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Real Estate Market Report - Costa Rica September 2023

The aspiration of buying a property abroad has been overshadowed by a series of challenges throughout this year. Factors such as inflation, historically high mortgage rates, and a limited housing supply of "close to the beach properties" have collectively created a difficult path for prospective homebuyers. Certainly, the era of mortgage rates hovering at 3%, 4%, and 5% has become a thing of the past. As of September 2023, the 30-year fixed-rate mortgage in the US has surged to its peak since 2001, standing at 7.25%. 

From the buyer's perspective, there is a substantial demand for new developments and contemporary constructions. However, in our region, locating such properties has historically been challenging because of inadequate water and infrastructure provisions. Over the past few years, it has been encouraging to witness the emergence of new developments, such as The Enclave, The Point, Senderos, and more. Nonetheless, there is a possibility that the Costa Rican market could transition into a situation where a scarcity of newly constructed homes becomes the predominant trend. This shift could occur due to the financial challenges faced by investors and developers, as the elevated cost of borrowing makes extensive development projects unattainable. It's highly probable that those who will manage to thrive will be involved in building properties within the mid-range price bracket of 400,000 to 650,000 dollars.

We have observed a big rise in the number of buyers investing in luxury homes within the 2+ million dollar range, as well as in hotels and bed-and-breakfast establishments. It appears that their motivation lies in capitalizing on the chance to invest in real estate in Costa Rica with the potential of making great incomes, possibly considering it as a more stable and dependable alternative to the stock market. It is true that the income tax here is certainly lower than in North America, combined to lower maintenance expenses, making it a very interesting option. 

The forecast for the upcoming quarter remains in line with the existing conditions. This translates to a limited pool of potential buyers in the price range of 0 to 1 million dollars. Typically, buyers aiming to invest within this price bracket rely on home equity or withdrawing funds from certificates of deposit (CDs) to make purchases, and the current timing is not favorable for such actions. We also predict a continuation of wealthier buyers seeking to invest in businesses and luxury home, and certainly, as usual, more people looking to move here in search of a new lifestyle.

We anticipate further price decreases for properties situated farther from the beach, while properties in close proximity to the beach are expected to maintain consistently high prices due to their desirability, contributing to a limited turnover in sales. Over recent months, an increasing number of homeowners are opting to list their properties for sale, resulting in a surplus of options entering the market. This influx of new listings is placing downward pressure on listing prices. When coupled with the decrease in the number of buyers, this is intensifying the pressure on sellers. The forthcoming months will shed light on how these factors will affect our sellers and whether they prompt our buyers to make the decision to buy in our beautiful country. 

Isabelle Emond, Owner/Broker