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eskasue

Real Estate Market Slowing ?

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Although I am new to this forum, I am not new to CR....I became a resident in 1980 while working here for a multi-national company, married a Tica and we built/bought/sold 5 homes in the Escazu & Santa Ana area during the past 10 years, after I retired. (let my residency expire...we only return now to visit family) Sold our last home 3 years ago and now living in the USA and re-thinking of buying again in Costa Rica. We know Escazu/Santa Ana but not sure this is where we want to re-invest $200k (or less). As everyone knows the Real Estate Market in the USA is going thru some really rough times along with the economy in general. As they say, "CR is usually a year behind the USA" yet when we talk with Real Estate Agents (who we have limited time for) they tell us "the USA real estate impact has had no impact to the CR market....I enjoyed one member comments that real estate agents are like "used car salesman" (enough said...lol). Now with the credit markets on "stop" vs "hold" we expect to see a dramatic downturn to an "overpriced" region where many expats have settled, etc. We would appreciate comments regarding how those living in CR see the markets (Beach and Central Valley). We expect he beach would be mainly the multi-national investor vs the Tico and the Central Valley mostly Tico's with the multi-national mix. tks

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Honestly, the real estate market here has been generally more stable than I had expected.

 

One thing that I have been talking about for a long time is the extreme over building that is taking place in Jaco. There is an extraordinary amount of inventory that will hit the market in the next 12 to 18 months. My theory is that this over-building represents a threat to the entire market in Costa Rica. My fear is that the market collapses there, it could possibly have a ripple effect on the entire market.

 

That said, my impression is that Costa Rica is doing amazingly well in the face of the global economic crisis. Indications are that the financial institutions are relatively stable and insulated from what is going on in the US and Europe.

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Honestly, the real estate market here has been generally more stable than I had expected.

 

One thing that I have been talking about for a long time is the extreme over building that is taking place in Jaco. There is an extraordinary amount of inventory that will hit the market in the next 12 to 18 months. My theory is that this over-building represents a threat to the entire market in Costa Rica. My fear is that the market collapses there, it could possibly have a ripple effect on the entire market.

 

That said, my impression is that Costa Rica is doing amazingly well in the face of the global economic crisis. Indications are that the financial institutions are relatively stable and insulated from what is going on in the US and Europe.

An interesting comment from "undecided" .... I had not thought of the real estate market being impacted as a result of the change in resident immigration laws. I can see now where this may have an impact in the beach areas, as 60% of those purchases are from North America and "yes" agree the spread to the Central Valley market. tks.....and the Khuna coments, I am with you 100%, "it's comming". Unless credit warms up dramatically in CR those builders/developers will be in the "remodel business" on a "cash basis", tks

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I am honestly not sure how much the change in the law will effect Real Estate values. The vast majority of foreign real estate investment is in Vacation Properties, people that maintain residence in North America.

 

The people that are going to be effected by the changes in the law are the one with modest pensions. Given the best number that I am aware of the total of Legal residents from the US is about 12,000, so the number effected will be a fraction of that number and I am not sure that the type of Real Estate development that is most prevalent is targeted to that group.

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Ekasue, as someone involved in the property market, I can say that prior to the economic problems particularly in the U.S. and Canada that my website received over 4,000 valid hits monthly regarding properties, and since that time I have been receiving less than 2,000, so I can vouch that yes the economic impact has already reached Costa Rica, and I believe will get much worse in the coming months rather than better. Construction has drastically decreased in the Pacific coastal areas and in areas such as Escazu and Santa Ana around San Jose, while in the interior the impact has as yet to be felt to a large degree.

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Any updates to be offered now that we're in late January? How has the recession in the US affected CR real estate, specifically, foreign investors liquidating assets (or dumping liabilities) given the tougher times at home?

