Our Osa Tropical Properties Costa Ballena real estate office released our detailed market wrap up for the fourth quarter of 2022 and a recap of the whole of the year last week and this week we want to follow up with our personal views about what is happening in the market.
Anyone living in or visiting Costa Rica in 2022 could see that it was an incredible year for growth in business and real estate in this region. Tourism and vacation rentals were solid all year as people scrambled to get out of their home-based routines and return to travel and adventure. This growth began in 2021 and exploded further as more people began to divest their interests in North America and Europe and choose a more simple life in tranquil, tropical places like Costa Rica.
There was a slowdown in the Costa Ballena real estate market in the fourth quarter of 2022, as to be expected in traditional market seasonality during the rainiest months of October and November. When looking at the whole of the year, the growth over previous years is undeniable with $156 million in real estate transactions in 2022 compared to $104 in 2021 and about $90 in 2019 – Costa Rica’s biggest year for tourism to date.
2022 Market Recap
Costa Rica’s real estate markets are largely dependent on tourism because the majority of buyers in tourism-dense areas of Costa Rica are foreign.
In 2022, Costa Rica received 2.3 million tourists, with the United States being the number one issuer of visitor’s visas (1.2 million visitors), followed by the United Kingdom, Germany, France, and Spain. This is 70% more visitors than came into Costa Rica in 2021.
Costa Rica’s record for tourists was in 2019 when the country received 3.1 million tourists and was slated to have an even bigger year in 2020. The growth in 2022 confirms the trend of positive development returning to this country’s tourism sector.
According to the country’s Tourism Minister, William Rodríguez, one of Costa Rica’s major successes is its “clear positioning” as a natural destination, encompassing 6.5% of the world’s biodiversity.
“These figures reinforce our innovative, sustainable and inclusive tourism model, in favor of local development that will continue in 2023,” said Rodríguez.
Costa Ballena Real Estate In 2023
There is currently not a lot of supply in Costa Ballena real estate. Even with a small drop off in market demand, the supply is still likely to be less than the demand for ocean view homes and land in Dominical, Uvita, and Ojochal. The areas south of Ojochal are likely to be the ones to heat up most as the demand for ocean view properties at affordable prices is driving the market south.
OTP realtor, Rebecca Rowntree, says that many of her clients are considering areas further outside the traditional town centers of Dominical, Uvita, and Ojochal than she has seen in previous years. “Based on availability, I am seeing Tres Rios, Lagunas, and Hatillo as more growth areas in 2023 for both homes and land.”
Rebecca has also noticed the local real estate market shifting towards “project” properties.
“I have clients who are considering purchasing homes that need improvement and they are planning to do renovations.” She says that this is new because in the past, most clients were looking for complete, turnkey homes, which is possibly a result of what is left available on the market today.
“I am seeing clients looking at those lesser priced homes that they can turn into something more, whether it is investing to make a flip or buying a more affordable property to start and then planning to improve it over time based on what their budget allows.”
YouTube star and OTP realtor, Richard Owens, says that he is excited to see so many new things coming to Ojochal in 2023. He has lived in Ojochal for nearly a decade since his mid-30s and as much as he has loved his life here, he has felt a few small things were missing in his daily routine. “With a gym, tennis courts, a couple of new restaurants and cafes coming soon, it is great to see the things that have been missing starting to fill in.”
Katherine Apsey is an OTP realtor who was recently featured on one of those shows that feature people hunting for real estate internationally. After her experiences with filming the show in late 2022 that friends and clients have been calling her wanting to know more about where she lives in Ojochal and how they can make the move, too.
“I am so excited about the areas from Ojochal south, including Tres Rios, San Buenas, and, of course, Chontales,” says Katherine. “I think that the interest is moving south. People are excited about it, it has fantastic views, and it is less populated so more privacy is available down in that area. There are still farms and larger pieces of land available in that area.”
Hot Areas To Invest In Costa Ballena
Long-time OTP realtor, Marcia Oro, invested in Costa Ballena real estate in 2022 and says that she would do it again. She purchased raw land at the start of the year and began construction on her now nearly-complete three-bedroom modern home in Ojochal. She feels the process is challenging and requires detailed, on-the-ground attention, but feels that she invested well in the location and style of home she built.
“I would build a modern house on a nice ocean view lot or buy a fixer upper with an ocean view and try to modernize that house. I am seeing the right opportunity to sell these houses for as much as three times the cost you put into them,” says Marcia.
