

Buyers in Costa Ballena

Americans account for at least 80% of foreign buyers in this area in the third quarter of 2021. The rest are mostly from Canada and Europe. Osa Tropical Properties agent, Marcia Oro, is finding that her potential buyers who had initially decided to visit Costa Rica by the end of the year are considering changing their flights to an earlier time frame because of how quickly listings are going off market. She says “they have concerns that everything that they like will be gone by December.” To those who are still planning to come in December, she is saying not to invest too much attention into what is on the market now and to wait until two weeks before their trip to start picking out listings. “It is very difficult for my clients to deal with the disappointment of seeing properties that excite them go under contract so quickly right now.” Agent Rebecca Rowntree says that some clients have to miss out a couple of times before they learn the hard way that now is the time to act. “Everyone wants an ocean view, privacy, and lots of land for under $150,000 and we basically have nothing to show them,” she says. Buyers in Costa Ballena (Dominical, Uvita, and Ojochal areas) today are typically looking for clean, modern homes in the $300,000-$800,000 range. Homes in Costa Ballena today range in price from $200,000-$8,000,000.

Average Time on Market for Properties in Costa Rica

Of the 78 homes that went under contract in Costa Ballena between July and September, the average time on the market was around 13.3 months. More significantly, though, the median time on market was 6 months, meaning that the majority of homes sold in six months or less. Six months may still seem like a long time to foreign buyers who are not accustomed to buying destination tropical real estate, which is almost entirely contingent on the buyer’s ability to travel to the destination. However, in our destination real estate market, selling homes in one or two months (or less) is an incredible feat. Despite the inability for many to travel right now, the high number of under contract and sold properties in 2021 has displayed a big shift towards digital sales, with buyers putting in offers on properties sight unseen. That’s not to say that they have not visited Costa Rica before — most of today’s buyers have visited Costa Rica at least twice in the past. But the quick pace of great listings going under contract shows that today’s buyers cannot wait until they are able to travel to buy the property of their dreams at the right price. Of the 25 properties that sold in the third quarter of 2021 in three months or less, regardless of price, the most unifying qualities between them are that they are turnkey, newly-built or remodeled, modern, and fully-equipped homes. Well priced lots with excellent views have also been snapped up in the last three months. It is nearly impossible to find land with good privacy and views for under $200,000.

Prices on Homes in Costa Rica

Our region of South Pacific Costa Rica has seen a rise in prices in September, which was the biggest month for sales in the third quarter and all year. Ojochal was the top market for number of closings in the last three months, likely due to the lower average prices on listings.  Of the 99 properties sold in Costa Ballena between July and September, the average sales price was $346,700 (median was $339,000) and the average price for a home was $429,000. Dominical properties sold for $628,000 on average (down from $820,000 in the second quarter), which is quite a bit higher than Uvita’s $285,000 average property sold price (down from $400,000 in the second quarter) and $260,000 in Ojochal (up from $244,000 in the second quarter).  This is likely due to the higher volume of individual lots sold in both Uvita and Ojochal, as well as the smaller beach homes that are very popular in Uvita right now because of their affordable price bracket, typically listing between $200,000-$300,000. Properties in Costa Ballena sold for just over 93% of their list price on average in the third quarter of 2021. costa-rica-real-estate-market-report

Ojochal, Dominical, and Uvita Rentals Market in 2021

Rentals in Dominical, Uvita, and Ojochal are largely occupied by long term guests. Foreign buyers looking for property, home sellers who are in between selling one property and building another, and digital nomads working from home in the tropics are the biggest market for rentals today, filling many of the available properties in the area. According to Richard Owens, realtor with Osa Tropical Properties who represents a number of rentals in Ojochal and Uvita says that almost all of his available long-term rentals are fully booked for the foreseeable future. But this level of busy is not the case for all rentals. “Those who have luxury short-term rentals are having a harder time filling their homes for the price that they want. I represent some gorgeous listings that can truly be classified as luxury: panoramic ocean views, tropical modern architecture, and gorgeous floral landscaping, but they want $3500 per month at a minimum and it’s not the most sustainable price bracket for long-term rentals. Now, in the short term over the holidays, they are already fully booked. But that’s not the case all year round,” says Richard

Profitable Home Renovations Strategy

Prices for listings that have been on the market for a while are staying fairly static despite the over all increase in listing prices. We are seeing new listings coming onto market with higher price tags than historical comparisons, but these are largely the hot-commodity modern, turnkey homes. However, older homes in a more challenging state are taking months, if not years, to sell. Every property has its own story and situation and while there are no “apple-to-apple” comparisons between properties, but there is a formula for how to price properties in Costa Rica and there are simply some qualities that are more difficult for buyers to overlook. Room to negotiate on price is dependent on what buyers are looking for, how rare those qualities are, and the motivation of the sellers. Those who do choose to spend the time and money renovating old properties in Costa Ballena are finding themselves richly rewarded with the amazing views and privacy that older homes in the area tend to have, as well as a much higher price tag that they are able to put on their newly-renovated home once they are ready to sell.

The Future of Real Estate in Costa Rica

Although there is some discussion about the robustness of this real estate bubble, markets all over the world continue to grow and are not showing signs of slowing as Millennials reach the buying age for homes. This huge new market is keeping the current bubble from bursting and is feeding our Costa Rican markets, too, as a wave of digital workers are choosing to work from the tropics. The booming construction market has been ongoing during the rainy season in 2021 throughout Dominical, Uvita, Ojochal, and beyond, while more vacant land is being sold thanks to more water concessions. For now, Costa Ballena real estate looks like it is positioned for a very strong high season coming up.

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