In 2005 I wrote an article titled “Why Costa Rica, Why Now!” and the article described the variety of compounding factors that were directly responsible for the incredibly active real estate market we were enjoying and as a result, the tremendous growth we were experiencing in our immediate area, and to some extent, most of the Pacific coast of Costa Rica.

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The reasons were pretty easy to understand:

  • A newly opened International Airport (Liberia International Airport) that had gone from the first direct commercial airline flights, 3 a week out of Atlanta with Delta Airlines, to 18 a week with in one year with American Airlines and Continental airlines coming out of their hub airports.
  • The opening of the Four Seasons Hotel and Arnold Palmer golf course which are located just across the bay from our area. The Fours Seasons and Arnold Palmer golf course were the first phase of a three phase project that will incorporate two more golf courses, two marinas, additional real estate and an overall build out budget exceeding $400 million dollars.
  • A strong US economy, combined with low interest rates for mortgages. It can also be argued that the extremely low returns from traditional secure investments (GIC’s, T Bills, Savings Accounts…) as well as a lingering uneasiness with the stock market, motivated investors to look at real estate as is the case during this economic cycle and Costa Rican was a close and secure real estate market that was performing well.
  • We felt the initial impact of the Baby Boomer market as this burgeoning market started to look offshore for their retirement/investment/vacation properties.
  • Our area is the closest beach community to the Liberia International Airport.

These were the factors that created the foundation for the growth we experienced from 2003 to the first quarter of 2006. Properties appreciated fairly well during this time period.

Due to the fact that 95% of the buyers of Pacific coast properties in the Costa Rica are from the United States, it is assumed by many of those now looking at Costa Rican real estate that the Costa Rican real estate market should be suffering similar maladies as that of the US real estate market.

The questions I get now are, “How is your market doing?” “Are prices dropping?” “Are you worried about your market?”

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The reality is nothing could be further from the truth.

The reason I make that statement is due to the following factors;

  1. It became very evident that a number of the larges scale developers from the United States recognized the predicament of their domestic real estate market some time ago and looked around the world for better opportunities. They decided on Costa Rica. Within a two hour radius of the Liberia International Airport at least nine large development properties have been purchased over the last 18 months representing an initial investment of over $200 million dollars to acquire these properties. The collective investment to build out these resort destination projects will be over a billion dollars. Historically the world over, when this has occurred in specific areas, neighbouring properties have appreciated in value, and in many cases at very aggressive rates. You know what they say about history repeating itself. The same will happen here.
  2. The Liberia International Airport now has 42 commercial airline flights a week and continues to grow. Delta will start a direct route to Liberia from Los Angeles this December. Opening the Californian market to a direct flight will have a very substantial impact on the real estate industry here.
  3. It has been reported that British Airways will begin a direct flight in early 2007. There are other airlines looking to begin routes as well, both domestic US airlines and international airlines.
  4. IThe following hotel groups have signed contracts to operate hotels in our immediate area, Hilton, Westin, Regent, Mandarin, Aman, Ritz Carlton and not too far away, St. Regis, Auberge, J.W. Marriott, and Hyatt. The joint marketing done by these hotel groups, combined with that of the airlines, will expose Costa Rica to the internal market place at a much grander scale than ever before. These hotels are all four or five star hotel operations and as a result will be bringing to Costa Rica a never ending supply of qualified buyers.

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  5. The Baby Boomers, yes I realize this is old and you have been hearing it forever but, the simple reality is that the huge number of this age group has changed markets their entire lives. Seventy-eight million people (or there about) will retire over the next 15 years in the US alone. Don’t think those developers that bought in Costa Rica aren’t aware of this. Our market can be sustained by less than 1% of the Baby Boomer market. Not much to ask for or need.
  6. One of the major factors for our market not softening as well is it is a cash market. Close to 100% of the property or home purchases here are cash buys. We do not have to deal with the aftermath of an over indulgence of speculator leveraged financed buys that artificially prop up property values and work to help values free fall when the market turns. This can not happen here as mortgage financing to date is not readily available in Costa Rica.
  7. We are not over built. A more accurate statement would be, we remain under built. The demand is still outweighing the supply. It will be some time before supply can catch up to demand.
  8. No hurricanes. It may seem like an insignificant factor but it is not. A significant portion of the market purchasing retirement/vacation or investment property would prefer to do so where a hurricane will not destroy their property. Costa Rica is such a place. It is surprising at the number of buyers we have seen that exchanged coastal properties in Florida or Texas for a property in Costa Rica over the last year.

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Yes, you have to take everything I state with a grain of salt as I live here and make a living from owning and operating a Century 21 real estate office, a successful development company and a technologically advanced construction company. However, what I have stated is simple fact and not “speculation”. It is what has happened, and what is happening.

And for me, I do not need to embellish the realities of our real estate, construction and land development industries as I have the comforting knowledge of knowing I can always turn to a prosperous career in free lance writing 🙂

Costa Rica remains “hot” and will get “hotter.” You may want to slap on some sun block and get down here to take advantage of the knowledge you now possess and get in front of all of those that will be coming. There are some opportunities that can be taken advantage of by those that are willing to act upon them.

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Written by Scott MacDougall an expatriate that has lived and worked in Costa Rica since 1992 who has been specifically involved in the real estate, construction and land development industries. Scott has also been a member of the executive management team of some of the larger more successful resort destination community projects in Costa Rica.

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