Rents & Sales Falling & Rising?

Costa Rica Real Estate – Some rents fall by 50% yet some house prices
rise in spite of a housing surplus.

Real estate brokers warn that prices might fall soon and there were fewer construction permits this year.

Average per-square-meter house prices rose between 20% and 28% last year
in various Metropolitan districts. However, representatives from the housing sector
confirmed there is a housing surplus and that over the next few months, house
prices might fall.

La Nacion compared sales prices for houses and condominiums published in
their classified ads section between June and July, 2004 and May and June of 2005.
It showed that in districts such as Montes de Oca and Tibas, prices
per square meter have fallen, although there were strong gains in Curridabat,
Escazu and Heredia.

Francisco Barquero, vice president of the Costa Rican Chamber of Real Estate Brokers
(CCCREB) remarked that in recent years, price inflation reflected a strong demand
due to the banks’ eased financing terms. “There was a boom, but it seems
to be over and prices are returning to real levels again,” he said.

For the second month running, aggregate house-construction permits have fallen as compared to 2004 after a sustained increase over the previous three years with
an overall annual increase of over 30% according to the CCCREB.

The drop in permits issued was reflected throughout the building sector in general,
which saw an annual 10% growth up to last month as opposed to 30% last year. Housing
represents about 63% of the construction industry sector.

Emilia Piza, president of the CCCREB admitted to concern about the difficulty
of renting and selling houses. “It is no longer profitable to buy
a house to rent out and paying off bank loans; the only capital gain is in raw
land; or, on the other hand, the best bet is to place your money in a current
account in the bank,” explained Piza.

Benita Morales, a real estate broker, stated that during the past year the number
of houses standing empty increased and in some zones, new-house rentals dropped
by 25%, and for older houses, by 50%.

Geovanna Molinari, a broker with JM Realty, affirmed that in Heredia, for example,
she rented out a house the previous week that had stood empty for a year for $700 after dropping the price by $400. Moreover, there has also been a fall
in housing sales.

Cesar Garro, a real estate broker, sold his house in Guadalupe 15 days
ago for $15,000 less than he had asked a year ago. “In some places, new house
prices have fallen by 7%,” said Garro.

Another indicator is that financing is beginning to slow down. Laura Moreno,
a Personal Bank manager for the bank, BAC San José, sees that the housing
surplus will mean housing developers lose out on some of their profits. However,
Moreno did not seem preoccupied about a gradual price drop creating financing
problems because loans are only granted after analyzing each client’s “ability-to-pay”
capacity.

“Prices will return to real levels again.” Says Francisco Barquero,
Vice President of the Costa Rican Chamber of Real Estate Brokers

“Although construction prices rose because of higher material and labor
costs over the previous three years, price hikes were seen because many foreigners
paid cloud-cuckoo-land prices in Escazu and Santa Ana that
affected all other cost lines. This situation will normalize soon because of the
housing surplus.”

“It took me over a year to sell” says Geovanna Molinari, a real estate
broker with JM Realty. “Saturation can be seen in the price range around
30 million colones ($64,000). One client had an empty house for a year, asking
$65,000 in Barva de Heredia. She sold it a year later $54,000. The price bubble
has burst.”

Our thanks to José Enrique Rojas and
our friends at La Nacion – Costa
Rica’s largest Spanish circulation newspaper for their permission to use
this article…

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Andrew Makarik

to@welovecostarica.com

Andrew Makarik is the main editor of WeLoveCostaRica, a fan of this sunny country. He is also a loving husband and a has a lovely daughter. By being a devoted family man and the biggest Costa Rica fan, he wants to make more people feel at home there. WeLoveCostaRica unites people and helps them find new home or a new travel destination. This website is a friendly community where everyone can find not only information, but also new friends and travel pals. Andrew is also passionate about IT and programming, so he himself maintains a friendly atmosphere in this cozy environment of WeLoveCostaRica.com.