The South Pacific Costa Rica real estate market continues to thrive in the third quarter (July, August, and September) of 2022. More people are visiting our region and staying in vacation rentals. Construction grew exponentially as turnkey property inventory dwindles and more buyers are purchasing land and building new homes as new contractors arrive in this area. Additionally, our office has noted that it appears that average property values are at their highest value in around 15 years. With the rise of remote work, people are choosing to move to areas that bring them joy rather than moving somewhere because of work. Costa Rica’s inviting Digital Nomad Visa makes this process more simple and opens the door for more remote workers to move to our coastal destination. The arrival of high-speed fiber optic internet to most neighborhoods in Costa Ballena in the last year was a big game-changer that is growing the real estate markets in Dominical, Uvita, Ojochal, and the surrounding areas significantly.   A good way to analyze if a market is growing is to take a look at the net migration pattern, or how many are moving out versus moving in. Costa Ballena is in a positive net migration pattern where we are seeing more people coming in than leaving, creating increased demand. 

Third Quarter Market Results For Costa Ballena Real Estate

Eighty-six new listings came on the market in the third quarter of 2022 and seventy-two listings had successful offers in the Costa Ballena region at that time. Of those deals, 53 closed in this quarter for a total of more than $51 million, which is the highest total for the third quarter we have on record, and the biggest quarter so far this year. Of the total deals in the third quarter, 43 homes were sold and 22 lots. There were also four commercial properties with successful deals and three large farms over 20 acres in size. Micro markets, like luxury real estate that is truly turnkey, are the types of properties seeing the most appreciation in 2022. Currently, there are 308 properties for sale in Costa Ballena. 114 of those properties have homes on them with the majority for sale in Uvita. There are also 156 vacant lots for sale, 60 businesses (including hotels and Bnbs), six condos, and 22 farms available to purchase right now. In total, Costa Ballena saw over $51.6 million in sales in third quarter of 2022. This is a significant increase over the second quarter (April to June), which saw $44 million in sales. Even in the traditionally busiest first quarter (January to March), totaled less than the third quarter, with just over $50 million in sales. The third quarter of 2022 more than doubled the $22 million sold in the same time period in 2021, despite having more numbers of closings last year in the same quarter (99 deals between July and September 2021 versus 72 this year). The main reason for this increase in total values over last year is that home prices have significantly increased in 2022 and because this area is attracting more high-budget, luxury buyers due to more modern, top of the line constructions on some of the best ocean view properties in Costa Rica. The average sold listing value in the third quarter was $717,000 USD, which is nearly double the average selling price in the same quarter of 2021 ($346,000 USD). This is the highest average sold price that this region has seen in more than 15 years. The second quarter average sold prices this year were $659,000 for 71 properties and the first quarter saw property values average $607,000 across 104 property deals. These values equate to a more than 8% rise in values every quarter in 2022 so far. Vacant land that sold in Costa Ballena in the third quarter totaled $6.1 million and averaged $293,000 per lot across this coastal region. Farm sales (land over 20 acres in size) totaled more than $1.7 million and garnered an average of $589,000 for these larger, more raw parcels of land. Commercial properties were the second most valuable market, with $6.8 million in sales and averaging $1.7 million per commercial venture sold. Houses continue to be the biggest market for buyers in this region, taking in more than $37 million in sales for the quarter. Home values averaged $838,000 in Costa Ballena between July and September 2022.