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I sat down with an investor group from NY today and we discussed the state of the market here in CR and what is going on in the USA. The biggest issue at hand is the complete lack of credit--or should I say reasonable credit. I've laughed when I received emails from the people at Scotia Bank offering 13.5% financing for our clients. Who in their right minds would pay credit card rates for a home or condo loan? Not many people. The one thing that is helping our non-cash buyers is developer financing. More and more projects are offering special financing, which is a plus. The disappearance of home equity lines have also made two of my deals in the last 3 months go south. My client literally showed up to the bank to wire funds and their HELOC was gone or reduced by over half! We have many factors that affect the beach/coastal areas that may not affect the Central Valley. Our property management division has been doing great. I don't really know what that tells me other than people are still traveling to CR and looking to save money by renting a home or condo. Two of our last four sales have involved some sort of private or developer financing. The properties that were sold were being sold under market value. I would like to consider myself an honest Realtor and not the 'car salesman' type that some on this forum refer to us as.

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An interesting comment from "undecided" .... I had not thought of the real estate market being impacted as a result of the change in resident immigration laws. I can see now where this may have an impact in the beach areas, as 60% of those purchases are from North America and "yes" agree the spread to the Central Valley market. tks.....and the Khuna coments, I am with you 100%, "it's comming". Unless credit warms up dramatically in CR those builders/developers will be in the "remodel business" on a "cash basis", tks

 

 

EskaSue, et al

 

Now, after four months since this thread started, what are the various opinions on CR property investment/use WRT the global liquidity/solvency issues?

 

Opinions offered thus far are interesting, as they have been on my mind this last year. I've been looking into CR and Ecuador for the last two years as a place to reduce my retirement overhead. I'm like many, not rich, but not poor. The last several houses I've bought have been for cash, and luckily, I've managed to get out relatively unscathed. I've temporarily settled in upstate NY to help my daughter build a 1500 sq ft house on their 40 acres. I bought a very cheap house to live in while I help my daughter build. It's about done, so I am revisiting X-pat choices. The house I have now has MANY positve qualities which will aid in liquidity when I pull the plug and need to leave. I've mentally accepted even having to take a capital 'haircut' to get out; NY realty taxing is not conducive to 'holding' property without using it (I'll never be a 'landlord').

 

In my past life, I've been an architect (hospitals, mostly), and have had experience building most types of construction. I continue to do small type 5 construction for my own satisfaction-use; I design, draw, and construct my projects. I have no particular fear of building out what I need, where-ever I finally end up. Of course, in another ten years, I will not physically be able to do as much as I can now (still).

 

After much research, I started favoring Ecuador, simply because I'm a little late in the game for CR. Appears that the changes in 'welcoming' policies (for X-pats from north, OR globally) are being tossed out. Would assume that the PTB (powers that be> which exists everywhere) have attained their goal of economic 'boost' from these policies, and are now retracting them. Ecuador, on the other hand, is trying to follow same formula to 'welcome' X-pat investment. However, that being said, with 'chain reaction' global economic dynamics, smaller (quicker) policy changes make for difficult navigation WRT making more permanent decision-making difficult. I would definitely put a LOT more focus on EXIT STRATEGIES.

 

CR remains on my radar, simply because there is more infrastructure; being a double edged sword, it also makes for less 'core-freedoms' (permits to pee on my own property, for instance... chuckle), as well as a higher 'base-line' for issues like taxation (property), etc.

 

I'm looking mostly at the central (Terrialba, La Suisse areas), for a 10-30 acre 'hobby finca', perhaps exisiting coffee, where I would be able to offset SOME of my living expenses, without heavy involvement. I would augment that with a couple head of cattle, sheep, etc, for experimenting with 'pasture raising' for personal use (local sharing-trading).

 

I have a friend who has spent the last two months 'on the ground' in Ecuador, and has reported a 'surprising' issue (to both of us). We had thought that like in North America, higher elevations would reduce/mitigate a lot of the 'biting' insects (mosquitoes, fleas, biting flies, etc). Much to our surprise, it did not appear to be the case in all parts of Ecuador (mid Feb thru mid Apr), regardless of the elevation (from sea level of 0 to 8000+ elevs of Quito, Cuenca, etc). Only seemed to be smaller concentrations in dryer areas such as Loja, Vilcabamba, and Malacatos. Not to be 'nit-picky', but, even if a small irritant, I'd still put it on the planning list; 'eyes wide open' and all.

