Investing In Costa Rica Real Estate In 2020

Osa Tropical Properties team predicts a seller's market on the horizon for Costa Ballena real estate.

Many of our clients, both near and away, have realized that Costa Rica is the best place to be before, during, and after this pandemic. While COVID is devastating parts of the world with more than 2.76 million cases and 196,000 deaths to date worldwide, Costa Rica’s series of extreme measures to stop this invisible scourge appear to be working. Costa Rica currently has 687 confirmed cases with over 12,000 tests conducted in a population of more than 5 million, and, unfortunately, 6 deaths. Meanwhile, many countries around the globe are in a complete state of chaos trying to care for their many affected, working hard to get medical supplies to their hospitals and support to their teams.  Costa Rica’s small scale -- both in size and population -- has many big benefits, including the ability to take appropriate actions to stem the tide of this pandemic. Although many of the measures taken by the Costa Rican government can be viewed as harsh or intrusive, like nightly curfews and driving restrictions, most expats and nationals are happy to oblige for the greater good, as opposed to living in a country that is being severely affected by the virus. Most of us living here in the Southern Zone only venture out for our daily exercise or to go to the grocery store. There are very few people on the roads or in stores and most people are respecting the recommendation to stay at home. The good news is that when this is all over, Costa Rica will undoubtedly resume its place as one of the world’s premier travel and retirement destinations. And our Osa Tropical Properties’ team prediction is that we will see our local real estate market move to favor sellers very soon.

Why a Seller’s Market?

In these times of economic turmoil and uncertainty, alternative assets are top of mind for many investors. Real estate has proven one of the best investments to weather a crisis and this current economic downturn is no different. More specifically, Costa Rica real estate is uniquely positioned as investors seek stability, steady yield, and diversification. Our real estate market has over the decades proven to rebound quickly after the global economic downturns of the 21st century. Investing in Costa Rica has allowed others to tap into the higher growth potential (and lower costs) of this emerging economy, while also exploring different asset types and geographies, unique tax advantages, and a more global lifestyle.

Despite the Crisis, Opportunities Abound

You might be thinking — “but what about the pandemic that’s currently decimating each and every market around the globe?!?” Of course, the downturn has dramatically impacted the immediate prospects for real estate worldwide. Even in normal times, buying property abroad was a complex and risky endeavor. Now, as virtually the entire world is on lock down, it’s become a fair bit trickier. However, as the chaos unfolds in the coming months (and years), opportunities will undoubtedly emerge as well. Savvy investors are keeping a close eye on the markets and positioning themselves to move on great investments when the timing is right. Although there are prolific economists currently writing that international real estate markets are about to experience massive levels of distressed inventory, motivated sellers, and rock bottom interest rates, our Osa Tropical Properties real estate team are forecasting a brighter outlook for both sellers and buyers in South Pacific Costa Rica. For instance, those with ample cash on hand, who are tired of stomaching the volatility of the various stock markets’ ups and downs, are looking for safer places to invest their money.  Buyers of Costa Rica real estate most typically pay in cash. Consequently, sellers are not feeling the immediate pressure of needing to sell. We are seeing our clients buckle down and hold firm to their prices, believing that the market is about to turn in their favor. Or they are actually deciding to take their properties off the market — either to curb low-ball offers, or because they have realized that they no longer want to sell. Three of OTP realtor Marcia Oro’s sellers have contacted her about taking their property off the market because they have realized in the past month that they love living in Costa Rica and prefer not to return to the US or elsewhere. All in all, our clients are feeling the true value of their Costa Rica property, now more than ever.

The Value of Property in Costa Rica

Offers are still currently being made on real estate in Costa Ballena and, perhaps surprisingly to some, they are not the low-ball offers that can be expected in such times of economic uncertainty. Today’s buyers are seeing the full value of purchasing property in Costa Rica, rather than simply the fiscal value. Therefore, sellers who paid for their Costa Rica investment in cash — who are not feeling that they are in a weak financial position — are ready to hold firm until borders reopen and the tourism sector undoubtedly reignites. Tourism and rental demand will remain slow in Costa Rica for some time (just like everywhere in the world), but this major international travel and expat hub is well-positioned to bounce back and regain its growth trajectory soon enough. Fuel prices are low and the prices for flights are poised to be at a record low when borders reopen. And Costa Rica will certainly remain a perennial, world-class travel destination thanks to its pleasantly warm weather, vast amounts of green and marine spaces, and peaceful, welcoming vibes. So as the world reopens and things begin to move again, we can expect our local real estate market to inevitably rebound with a vengeance.

Defending Against Inflation with Real Assets

This is an opportune time to put that capital to work, finding ways to move into more resilient and productive long-term stores of value. Investors should set themselves up now and wait for the rental markets and tourism to return. As governments worldwide pump unprecedented levels of new stimulus money into their economies (with trillions more on the way), we are ultimately heading for a period of high inflation. Generally, “real assets” maintain their value and provide the most effective hedge against an inflationary environment — none more so than real estate itself. Investing in historically strong real estate markets helps investors create stable and income-producing portfolios that defend against impending inflation. 

A Flux Market Ahead

These uncertain times will eventually pass and, as things shake out, there will be exceptional opportunities to be had. Although a few highly-leveraged sellers may be in a position that requires them to lower their price for a quick sale, like a few hotels and businesses in the region, most sellers will find themselves among a smaller number of comparable properties on the market as more people decide to stay in Costa Rica. “Snow bird” expats who decided to leave Costa Rica sooner than they typically would at the beginning of the COVID pandemic are contacting us saying that they are regretting their decision. They were thinking that they should go back north to be with family. But now they are wishing that they had instead paid to fly their families down to get away from the danger and chaos around them. These people now believe that they are better to live in tranquil Costa Rica, which they view as a safer place to be for financial reasons, health reasons, lifestyle reasons, and political reasons, too.

OTP’s Team Market Forecast

Only last year, we reported that more than half of our buyers were investors who felt good about the US economy and that it was a good time to invest in an income property. But this year, buyers are looking for a place of refuge. This has our OTP team feeling that as soon as world borders reopen and travelers can visit again, there could very well be a flood of people wanting to leave their homeland to move to a better place. We have been recommending buyers invest now before prices on real estate go up in Costa Rica. The property assortment in certain key markets has already dwindled in the last year and now inventory is poised to contract even further.  We started the pandemic lockdown in March with a sharp decline in client interactions. But in the last two weeks, our schedules have picked up significantly with client inquiries, virtual property showings, and deals closing. As a team, we are getting back to strategizing, bringing back our weekly meetings over the Zoom meeting app. Our goal is to dispel the myth that there are abundant deals on the horizon in Costa Ballena real estate. Lower supply and a desire to find a better way to live will almost guarantee that. Looking ahead, it’s impossible to say precisely how it all plays out.  At this point, what’s most important is to establish your own set of criteria and continually monitor real estate markets with strong investment potential. Now is the time to understand how the opportunity landscape is evolving in Costa Rica and be ready to move on great investments when you find them! For some, the asset class remains notoriously difficult to access and navigate. Searching for the right investment property can be a daunting task in a foreign nation. But Osa Tropical Properties is here to help you find the strongest investment potential and best fit for you.Our expert team is here to help you easily scout our property markets in Dominical, Uvita, Ojochal, and more, as well as find up-and-coming neighborhoods, identify and analyze properties, close deals, and turn them into cash-flowing investments. We break down the frameworks, strategies, and tactics to take you through the entire investment process in Costa Rica from start to finish. Sign up to our weekly newsletter below to stay connected.