Time On Market

As mentioned in previous market reports, the number of days that a listing spends on the market in Costa Rica is not an accurate depiction of the quality of a listing. Costa Rica is predominantly a destination real estate market. Buyers need time to plan a trip to see properties for sale in person. The newest homes get snapped up the quickest, with many brand-new, modern constructions going under contract within a month of listing. The oldest homes (those over 15 years old) spend the longest time on the market.  The average days on market for listings in Costa Ballena in the third quarter was 362, with a median of 131 days. The average is skewed significantly because some homes spend years on the market, only to one day sell to the perfect buyers who finally made their way over. Not every buyer wants a brand-new modern home and many still appreciate the character and charm of an older Spanish colonial construction on a mature property with an established garden. The ten properties that sold the fastest had deals within 28 days. Three of these were lots for sale and seven houses. The values of these properties that sold quickly were between $89,000 USD and $1,750,000 USD. This shows that there is no one price bracket that is moving in today’s market.  All of the homes that sold within a month were at least three bedrooms in size with at least two bathrooms and they averaged 3000 sq.ft. in size. Pools and established landscaping both factored into the quick sales of the fastest-sold properties (95% of the top 10 sold homes had these qualities), as did ocean views (8 out of 10 had big ocean views). Of the properties that took the longest to sell, these were mostly older homes or land that is located in not as popular areas (those without ocean views, rivers, or close to town).

List-To-Sold Price Ratio

The average list-to-sold ratio was 92.9% for the third quarter. The highest-value home that sold between July and September went for 114% of the asking price was a luxury residence in the prestigious Las Olas development near Dominical. This property sale turned into a bidding war within two weeks of listing and the home garnered an extra $250,000 on top of the asking price. The properties that sold for the closest to the asking price in the third quarter of 2022 were mainly located in Ojochal and Dominical. All of the properties that sold for 100% of the asking price were house listings that featured pools, landscaping, modern/contemporary design, and with luxury ocean views. Newly-built homes are the easiest to price accurately because there is a clear correlation between the land price, the cost of construction, and the market value. The properties that sold for much less than the asking price in this quarter were small lots and large farms. Older homes on more established properties have a less-quantifiable value because different buyers see different values depending on their wants and needs.

Construction Costs in Costa Ballena

According to a quote from a local architect in South Pacific Costa Rica, to build a premium quality (not luxury) turnkey home is around $1575 per m2 ($146 per ft2). To renovate an existing structure with a new kitchen, windows, tiling, and the works can run between $1100 and $1350 per m2 ($102 to $125 per ft2), depending on the existing building condition. Luxury home builds with top-of-the-line finishes and furnishings and built in the most high-end construction style will cost between $1880 per m2 and $2420 per m2 (around $175 and $225 per ft2). Builders in Costa Ballena normally charge around 8.5% of the total budget for the design, construction plans, and building inspection, plus tax. Buyers may be able to save money by buying an existing home that is older and bringing it up to more modern or even high-end standards and many choose this option because some of the most beautiful properties in Costa Ballena were occupied by homes built more than 15 years ago during the last real estate boom in this area. The price of land in Costa Ballena was around $25 per m2 ($2.3 per ft2) on average of the vacant lots including luxury ocean-view land sold in the third quarter of 2022. Ocean view land alone averaged around $27.70 per m2 ($2.57 ft2) while mountain view averaged $14.50 per m2 ($1.34 per ft2). The average price per square meter of the three farms sold between July and September was far lower at $1.60 per m2 ($0.15 per ft2), or around $6,600 per acre. Many unfinished homes were sold in this period based on renderings and site visits. Buyers enjoy the opportunity to pick out their own finishes and furnishings while not having to go through the challenging process of managing a home build. There is also a backstage economy of developers selling unlisted homes before they even have a chance to be brought to market. Realtors in the know can help broker these deals so it is essential to find a good agent who knows the different developments happening in the area.

