There is a subset of buyers in our Costa Ballena real estate market known as ‘long-tail leads.’ These are people who tend to look at properties for years before they are finally ready to make an offer. With the growing number of tourists (and subsequently real estate buyers) coming to this region, what would be our future buyers are increasingly asking if they should hurry their timeline along and buy now. We don’t have a crystal ball (yet) but we do have our boots on the ground, entrenched deep in the field of real estate in Costa Ballena. We hear our clients’ concerns as inventory levels continue to decline and prices continue to trend upwards. We are here to have this frank discussion about our advice to potential buyers in this challenging market who are being driven by their fear of missing out.
Costa Rica’s Real Estate Market Is Hot
Some of our real estate clients today plan on retiring in Costa Rica in a few years. They worry that real estate prices in Costa Rica may be too expensive to buy in the future as they watch everything that is currently on the market being sold out from under them. They already visit the country multiple times a year and they are fairly certain that Costa Rica’s Southern Zone is the place for them. But their current five-year plan seems like it is too far out in the distance to keep up with the rising real estate prices.
In today’s global markets, there is so much new wealth to contend with, especially in younger demographics. Millennials are buying their first homes and property values have been trending through the roof in many markets around the world, including all over Costa Rica. Many are looking to capitalize on the sale of their primary residence in North America or Europe and are looking to retire early or at least cut back on their workload with their gains. Others are divesting from stocks and putting their wealth into assets. Tropical vacation property is high on the list for both of these demographics.
Savvy investors who can afford to bump up their plans are working on creating their own golden parachute by buying great properties in Costa Rica now before further market increases. Those who cannot yet retire are looking to rent their home in Costa Rica through property management companies while they complete their retirement plan.
Many who bought property in Costa Rica five years ago as an investment in their future have seen their properties double in value this year as compared with when they purchased. In those five years, they have been able to enjoy their investments two to three times a year when they visit and rent it out part time, paying off the majority if not all property expenses while their property value appreciates.
And in today’s market, land prices are only going up and the Airbnb rental vacation market is exploding. Those who got stuck in analysis paralysis and couldn’t commit to their plan to buy then are kicking themselves hard now. Not only did they miss out on having a fairly tranquil safe haven during the past two years of the pandemic, but they are missing out on the value increase of this enjoyable asset.
Purchasing Property During Uncertain Times
Other than during the two global market crashes of the last two decades, real estate in Costa Rica rarely goes down in value. Sellers hardly ever drop their list prices because they generally don’t need to — they paid for their property in full and there is typically no mortgage in the equation.
There is a potential worry that there may be an impending stock market crash due to inflation, which would decimate a lot of the excess spending money that people use on things like holidays to Costa Rica. However, for the time being, tourism to Costa Rica is in a period of significant growth, even when compared to pre-pandemic levels when tourism was at its highest level ever.
In a recent Skyscanner survey conducted with OnePoll to learn how people across the UK, USA, Australia and Germany are feeling about travel this year, holidays and vacations were deemed the most important leisure activity being at least important to 93% of respondents and very important to 44%.
After a long winter in the northern hemisphere, travelers are eager to switch their annual freezing temperatures, wind, and rain with sunnier, warmer climates. There is growing demand from Europeans coming to Costa Rica this year, as shown in our first quarter market report from last month. Costa Rica has seen a 168% increase of travelers from Germany, for instance, when compared to 2019.
Travel was the second most notable post-lockdown “moment of freedom” that people in the survey claimed to have felt, and this is a very moving sentiment after two years of no travel for many people around the globe. Word of mouth is a top factor for where people travel and Costa Rica’s reputation is being trumpeted across all channels, causing an increase in bookings to this tropical nation.
In 2022, Costa Rica is in the top five UK outbound destinations trending above pre-pandemic levels, up by 62% over 2019. The Skyscanner survey shows that demand to destinations such as the Maldives, Mexico, and Costa Rica “has started to exceed pre-pandemic levels as leisure travelers set their sights on long-awaited winter and summer sun.” The poll also shows that demand for visiting friends and relatives is also coming back strongly, which we are seeing as another factor helping to grow our market.
