The environment for financing real estate in Costa Rica, particularly for foreigners, has undergone a significant transformation over the last 18 months.

It continues to evolve rapidly as capital providers seek to leverage solid returns from low-risk borrowers in Costa Rica, a country with undisputed stability and a maturing real estate market.

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The Costa Rica banking environment has experienced significant consolidation as the globalization strategies of major international banks have made their way to the region. The most significant examples have been the acquisition of Banex by HSBC, Banco Cuscatlan by Citicorp and Banco Interfin by Scotia Bank.

Though these acquisitions have yet to result in the true operational assimilation and integration of these local banks, planning and preliminary implementation for more integrated operations is well underway.

The strength, stability and characteristics of our market will drive further M&A activity in the banking sector. We should also see services expand from international banks, who have heretofore only maintained satellite Costa Rica offices as well as the entry of new international banks who’ve given Costa Rica priority within their international expansion plans.

It’s been less than two years since residential loans became available to non-residents with terms resembling myriad conventional mortgage products offered by lenders in North America.

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When Costa Rica Mortgage initiated its operational pilot and market test in early 2007, we were the only mortgage brokerage to be found on popular search engines such as “Google”. Though we take great pride in closing out 2007 as the only professional mortgage brokerage operating in Costa Rica with brand new offices located in Escazu, 2007 has seen numerous entities enter the mortgage brokerage services marketplace.

This past year has also seen the departure of several startup mortgage brokerages, claiming to provide through private funding sources as an alternative to institutional lenders.

Though some of these were successful in funding a small number of loans, the market is awash with reports of borrowers whose real estate acquisition plans and dreams were derailed by claims of “low documentation, easy process, and 30 year fixed rate” loans which never materialized.

The financing industry in Costa Rica has reached the early stages of maturation and there are now several lenders capable of providing residential financing for foreigners. These are, however, early days and with the attractiveness of our real estate market, the downturn in the U.S. environment and CAFTA, the mortgage brokerage industry will see the entry of many new firms as the array of existing mortgage products grows exponentially over the next 3-5 years.

There are many U.S. and global-based financial institutions that have been targeting Costa Rica as a growth opportunity. Several of these lenders announced plans throughout the year to start lending by the end of 2007. Though most of them have experienced short-term setbacks, due to the US mortgage meltdown, we should expect to see several non-Costa Rica institutions enter the market as 2008 progresses.

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For commercial financing, 2007 has seen the acceptance of Costa Rica as a prime opportunity market. Many investment banks, private equity groups and hedge funds focused on fund offshore commercial real estate, closed their first Costa Rica transaction in 2007 and many of them are actively seeking to fund Costa Rica commercial real estate with both debt and equity as a significant component of their asset allocation strategy.

We are working closely with many of these firms and we are very excited about helping them to fund their projects. We are also looking forward to helping you – the VIP Members of WeLoveCostaRica.com to buy the real estate that you have been dreaming of wherever that may be in Costa Rica.

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