Buyer Profiles and Driving Forces

The foreign buyer pool contacting our office is shifting from around 80% from the United States last year same quarter to 38.6%, leaving room to include more Canadians at around 14% and Europeans mainly from France, Germany, the United Kingdom, Switzerland, and the Netherlands.  Japan, Russia, Mexico, and Spain are surprising new additions to the top 20 markets for researching Costa Rica real estate on our website. Web traffic from within Costa Rica (31.5%) represents the many realtors and buyers from within the country looking for real estate in Costa Ballena. This internal market includes expats already living in Costa Rica and interested in buying into the hot Costa Ballena real estate market. Osa Tropical Properties' web traffic in the third quarter of 2022 was down 5% from the second quarter, which is within the standard seasonal deviation as we enter the rainiest part of the year (September, October, November). However, our website’s traffic is up 20% on last year and 3.5 times greater than what it was in the same period in 2019 and 2020. Traffic on our website began to increase considerably with the dawn of Covid restrictions in 2020. The shift to work-from-home culture brought with it the notion that living in a foreign country is within the realm of probability for more people. Those wanting to work in the tropics and in a similar time zone are finding much affinity in beautiful Costa Rica. Politics, mounting social strife, climate change, rising prices, and family security all continue to be the top factors driving buyers to Costa Rica. This is a country that proved to be decisive and fair during the pandemic and solidified its image as a place of safe and stable politics during this tumultuous time. People from all over the world are wanting to escape the increasingly hectic and aggressive urban lifestyle in search of a calmer social dynamic. Costa Rica tops the list of escape destinations because of its pura vida ethos, which has captured the hearts of many who have visited or know others who have. Increasing climate catastrophes are also pushing real estate buyers out of the traditional destination real estate markets like Florida, Texas, and California, as has the increase in taxation and the everyday cost of living. The cost of living is a huge driving force for people living in high-cost-of-living cities. Home prices, rents, and income taxes factor into this. NY, California, Illinois, New Jersey are all at the top of the list of the most expensive in the United States for the cost of living.

Popular Destinations

The most popular destinations in Costa Rica continue to be outside of the Southern Zone. The top beach destinations are Santa Teresa, Tamarindo, and Manuel Antonio, which is only 30 minutes from Dominical. Guanacaste is still the favored province and Puntarenas is still not on the radar for many visitors and investors. However, we have noted a marked increase in buyers from within Costa Rica who are seeking out our quieter jungle beaches rather than the drier and busier beaches up north. Costa Rica's capital, San Jose, is still the most researched destination in Costa Rica.

Rental Market in Costa Ballena

Top rental homes in Costa Ballena are expected to be new, modern, and with amazing 180-degree ocean views from every room. Being located within close distance to a highway and amenities is key, and having separate luxury residences for multiple couples or extended families visiting gives more marketability. Popular construction features include high wooden ceilings, sliding glass doors opening to large covered terraces, luxury furnishings and finishes, spacious bedrooms with closets and full bathrooms, large kitchens with top-of-the-line appliances, and quality amenities like a lap pool and sauna. These types of homes will rent for over $5000 per month. Basic rental homes are expected to come with strong and reliable fiber optic internet, to have around two bedrooms, a private kitchen, and a bathroom, and to be in a quiet and peaceful location. Most renters prefer homes in well-maintained, good condition. These types of homes will rent for around $1000-$2000 per month, depending on the precise location and amenities. Christine Schiferl from Jaguar Property Management based in Uvita says that a lot has changed in her business in recent years. She says that her company had its best third quarter on record. Her company has been in business since 2013 and this has been its best year. In recent years, she changed the company’s business model to only accepting luxury vacation homes.  “Luxury rental homes are those that are three or more bedrooms – the more the better – with full ensuite, all ocean view, and with rooms of equal size,” says Christine. “These types of vacation homes rent for $400 a night or more if they have all the bells and whistles.  Jaguar Property Management receives the most inquiries for the Uvita area. “I think it provides the perfect blend of tours, activities, restaurants, nature, beaches, and it is very convenient for families because it has larger grocery stores, banks, shopping, and more,” says Christine. According to the way this year is tracking, she believes that the coming high season (December to May) will surpass the last high season’s records. “We are booking in the rainy season, which we have not seen very much in the past. We rarely got people staying in August, September, October, or November and now we have quite a number of people coming here and staying in the rainy season.”

