It is already midyear 2022 and even during the rainy season Costa Ballena real estate is heating up! Home values continued to increase in the second quarter of 2022 and with a sales total of over $44 million for the area for the last 3 months, the traditionally quietest quarter of the year has us excited about how this market is growing and evolving.
Some investors are reasonably hesitant to make a move on Costa Rica real estate at this time because they are fearing a repeat of our last global recession in 2008. People who came here before 2008 were largely speculators looking to increase their money through investing in Costa Rica property. The most prevalent motivations in this real estate boom are different and global declines in real estate markets are very location dependent. Most people who choose Costa Rica today are investing in themselves, which is the main reason why this market is poised to grow.
*Disclaimer: We are Costa Rica Real Estate advisors, not financial advisors. If you have any doubts as to the merits of an investment, you should seek advice from an independent financial advisor.
Second Quarter Market Findings
Tourism in Costa Rica showed a recovery of 33% in 2021, after the impact of COVID-19 in 2020, when only a little over one million tourist arrivals were registered, most of whom arrived in the first three months of that year.
According to the most recent ICT data, in the first quarter of 2022, more than half a million tourists from the United States and Canada entered by air. Last year saw a 66.4% recovery of the 2019 tourism figures. Income from tourism in 2021 totaled $1.5 billion dollars, a growth of 15.8% compared to 2020, but still below the nearly $4 billion dollars that entered the country in 2019. In 2022, tourism continues to be the main generator of foreign currency.
The number of tourists entering Costa Rica may be down on the whole but the Costa Ballena real estate market continues to track upwards going into the second half of 2022. OTP sales data for the Costa Ballena (Dominical, Uvita, Ojochal) shows that there were 49 closings in the months of April, May, and June of 2022 with a total of $32.7 million in sales. These figures are up significantly on last year, which saw around $20 million in closings for the same period.
Tourists generally visit Costa Rica to escape the cold in North America and Europe, which is why the start and end of the year tend to be the busiest. And a growing number of these people are returning a bit later in the year for a longer amount of time to investigate what life is really like down here and to look at properties. This is the time of year when it is easier to see properties because they are not occupied by short-term renters. The potential buyers visiting at this time of year are the people who keep our communities thriving in the “quieter” rainy season.
Looking at our Google Analytics (website traffic details), we can see that new users are down by almost 7% over the first quarter of the year. This aligns with the total deals comparison, which is down 12% from last quarter (both under-contract listings and sold listings totaled $50 million in the first quarter and $44 million in the second quarter). However, when juxtaposed with the lower number of listings sold (104 last quarter versus 70 this quarter), we can see why sales value averages have increased by 8% over the first three months of 2022. This tells us that buyers are contending with lower inventory and greater numbers are buying in higher price brackets than ever before.
This list-to-sold price (comparing the price it was listed as with the final sales price) continues to hover around 95%, which is consistent with the last two quarters, showing that listing values are close to what the market thinks they should be.
The average property dimensions of listings selling in the second quarter of 2022 were:
- Construction size: 3300 sq. ft.
- Acreage: 1.98
- Bedrooms: 4
- Bathrooms: 3
Ojochal continues to be our most popular market in Costa Ballena, seeing 59% of the total market share. Dominical was around 19% and Uvita 22%.
Chontales is an up-and-coming region that saw a sharp increase in sales in the second quarter. It is a bit further south and more removed from tourism amenities, which means that prices are a bit lower but the area is perfect for nature lovers who want to be in a quieter area that still has spectacular views and modern ocean view homes.
Homes in Costa Ballena continue to be the best sellers, but land for sale is an increasingly popular option as home inventory dwindles. Property inventory is down 11% over the start of 2022. There are currently 276 properties for sale in Costa Ballena. 106 of these are houses, 135 land listings, and 24 businesses for sale.
The time-on-market for listings in the second quarter was nearly double that of last quarter, telling us that inventory is so low that the listings that have been sitting on the market for years are finally selling to eager buyers looking to get into Costa Ballena.
