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The Costa Rica Housing Market is Booming

By Al Twitty | September 28, 2019

Costa Rica’s tourism is booming and the real estate market feels it. Since 2010, the country has attracted a continuously growing number of tourists. And since many are charmed and won over by Costa Rica’s beauty, many have decided to settle here, at least during summertime. In fact, the impressive growth of the real estate sector in the country is driven by the large number of tourists that come here to visit, fall in love, and decide to buy their own corner of heaven. But there are other motifs behind the sector’s impressive growth. And below we will have a closer look at some stats and data on the topic.

San Jose – An impressively profitable city to invest in

Properties in San Jose, Costa Rica’s capital are in high demand. And this makes both properties for sale and rental properties to get incredibly profitable for investors, by the day. As of July 2019, the average house listing price reached US $1,110 per square meter, which is by almost 4% higher than the previous year. Condominium price also rose over the past couple of months, today being estimated at an average price of US $1,700 per square meter.

When it comes to rental properties, the San Jose market is just as profitable. The return on investment rate is estimated at 8.6%, according to this study.

And, according to market analysts, all other provinces in Costa Rica experienced similar growth. Only a few were the provinces where housing prices dropped, one of the being Guanacaste. Here, the house prices fell by almost 3%, while the condo prices rose by an impressive 40%. Although the numbers may surprise many, these are largely motivated by the staggering number of foreign tourists that visit the country.

For example, the total number of tourists reached a record of well over 3 million back in 2018. In 2019, only in the first half of the year, the number of tourists almost reached 2 million. North-Americans but also Europeans seem to be the main category of travellers that choose to spend their vacation time here.

But foreigners are not the only growth drivers in the real estate sector. Because the overall economic landscape has seen tremendous improvements over the past few years, locals also buy more properties than they previously did. With a growth of almost 3% in 2018 and a growth projection of almost 3% in 2019, nothing seems to be stopping locals from investing in their own country.

Foreigners, pumping money in Costa Rica’s real estate sector

There are a lot of things that US buyers find attractive and even charming in Costa Rica, and they don’t hesitate to put their hard-earned money into an even more charming property here. Since it has become one of the most visited countries in Central America, Costa Rica has been visited by 40% of the total number of Americans that reach this part of the world.

Today, well over 100,000 US citizens have established their residency here, and well over 1 million visit it yearly. However, the experts at Blue Water Real Estate Costa Rica claim that recently, the country has become a popular destination for German, French, and Canadian citizens too.

Foreigners mainly target beachfront or oceanfront properties, luxury estate, and other high-end properties. As compared to the prices in their home countries, foreigners see the median prices in the country as a bargain. Especially US citizens, used to the high real estate prices in their states, are impressed by how profitable the market here is.

Because foreign investors enjoy the same ownership rights as Costa Ricans, the market has become more popular by the year. Besides, the lack of residency restrictions and property taxes makes the country even more appealing than at first sight. Properties in the Central Valley sell in a matter of weeks, once they’re up for sale. Foreigners looking for more affordable housing solutions can start researching the southern region, where new real estate development hubs are currently located.

But the most popular market segment for foreigners is the gated community segment. Here, the median price per property reached US $200,000 in 2018.

Good rental yields

Costa Rican investors not only enjoy generous profits on properties for sale. The rental yields all over the country are profitable too. And you’ve guessed it, this is mainly driven by the high touristic potential of the country. The gross rental yields on residential properties oscillate between 6% and 9%. Although these are gross numbers, the profits remain high even after taxes. And you’ve guessed it, the most profitable properties are luxury, high-end properties. For example, San Jose rental apartments and houses bring their owners returns of about 8%.

Foreign investors should hurry

In spite of the high demand for high-end properties, many residential construction plans are due to fail. At least in San Jose, constructors are slowing down their projects. The plan is to allow the surplus to be absorbed by buyers in the next couple of years. And the numbers below prove it.

  • The building permits for residential homes dropped by 13% in 2018, according to this data.
  • The square footage of residential building projects also dropped by an impressive 20% over the same timeframe.
  • The median value of the residential building permits fell by 15%, according to the same study above.

Although in San Jose the numbers can look concerning, this is a normal reaction of the market. On the other hand, the situation in other regions in Costa Rica is not as concerning. The decline, nationwide, registers a modest drop of 2% in the number of building permits.

Costa Rica has become one of the most attractive South American destinations for foreign investors. With an offering real estate segment and a stunning natural beauty, there is no wonder that foreigners come in flocks here to secure their own corner of heaven.

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