Many people realized a year ago that they would be spending at least the next few months at home due to the fallout from COVID-19, so they started making improvements to their everyday lives. Some renovated their home offices or kitchens. Others bought new homes with larger floor plans and more outdoor space. But a select, innovative few decided to go a little further in their quest for pandemic comfort: they bought tropical real estate.
People from all over the world are looking at tropical real estate as a good investment in 2021. But why are they feeling so confident in Costa Rica? The answers are actually simple and repeated over and over across a variety of publications on real estate, investment, travel, and lifestyle: People want more space, more beauty, and more tranquility. And tropical real estate in Costa Rica is able to offer that in droves.
Since borders to Costa Rica reopened fully in November, every month has been busier than the last. This excitement is being fueled by a demand that cannot be met by the inventory coming to market. There have been less homes going on the market in the first quarter of this year than there were in years past and many homes have been taken off the market as sellers rethink their strategy or decide on a new course for their life that includes more time in Costa Rica. The mantra is: “now is the time because tomorrow may never come.”
Real estate transactions increasing in Costa Rica
After the pandemic hit Costa Rica in March 2020, there was a real constriction as buyers moved to the sidelines. Real estate investors adopted a wait and see approach for the most part of 2020 as the pandemic swept across the world, resulting in a decrease of almost 29% in total investment volumes (excluding development sites) during the year globally as compared to the year before. Then a funny thing happened late last summer when people started to venture out of quarantine — sales and prices started to bounce back. After months of lockdowns and travel bans, people were taking notice of the under contracts and solds and are feeling like they are missing out on the action.
The frigid temperatures in the North are no longer the only driving factor in why investors, retirees, digital workers, and snowbirds are eyeing Costa Rica as a private paradise. Partial lockdowns and restrictions across the U.S. have inspired many to turn their eyes to Costa Rica and its tropical climate, warm people, and peaceful nature. Costa Rica’s reputation as a relatively safe destination during the pandemic is a major attraction to overseas buyers who see the value in peace of mind. Even those who already own a property in Costa Rica are taking a closer look at that house and deciding that they need a larger home or more land now that they’re spending a lot more time living in Costa Rica.
Costa Rica real estate buyers who postponed acquisitions during the pandemic and are eager to make up for lost time. Buyers today worry that they will miss out on future price gains if they don’t get in now. They are eager to find opportunities to benefit from price growth. And virtual buying has become a way for people to get a leg up on the competition if they cannot travel.
Costa Rica property investors who are reluctant to travel outside of their country because of mandatory quarantines upon arriving home are buying “sight-unseen” using video tours. Others are taking the global travel hesitancy to their advantage and flying out just to look at properties in Costa Rica, despite having to quarantine and/or take other measures upon their return. To these buyers, it is worth it to see all the available properties before the other investors come back.
Who is buying tropical real estate in Costa Rica?
Buying tropical real estate in Costa Rica or anywhere in the world may seem like the domain of the wealthy. But there are buyers with all kinds of budgets who appreciate the privacy and income opportunities that come with owning a home somewhere tropical. Tropical property owners in Costa Rica say the lifestyle is incomparable. There are amazing views of the ocean, mountains, and rivers with stunning waterfalls. The tropical forests are filled with tonnes of amazing biodiversity. Colorful sunsets and sunrises dazzle every day and there are clear skies filled with stars on most nights that it’s not raining. We can entertain large groups without disturbing others thanks to big lots that are separated by trees, rivers, and valleys and plenty of room for guests to stay. These are all things that make for an uncompromisingly joyful life that people from all walks of life enjoy.
Is this boom about to bust?
To the surprise of many, Costa Rica real estate has experienced an unexpected boom during the pandemic as people from the U.S., Canada, and Europe are looking for a place where lockdown restrictions are less substantial and the weather more pleasant. Many feared this sudden spike of interest was temporary but the trend of remote work seems to have kept the market alive and well and the trend shows no sign of stopping. In fact, homes in Costa Rica priced over $1 million have increased in sales volume since November. And homes across all price levels closed so far in 2021 have sold on average for over 96% of their asking price with quite a few selling for asking price or even above.
Buyers from all over the world and from within Costa Rica are flocking to small towns in the South Pacific in an unprecedented real estate boom. The residential real-estate market is on its biggest year since 2008, just before the housing bubble burst and set off a global recession. Yet in nearly every meaningful way, today’s market is the inverse of the previous boom.
In the mid-2000s, too much new construction led to an oversupply of houses. When the stock market crashed in 2008, many homeowners and developers in Costa Rica lost significant value on their properties. The current tropical real estate boom is far more stable than the last one, which felt like more of a cash grab frenzy. Covid has catalyzed a rethinking of where we live, and why we live there and more people are deciding that tropical Costa Rica is the place to be.
Unlike in the building boom of the mid-2000s, a deficit of homes for sale is playing a big role in the current spike in prices. New-home construction hasn’t kept up with demand in recent years, as builders took years to recover from the financial crisis and faced shortages of land and skilled labor. Those shortages and rising material costs continue to hinder builders as they increase production.
Advice for sellers
Real estate agents all over Costa Rica are sharing record sales and an inventory that dwindles as fast as it grows. For homeowners looking to cash out, this may be the perfect opportunity to maximize profits by putting your property on the market now. Though the first quarter of 2021 has brought along a slow decline in the market due to lack of inventory, we can expect that the demand for properties at various price points in Ojochal, Uvita, and Dominical is here to stay for quite some time.
Decluttering is key for getting the best price for your home when it is time to sell. There is proof that sellers get substantially more if they stage their home for buyers looking for an easy turnkey exchange. A good realtor will be able to guide you on what features and amenities clients expect to see in a Costa Rica property.
Buyers today expect videos of the homes they want to buy. Thus, video marketing and virtual tours are a necessity. Our team of agents are seeing properties every day and filming tours for their clients overseas that sell homes fast. The future is now and online commerce has found its way to Costa Rica real estate.
The decrease in inventory really has impacted us because there’s just not a lot to buy. We have tons of people qualified to buy but there aren’t enough properties to show them. The hardest part of an agent’s job right now is watching our clients’ frustration when their offers aren’t accepted and there is no other property that is comparable on the market.
Advice for buyers
It’s so important right now to use a realtor because buyers are unprepared to navigate this market and knowing what it takes to get an offer accepted. Competition is still and an experienced negotiator and prompt communicator will be the ideal type of agent to be representing you in today’s market.