Trends and Threats in the South Pacific Costa Rica Real Estate Market: A Mid-Year 2024 Analysis

The South Pacific region of Costa Rica, particularly Costa Ballena, has experienced notable shifts in its real estate market in the first half of 2024. This article delves into the significant trends and emerging threats impacting the market, providing a detailed comparison with the previous year. Whether you’re an investor, a real estate professional, or someone considering a move to this picturesque region, understanding these dynamics is crucial. In this analysis, we highlight the key trends driving the market and the threats that could potentially undermine its stability.

For more detailed insights into the real estate market in South Pacific Costa Rica, sign up to our weekly newsletter and receive a free PDF copy of our Mid-Year Market Report For Costa Ballena 2024.

The first half of 2024 has brought about significant changes in the South Pacific Costa Rica real estate market. With steady buyer activity and a notable decrease in the average days on market for properties, the region shows signs of a dynamic and competitive market. However, this growth is not without its challenges. From prolonged selling periods for land properties to the potential impacts of global market conditions, as well as lower sales volume in total for the region, various factors could pose threats to the market’s stability. This article explores the latest trends shaping the market and the threats that investors and stakeholders need to be aware of.

Disclaimer: The data presented in this report is based on the best available information and, while not exhaustive, offers a fairly comprehensive overview of regional sales. It is not intended to serve as investment advice and reflects our opinions based on the information currently at hand.

Trends in the South Pacific Costa Rica Real Estate Market

1. Improved Market Dynamics in 2024

The South Pacific Costa Rica real estate market has shown increased activity and dynamism in 2024. One of the most significant indicators of this trend is the reduction in average days on market for most property types. Properties that previously lingered on the market for months are now selling faster, reflecting higher buyer activity. The percentage of properties closing within a month has risen from 2.9% in 2023 to 6.7% in 2024, suggesting quicker decision-making by buyers. This uptick in activity, despite a slight decrease in overall sales volume ($53 million in the first six months of 2024 compared to $55 million in 2023), highlights a more efficient and responsive market.

2. Stronger Market for Houses

The demand for houses, especially in specific price brackets, has been robust. Homes in the $300,000 to $500,000 range as well as luxury properties have seen substantial interest. These properties often sell closer to their listing prices, indicating strong buyer confidence. The average days on market for houses have dropped significantly from 273 days in 2023 to 197 days in 2024, showcasing a quicker sales process overall.

3. Demand for Prime Locations and Views

Properties with exceptional views or prime locations, such as ocean views and central areas (close to amenities and/or beaches), continue to perform exceptionally well. These properties often sell at or above listing prices, driven by their desirable locations. Luxury listings, particularly those priced over $1 million, have seen success in 2024, as affluent buyers invest in well-built properties with enduring value. The continued growth of the market, despite slight slowdowns from the highs of the COVID-19 era, underscores the attractiveness of prime real estate in Costa Ballena.

4. Development Boosting Real Estate Sales in Costa Ballena

Costa Ballena’s real estate market has seen significant growth due to several key factors. Significant investments in infrastructure, such as roads, utilities, and public services, have enhanced the region's attractiveness to buyers and investors. New business developments and government incentives have boosted the local economy, driving increased demand for real estate. The region's natural beauty, amenities, and lifestyle offerings have made it increasingly desirable, attracting both residential and commercial buyers. The introduction of new residential and commercial projects, including private schools, high-end sporting courts, gated communities, luxury developments, and commercial centers, continues to spur growth. Additionally, the increase in tourism has boosted the local real estate market, making short-term rentals and hospitality-related properties more lucrative.

Stay-tuned for our upcoming report on tourism growth and rental investments in Costa Rica and how this affects our real estate market by signing up to our weekly newsletter.

5. Special Report: Lower Mortgage Rates Potential to Boost Costa Rica’s Real Estate Market

As the US Federal Reserve hints at potential rate cuts due to cooling inflation and a softening labor market, the anticipated decrease in mortgage rates is expected to significantly impact Costa Rica's real estate market. Lower US mortgage rates mean buyers have lower monthly payments, freeing up more funds for investments such as purchasing property in Costa Rica. With lower rates, US homeowners can tap into increased home equity to fund property purchases abroad, enhancing financial flexibility.

Lower rates also lead to refinancing, allowing homeowners to reduce payments or take cash out to invest in Costa Rican real estate, increasing liquidity for property investments. The lower financing costs make Costa Rican properties more attractive to investors looking to diversify portfolios, considering the stable market and potential for rental income and property appreciation. 

Threats in the South Pacific Costa Rica Real Estate Market

1. Long Time on Market for Land and Luxury

Despite the overall positive trends, land properties, especially those without prime views or locations, continue to face long selling periods. The average days on market for land remain high at 290 days in 2024. These properties often sell below their listing prices, indicating a softer market segment. This issue is particularly noted in high-value estate properties, which tend to sit longer in the due diligence process, as buyers invest more time in studying the property before making substantial investments. Additionally, it often takes time to gather the necessary funds for higher-priced properties, contributing to the prolonged selling periods.

2. Potential Overpricing

Properties that linger on the market for extended periods may be overpriced or less desirable. Buyers of Costa Rica real estate are often seeking a specific quality of life that typically includes privacy, natural surroundings, and great views, as well as homes of a good caliber construction (generally concrete) and around 3 bedrooms in size. Properties that fall outside of these favored parameters tends to sit on the market for longer and will face price reductions and lower offers in that time.

3. Market Saturation

Certain sectors, such as commercial properties, might be experiencing saturation. Many commercial properties, especially hotels, have been sitting on the market for years, leading to reduced sales and potential difficulties in finding buyers. Most commercial investors prefer to build their dream business from scratch, given the lower cost to build compared to buying. However, a lack of market research can lead to costly mistakes, as purchasing an already successful and functioning business can often be a better investment than starting from scratch, hence why many commercial properties sit on the market for so long. A solid business strategy that capitalizes on the needs of the community tends to find good success in our growing region for tourism and investment.

4. Dependence on Global Market Conditions

The health of the real estate market in South Pacific Costa Rica is closely tied to broader economic conditions. Any downturns or instability in global markets could impact buyer confidence and market activity. The market's dependence on foreign buyers also makes it vulnerable to changes in international economic conditions, travel restrictions, or geopolitical factors.

5. Special Report: Election Year Cycle Dampens Travel and Investment

The Costa Ballena real estate market has seen an increase in properties under contract and closed sales recently. However, the ongoing US presidential elections have diverted attention from real estate investments in Costa Rica. Historically, election cycles cause a market slowdown, with activities resuming only after election results are finalized. During this period, many investors reassess priorities and make substantial decisions. The US elections are particularly impactful since most Costa Rica real estate buyers are from the US, given the proximity, ease of travel, and historical ties.

For a full report on this year’s US election cycle and its effects on the Costa Rican real estate market, see our recent article here.

Final Thoughts

The South Pacific Costa Rica real estate market is experiencing dynamic changes in 2024, with significant trends and emerging threats shaping its landscape. While the market has become more active and many properties are selling faster, challenges such as prolonged selling periods for land, potential overpricing, and dependence on global market conditions remain. Investors and stakeholders must stay informed and adaptable to navigate these complexities effectively.

For those considering investing in this vibrant region, now is an opportune time to explore the possibilities. Stay ahead of the trends, understand the market dynamics, and make informed decisions to maximize your investment potential in South Pacific Costa Rica. Subscribe to our newsletter for the latest market reports, expert insights, and exclusive opportunities to stay connected with the evolving real estate landscape in Costa Ballena, Costa Rica.

SUBSCRIBE NOW!