New Developments in Costa Rica

Digital Nomad Visa

The digital nomad lifestyle is now being formally recognized by governments and tourism authorities. Costa Rica, Bali, Portugal, and Malaysia have introduced digital visa nomad visas in the last month to jump on this global trend. Under Costa Rica’s digital nomad visa program, holders of this visa can stay up to three months and then extend their stay for up to two years, according to the Costa Rica Minister of Tourism, William Rodríguez. They can open a local bank account, they do not need to pay Costa Rican income taxes, they can use their home country’s driver’s license, and they pay no import taxes on computers and other remote work equipment. Costa Rica’s population of 5 million people would benefit economically with less than a percent of the U.S. remote worker segment. “Our research says there are 3 million people working in the States from home,” said Minister Rodríguez. “If we can have half of one percent of that, we are done. We are aiming for that number.”

Continued Growth In Tourism

Although it is difficult to accurately estimate the number of tourists who will arrive by the end of 2022, the Costa Rican Tourism Board (ICT) predicts that it is very likely that Costa Rica will close the year with more that 2 million tourists by air. Tourism figures for Costa Rica are showing a rapid regrowth this year from the height of 2019 numbers. All entry points in Costa Rica show 1.6 million visitors from January to August 2022, which is still down by 27% from 2019 numbers. But when comparing visitors arriving solely by air from North America and Europe, we can see that the numbers are closer to 2019's highs (90.6% and 94.8% of 2019, respectively). Costa Rica is considered one of the premiere destinations for ecotourism in recent years, and this naturally beautiful country is more than 50% forested. It has been part of the Happy Planet Index for several years, and has high-quality infrastructure established for global tourism. Tourism in Costa Rica is all about well-being in nature. The traveler type visiting Costa Rica has also changed in recent years. According to ICT, before the pandemic, the majority of visitors were made up of entire families. Now there is a higher concentration of couples or single travelers. Their studies note that the majority of tourist arrivals are from North America (71%), with the United States the bulk; followed by Europe (19.2%), South America (4.4%), Central America (3.7%), and the Caribbean (0.3%). Tourists who spend a vacation season in the country consider that they leave as better people, according to studies by the ICT. In their surveys of travelers carried out in national airports, visitors noted that Costa Rica is home to a “valuable society“. “Those who visit us consider that after spending a vacation season in Costa Rica they leave as better people, which has an incredible value from the point of view of communication, positioning, and other things that are essential to decide where we put our resources. tourism,” said William Rodríguez, Minister of Tourism.

Are we entering a market recession?

With high inflation and rising interest rates fueling speculation that a global recession is on the horizon, it may come as no surprise that realtors in Costa Rica are hearing concerns from their clients. Costa Rica real estate is not a financing-based market for foreign buyers. There is very little option for financing other than potential private seller financing so people are usually able to sit on their paid-off property in Costa Rica to wait out a bear market. Nevertheless, the push factors actually bringing people to Costa Rica appear to be growing in intensity as more and more foreigners from all over the world are looking to buy real estate in a more peaceful and less expensive location. Costa Rica real estate is generally considered to be a long-term hold and therefore potential buyers should consider that buying real estate in what may be a recession is not about trying to time the market but about the value of what type of property you can buy that fits with your lifestyle and is sustainable for hopefully 5-10 years.

Why Choose Costa Ballena Real Estate?

People appear to be interested in Costa Rica with renewed vigor. Nothing fuels the desire to buy a vacation home quite like the end of summer and the third quarter of 2022 showed us that many people envision a second home in Costa Rica as a source of family memories, wealth, rental income, and other lifestyle benefits. Property prices in Costa Ballena are set to rise, steadily driven by demand from foreign investors. With the many initiatives to continue growing tourism to this country and with the growing popularity of this region with families and digital nomads, we anticipate another record-breaking quarter to finish out 2022 with little sign of slowing next year. *Please note that we are not financial advisors and the contents of this article are only our opinions and not financial advice.