How Does the Costa Rica Real Estate Market Work?
I have experience as a Real Estate Attorney, in both Canada and Costa Rica, with a Law Degree from both jurisdictions. During the twenty-one years that I have been practicing law in Costa Rica, I have seen several Real Estate Market Cycles completed.
Real Estate Market Cycles – U.S. Economic Effect
From a residential and commercial real estate point of view, these Real Estate Market Cycles are largely driven by the state of the U.S. Economy at any given time. There is usually a lag-time of approximately one year to eighteen months for the economic effects in the U.S. to have an effect on the Real Estate Market in Costa Rica. The Covid Pandemic and particularly the social-economic effects it has had, with a larger number of Canadians than usual entering the Real Estate Market in Costa Rica, has distorted the Market from the norm with respect to property sales, making it a stronger “Sellers’ Market”, especially, in the Pacific Coast expat beach communities. There has been a slight levelling-off of the market in the expat beach community areas in the high-end property sales, but mid-priced property sales remain brisk. Opportunities for “fire sale” property prices, where a Seller has to return to their Home Country quickly, for health, or other reasons, remain few and far between.
Effect of the United States Election on the Real Estate Market
There is habitually an exodus of U.S. Citizens from the U.S., from the losing side, following any Presidential Election, with an increase in those exiting the U.S. coming to Costa Rica. In this Presidential Election year in the U.S., the Republican Party has been victorious. With a lowering of U.S. interest rates to stimulate housing sales, it will be interesting to see if this exodus pattern continues, following the November 2024, Election results. I have witnessed this pattern happen previously following U.S. Elections, but with this significantly more emotionally charged Election and the deep divisions politically which exist in the U.S., I expect this pattern may be amplified this time around. Significant price increases in the Costa Rica Real Estate Market most likely will follow this event, through the strengthening of an already strong “Sellers’ Market”.
Buyer Beware
Expats considering a real estate purchase in Costa Rica must be aware that the legal system utilized in Costa Rica is the Roman Civil law System and not the English Common Law System, which is the dominant legal system utilized in the U.S., Canada, and British Commonwealth Countries. There are many differing requirements between to two different legal systems. Also, there is no regulation of the Real Estate Industry as to licensing of Real Estate Agents, or any Government or professional oversight body, which is able to discipline Agents for improper conduct. Although several informal entities exist offering a compilation of real estate listings, no formal comprehensive MLS System exists in Costa Rica, to provide information on both the availability of properties, or market price comparisons, in the manner that such a System offers elsewhere, such as in the U.S. or Canada. Accordingly, choosing a Realtor with good credentials, with many expat Realtors having prior training in the Real Estate Industry in their Home Country, and obtaining references. The Realtor having a good local knowledge of the area of Costa Rica where you wish to purchase property, is very important. Choosing a knowledgeable and competent Real Estate Attorney acting for your independent interests as a purchaser is equally important, to undertake the legal due diligence requirements necessary in a property purchase transaction.
My Opinion
Taking this economic “lag-time” factor into account between the time of property sales in the U.S. and property purchases in Costa Rica, I would expect to see another big boost in Costa Rica property sales and a heightened “Sellers’ Market” by the late Spring of 2025. In the interim period, there could be a slight dip in selling prices in tourist oriented areas in the coming months to the date of the U.S. Presidential Election, with the end of the Tourist High Season and an increased volume of vacation rental properties being listed for sale on the Market. The introduction of DSCR Mortgages (Debt Service Coverage Ratio Mortgages, based solely on the projected rental income of the property) for the purchase of investment properties, by a number of Costa Rica financial entities, and available to foreigners without Residency status, will further help to stimulate this continuing “Sellers’ Market” phenomena.