Although real estate market trends in Costa Rica tend to typically follow the US, this time it doesn’t appear to be the case. Many markets in North America are seeing a slowdown that we are not experiencing here. Mortgage rate increases are not affecting us because buyers are coming here with cash.
Rentals in Costa Ballena
Of the more than a thousand rental homes in Dominical, Uvita, and Ojochal, there are 788 classified as vacation homes or cabins on Airbnb. At least 200 of these are active luxury vacation rental homes that rent for at least $300/night, with more than half of the luxury homes renting for over $500/night in the high season.
Local property management expert, Christine Schiferl, from Jaguar Property Management, says that as a rule of thumb for Costa Rica vacation rental properties, you can expect an annual net return of 4%-6% on your investment and average occupancy rates of over 60% for the year.
Investment Opportunities in Costa Ballena Real Estate
A new president of Costa Rica was elected in the second quarter after winning a run-off election. President Rodrigo Chaves of the Social Democratic Progress Party. Since his election, he has presented a new national tourism plan that seeks to host 3.8 million tourists annually within the next 5 years (Costa Rica had more than 3 million tourists for the first time in 2019).
His presidency bodes well for the continued growth of tourism and real estate in Costa Rica and he has already implemented a number of measures that exhibit this with sustainability as an integral pillar backing this growth.
For one, it was confirmed last week that the regulations for the Digital Nomad Law are ready and will be signed next week. This is a promising development for this law and another that reduces the minimum capital investment for residence in the country from $200,000 to $150,000. The latter law does not yet have a finalization date but it would allow for duty-free importation of vehicles to Costa Rica for personal use as well as tax exemption for the importation of household items.
These laws were approved in July 2021 and the regulations were to have been ready by November 2021. There is little doubt that when they are finally put into action that this will drive up investment even more in Costa Rica. Annually, the US population in the Central American country grows by 32% and has increased by 160% since 2016. By 2026, it is expected that 317,000 new Americans will move to the destination.
OTP Projecting Growth in Costa Ballena Real Estate
Costa Ballena, Costa Rica is a young world-class destination like Hawaii was thirty years ago. But because of recent environmental regulations implemented in Costa Rica, you won’t ever see towers in this part of the country. Currently, Costa Rica has positioned itself as the fastest-growing country for US citizens outside the United States in the search for a better quality of life outside the country.
Faced with a worldwide shortage of single-family homes, developers have focused on Costa Rica as the main market to meet demand. In 2019, Costa Rica had 5,490 single-family homes available for sale. At the start of 2022, 1,840 of that inventory remain due to high demand. New construction developments provide a solution to this problem, which is why land speculation has increased.
OTP realtor Richard Owens says that he is investing in land in 2022. He sees the value in buying a large parcel with a great view and then subdividing and developing build sites to sell at a much higher land value. “A prepared building site that is ready to put a house on right away is much more valuable in today’s market than a large, undeveloped parcel.”
Marcia Oro, OTP’s most senior realtor, says that she sees the value in building spec homes today if investors have the capital to do so.
“I would invest in a great ocean view property that is over an acre and build a luxury home on that,” says Marcia. “$500k wouldn’t be enough to do this but many investors go in with a partner. The opportunity is there to more than double the investment if done right. Around 95% of my clients are asking for a great ocean view property that is private and has a newly built modern home on it and there is almost no supply in today’s market.”
What else are savvy investors doing to compensate for this lack of inventory? Marcia says that the ones with vision are buying older homes on incredible ocean view properties and renovating/modernizing.
“The other option,” she says, “would be to buy an old home with a great ocean view lot and completely renovate the home to resell. I think that this could be done for $500k in today’s market and there are great returns potentially there if things are done well. I would consider a mountain view property but for it to have the same potential returns as an ocean view property it would have to be for the right price.”
In spite of all of this evident growth of our Costa Ballena real estate market, global and even local travel and tourism publications still consistently omit this region in their “places to visit in CR” lists, which tells us that there is still a lot of room to grow when the rest of the world learns about our little secret paradise.
Those who are investing in South Pacific Costa Rica today understand the magic of this place and know that there is a very real market of people who want what Costa Ballena real estate has to offer.