How Election Cycles Impact Costa Rica Real Estate: 3 Trends You Need to Know

We've been anticipating a breakthrough for what feels like ages. The energy is palpable, bubbling just beneath the surface, and we know a surge is imminent. However, a significant barrier remains, preventing people from making the life-changing decision to buy property in Costa Rica. The US election cycle and high-interest rates are significantly impacting Costa Rica's real estate market, a topic of keen observation and discussion among realtors and market analysts.

Historically, US elections tend to create a period of uncertainty, which can lead to a temporary stall in buyer activity. However, out of the election outcome rise new avenues and opportunities for those willing to seize them.

In our 20 years of operation as a real estate office serving Costa Ballena, we've witnessed various cycles in the market. Notably, there was the significant building boom that began around 2004 (an election year) and continued until the end of 2008, just after the onset of the Great Recession, which was also an election year. The Costa Rican economy began to rebound in 2010 but didn't fully recover until around 2016 (another election year), when the next major surge of tourists, expats, and foreign investors started arriving.

Although the last election cycle in 2020 was dominated by COVID-19, the years since have seen the largest influx of foreigners to Costa Rica. We can only assume that once this dam breaks, the next wave of expats moving to Costa Rica could be even bigger than the last. Below are some cyclical trends around election time that reinforce our belief that now is the time to invest... before the rest!

Trend #1: Economic Uncertainty 

Elections, particularly US presidential elections, often create a period of economic uncertainty as people wait for the chips to fall where they may for the next extended period. Potential buyers might delay making significant financial commitments, such as purchasing foreign property, until they have a clearer understanding of the economic policies and stability the new administration will bring.

Elections often bring about uncertainty regarding future economic policies and political stability, causing potential buyers to adopt a 'wait and see' approach. They prefer to have clarity on the new administration's stance on issues like taxation, foreign investment, and economic policies before making significant financial decisions such as purchasing property abroad.

A veteran realtor in Costa Ballena and one of OTP’s newest additions to the team, Felicia Clarke has worked in the real estate and travel industries in Costa Rica for most of the last decade. She sees patterns from previous election cycles emerging again. “Previous elections brought our market to a slow pace during the election year. People are unsure of what is going to happen and are not sure where to put their money until they either feel safe or not so safe with the US government and what will happen with the market and their future.”

The psychological impact of elections cannot be underestimated. The uncertainty and media coverage surrounding elections can create a general sense of instability, causing potential buyers to pause and reassess their financial decisions.

Trend #2: Focus on Domestic Issues

During election periods, potential buyers from the US and other countries often focus more on domestic issues and the political climate at home. This distraction can temporarily decrease interest and activity in foreign investments. The stock market and other financial markets tend to be more volatile during election years, affecting investment portfolios and financial confidence. As a result, potential buyers may adopt a cautious approach until the markets stabilize post-election. Additionally, elections can lead to fluctuations in currency exchange rates. Buyers might wait for more favorable exchange rates to ensure they get the best value for their money when purchasing property abroad.

Long-time OTP realtor, Marcia Oro, has been working in Costa Ballena real estate for the past four election cycles. She observes, "In times of uncertainty, like before an election, people tend to hold off on making big decisions, including buying property. The US is very divided right now, which adds to the uncertainty. Over the years, I’ve noticed this pattern every four years—uncertainty leads to little movement in the market.” 

Impact of High Interest Rates

High US interest rates significantly impact Costa Rica real estate buyers. Higher mortgage rates in the US reduce the purchasing power of potential buyers, making it more challenging to finance international property purchases, including those in Costa Rica. Additionally, rising interest rates make US-based investments, such as savings accounts and bonds, more attractive, leading to a shift in investment priorities away from foreign real estate.

High US interest rates significantly affect Costa Rica real estate buyers not directly through Costa Rican financing options (although local options are expanding for foreign investors), but through the financial situations of buyers in the US. Higher interest rates in the US make it more difficult for potential buyers to secure favorable financing or sell their homes at higher prices, which affects how much cash they can bring to invest in Costa Rica. If buyers can secure home equity loans at lower rates in the US, they can access extra cash to purchase properties in Costa Rica. This indirect impact underscores the importance of monitoring US interest rates when considering real estate investments in Costa Rica.

However, post-election periods often bring the potential for interest rate drops as new administrations implement their economic policies. If economic conditions improve and inflation is controlled, the Federal Reserve might lower interest rates to stimulate growth, potentially reversing the trend and increasing US buyer interest in Costa Rican real estate. Monitoring economic indicators and policy announcements closely is essential to anticipate these changes.

Marcia notes that historically, a few months before the election, market activity starts to pick up as governments often lower interest rates to boost voter confidence. “Even though I'm from Canada, our rates often follow US trends. If interest rates drop, we’ll likely see more buyers entering the market. With greater certainty, even if only half of the US population feels satisfied, the unsatisfied will seek a new home in a peaceful country like Costa Rica.” She also notes that those who are satisfied with the election results may also have increased confidence in their country's economic stability. "This confidence can lead them to refinance their homes and utilize the equity to purchase property in Costa Rica," she says.

Trend #3: Increased Demand Post-Election

Following elections, especially when the results lead to economic stability and favorable policies for real estate investment, there is often a notable increase in buyer activity. This trend has been observed after previous US elections, where Costa Rica saw a rise in inquiries and transactions as buyers regained confidence and resumed their investment plans.

Over the past five years, real estate sales in Costa Ballena have surged by 44% from 2019 to 2023. The release of the latest Google satellite images for South Pacific Costa Rica in May 2024 highlights the region's expansion, showcasing new homes, services, and infrastructure development.

OTP realtor Richard Owens offers timely advice to potential buyers: now is the time to make your move. "Prices tend to rise after the election because many people hold off on purchasing. They sit on the fence, waiting too long to decide, and then it's too late. Recently, prices have been coming down." Richard also quotes one of his investment mentors, stating, "Even experts like Dave Ramsey recommend buying now while it is still a buyer’s market."

OTP's newest agent, Tonya Kershner, concurs with Richard. She has been working in real estate in Costa Ballena for many years but recently moved to our team. Her expert thoughts are: "Because prices are dropping, now is the time to buy. Due to pre-election uncertainty leading to a pause in buyer activity, prices do fall." However, she warns that "after the election they go back up."

OTP's newest agent, Tonya Kershner, agrees with Richard. With many years of experience in real estate in Costa Ballena, she recently joined our team. She shares her expert opinion: "With prices dropping, now is the time to buy. Pre-election uncertainty often leads to a pause in buyer activity, causing prices to fall." However, she cautions that "prices typically rise again after the election."

Felicia Clarke believes Costa Rica provides the escape many people seek after prolonged periods of uncertainty. "We all need to chill. That's why people move here. They want to make the most of life while they still have it."

Political events can also influence these trends. For instance, significant political developments in the US can impact the decision-making process of potential buyers. Regardless of political affiliations, Costa Rica's reputation as a stable, peaceful, and welcoming country continues to attract those looking for a safe investment and a better quality of life.

Act Now Before Prices Skyrocket!

Real estate prices in Costa Rica have remained high since the COVID boom, but many listings have been on the market for a while and are open to negotiation. We are currently in a lull, presenting a prime opportunity for savvy investors. Over the past year, there has been a 133% rise in sales of large tracts of land, likely earmarked for future development. Luxury homes that have been on the market for a long time are also selling now. Get in before the influx and secure your piece of paradise in Costa Rica while the market is still favorable. Don’t miss out on this opportunity to invest before prices rise again!