FOMO As A Key Driving Factor In Costa Rica Real Estate Today
As travel to Costa Rica is growing exponentially, the ‘Fear Of Missing Out’ (also known as FOMO) frenzy of people is growing with it who come here, fall in love, and also want to make a life in Costa Rica a reality.
Many buyers have watched as homes they once passed on for being too expensive have become even more expensive and selling out from under them, leading them to fear that they may miss out on more equity gains if they wait out the housing market. People are less worried about finding that perfect home than they are worried about losing out. They are worried that if they don’t buy now, they will end up paying more in the future.
The volatile rental market also adds to buyer fear. There are people who have been renting in Costa Rica since the start of the pandemic thinking they were going to rent in the short term until prices came down. Now they think that’s not going to happen. And as buying opportunities have withered, landlords have raised rents aggressively to keep up with market demand.
At the end of 2021 in the US, real estate inventory fell to a record low, according to the National Association of Realtors. On top of the 20 percent rise in 2021, Zillow projects that home prices will rise another 16 percent in 2022. Intimidated buyers are being replaced with others looking to escape rising rent prices, or by shoppers who sat out last year while waiting for more stability in the market. These circumstances are pushing real estate buyers to look internationally for a better quality of life at an affordable rate.
But Costa Rica is not for the light of wallet, when compared to other Latin American destinations popular with expats. It is the travelers and buyers with money who come to Costa Rica. This country is known to be one of the most expensive countries to travel to and live in Latin America and the people coming here are not looking for cheap. They want to know the environmental and social beauty of Costa Rica that they have heard people rave about for years if not decades.
Winners In The Real Estate Market In Costa Rica In 2022
This market is very clearly a win for sellers right now but it is very challenging to buyers who don’t have millions to spend, and for realtors who are having a hard time showing properties to buyers before they sell. The amount of time that we are putting in with the average buyer has increased significantly this year as we are needing to show many more properties over longer periods of time before buyers find the right one.
The majority of the buyers we are working with today are not investors and they are looking for a home for themselves, even if they cannot live in it right away. Most have seen numerous properties in person or via video tour and have even made some offers that were not accepted.
Prices for homes in Costa Rica may seem very inflated to those who have lived here for a long time or have been watching the real estate market for many years. But it seems to us that these higher prices are here to stay, if not continue to increase as more and more tourists and real estate prospectors arrive every month.
Keeping A Level Head
Real estate prices in Costa Rica are soaring, inventory is low, and competition is fierce. Buyers are making offers on properties sight unseen for fear of missing out. But this may not be the right move for everyone and prospective buyers are panicking at the last minute and letting deals slip through their fingers.
Buying in the current boom could prove to be a risky decision, as homebuyers are potentially buying near the peak of the market, and it could take years before they see a return on their investment. But comparing to the last real estate bubble bursting in 2008, the market forces are a bit different today. Numerous real estate investment experts are positing that markets with an inventory shortage and expected population growth are not likely to crash. The biggest problem in today’s market is supply, which continues to trend downward.
Many buyers are looking to real estate in Costa Rica to solve the problems in their lives created by the pandemic. They want to spend more time outdoors in nature and to be in friendlier, more tranquil communities. But they may not be ready to put their chips into this basket if they have not spent enough time in Costa Rica getting to know what their lifestyle will look like and how much it will cost for them to live here full-time. The choice is theirs as to whether they are ready to buy now or now but the frenzied market is indicating that they will be replaced with other buyers who are willing to take the calculated risk that holds the many lifestyle rewards that they are looking for.
As we head into the low season in tourism in Costa Ballena, our roads continue to be unseasonably filled with traffic, especially with the seemingly endless convoy of construction machinery and materials traveling up and down the roads in Costa Ballena. We are reminded every day that this increased buying trend in our real estate market is here to stay, at least in the immediate future. Still, it is important for buyers to not get caught up in a frenzy where they will make quick decisions they may regret. Working with our team of expert, no-pressure agents is a great way to ensure that you are covering all of your bases and getting the advice you need to make a confident choice in this important life step.