There was a significant increase in the number of buyers in 2022 who bought raw land to build. Rebecca sees that trend continuing. “There are still a lot of buyers looking at land in case they cannot find what they are looking for in a home based on the limited availability of pre-existing homes as a continuing trend.”
Rebecca says that she would also consider investing in a home that possibly needs some love or updating. “It is more affordable out of the gate,” she says.
According to property managers and vacation home owners in this region as well as our own research through rental analytics websites like AirDNA, we know that rental return on investment can be anywhere from three to seven percent for average homes and 10 to 15% for high end homes. Some properties with the right kind of magic can see upwards of 20% returns on investment because the buyer found the right nexus of a hidden gem property in the right area being operated well.
Rebecca Rowntree says that she would invest in a rental property because the rental market is still continuing to be “super hot” here. “It is a good way to get a return on investment in real estate here,” says Rebecca.
In reading expat forums and listening to clients tell us about how they are looking for an escape plan, we estimate that 2023 is still going to be a great year for real estate because Costa Rica offers an easy retreat. Not only have most people already been here and fallen in love with the magnificent nature and culture here, but this country also uses the US Dollar for most larger transactions (cars, real estate, etc) and it is only a short direct flight from most major US, Canadian, and European airports.
Costa Rica’s Tourism Institute (ICT) expects the country to reach 3.8 million tourists in 2027, which would generate around $4.9 billion USD. The National Tourism Plan has the agenda of growth and improvement of tourism offers in Costa Rica, using the tourism sector as the engine for economic development in the country.
Katherine Apsey, thinks that commercial properties are the way to maximize your investment in Costa Rica with the projected growth in tourism.
“If I were going to invest in real estate, I would definitely invest in commercial property in Costa Ballena,” says Katherine. “I think we have seen an increase in the number of people moving to this area and I think there is room for growth in the commercial sector. Services, restaurants, tour operations, lodging, and high-end mini-markets – things like that.”
Richard Owens is interested in the community-building aspect of the growth in this region and thinks that investing in multi-unit housing is the way to go in 2023.
“If I were to invest in Costa Ballena I would build an apartment building,” says Richard. “There are many young professionals moving into the area and it is hard to find a place in the village.”
Will Growth Continue In 2023?
2022 saw a return to tourism seasonality in Costa Ballena, although with many more tourists choosing to visit in the green/rainy season than ever before. The first quarter of 2022 had the most tourists and real estate transactions for the year, as has been the historical norm in this South Pacific Costa Rica region. This first quarter of 2023 will likely give us a good indication for how the tourism and real estate markets will be going forward as the first quarter of the year is traditionally the strongest for tourism.
We recognize that the real estate and stock markets are cooling in many sectors around the world. But this is not yet being reflected in our local tourism and real estate markets, which is still a region with less premiums on prices than the more northern regions of Costa Rica, where tourism is traditionally much stronger because of the year-round dry climate.
Rebecca Rowntree, says she is reserved in her hopeful optimism about 2023 because of what is happening in the North American markets, where the bulk of our buyers originate from in this region.
Price reductions are still likely to be seen on listings where sellers are sitting on investments in Costa Rica that they need to turn over quickly for personal reasons. However, most real estate sellers in Costa Ballena are cash buyers and are sitting on solid investments that they can hold and wait for the market to grow and the right purchaser to come along.
“In the case where clients are coming here but first have to sell their home in North America, with the home values that have decreased anywhere from 10-30%, that makes it a bit more of a challenge,” says Rebecca. “For clients who are going to pull funds from their investments where the stock market also hasn’t been very strong also makes it a challenge.”
Still, she says she feels reasonably optimistic. “At this point, what I see is possibly a continued level of people purchasing real estate here that we saw last year. I don’t think it is going to grow but I am very optimistic and hopeful that it will at least continue at the same level as we saw last year.”
Katherine Apsey, feels confident in further growth. “I definitely see continued growth in 2023. I see the demographic changing, though, with more families moving here. It is no longer an area that is solely attractive to retirees. There are lots of younger people moving in the last two years and I see that continuing to grow this year.”
Richard Owens also sees continued growth, but maybe not at the same pace it is now. “I believe next year the rate at which it is growing will drop but continue to grow.”
Marcia Oro is also feeling hopeful and optimistic for 2023. “I do see continue growth here. There are so many people wanting to move or invest here for their future and the market slow downs in North America do not seem to stop investors from buying here.
Marcia says that despite market declines in North America, she sees her clients finding ways to invest regardless. “There are still many people with money and they are attracted to this area. Once they find a nice house, they buy it regardless of the cost.”