 

So, what opinions do you have WRT current economic issues as they affect CR, now that we are seeing a much greater potentiation for 'connected' affects? to continue this thread?

 

ciao for now,

roccoco

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As you Spanish improves and you begin to learn Costa Rica you will identify EskaSue, et al as a small city outside San Jose where most of the international community have accumulated over the years....the city name is Escazu (pronounced Eskasue)...I just "Gringo'ized" it.

 

Our update since starting this thread...we purchased a small town-house in Santa Ana, which we know the most about and feel comfortable in that area for investments. The unit we purchased was a new (never lived in) home where it is mostly built out. An important factor in investing in CR or any 3rd world country. In fact the builder has a few homes to finish but has not moved on his prices and the home we purchased was "well below" his market price...guess the seller "just wanted out" !

 

Our interest was to visit a couple months a year and use the home for that purpose. However, my wife (a Tica) talking with some "rental type agents" said they had clients interested in that Santa Ana area who worked at the Forum and long term rentals were offered. No disrespect to the Tico's but we would not prefer to rent to locals and as it turned out we rented to a multi-national companies ex-pat who expects to be in CR for at least 3 years. This met our needs very well and "rented we did". As info, we were ex-pats from a munti-national company living in CR, Venezuela, and Brasil and feel this was our best investment.

 

The supprise we can offer is that the Private Banking community has not reduced their CD rates and still offering more than double that of the USA in todays market.

 

Wish you all the best....we do not know Ecuador but some of those things "I" like the most about Costa Rica is there are free elections, no military, and a government with a similar format to that of the USA. Other qualities are the education level of the Costa Rica population is far greater than other Latin American countires. I'm sure others reading will add to this list of positives for this country.

 

Suerte !

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Things have slowed and many real estate salesmen/women are out of work. Construction is down and prices are starting to fall, although many are just sitting around waiting for this thing to pass. I'd wait another 6-12 months and you could probably get a "great" deal. BCR and the other bank websites often have foreclosed homes for sale as many are losing their jobs. I just wish crime wasn't a side effect of all this. But that's another subject all together.

 

PuraVidas

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As many know I have not been a fan of owning real estate in Costa Rica on this board.

 

But I have to say, prices up to this point have stayed relatively stable, though things are generally not moving.

 

I am still waiting for the other shoe to drop in Jaco. Hundreds, maybe thousands of Condo units set to hit the market all about the same time. We will see how things hold up after that.

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I just returned from Costa Rica and spent several days looking at real estate in Grecia, San Ramon and Atenas (primarily Grecia). I have been a small investor here in the US for many years, so was trying to get a feel for the market there prior to purchasing. I liked the realtor I was working with who showed me, per my request, single family homes in the $50,000 - $150,000 price range.

 

I was surprised to find that there were more than a few very, very good bargains in this price range. Over and over I heard expats explain that they had taken a terrible beating in their 401K accounts and/or in real estate held in the US. They were very anxious to sell. My gut response is that this trend will really pick up over the next one to two years, offering some terrific opportunities for new investors in Costa Rica. I think that the market for expat buyers will recover, but that their target market in Costa Rica might be very different in the future. This horrific recession will permanently stunt the finances of millions, including the Boomers who have fueled much of the Costa Rican expat real estate expansion.

 

My guess at this very preliminary point is that future expat buyers will be looking for smaller homes with good finishes and that these homes will be used/needed for more than just vacation destinations. I think that furnished rentals of this type in Costa Rica could provide a very good cap rate if purchased at or near the market bottom. I am going to continue to follow the market carefully (in the Grecia/San Ramon area) in an effort to understand when to enter and what to buy. I guess that old saying really holds true now: "The time to make money is when blood is running in the streets, even if it is your blood".

 

Time will tell, but for me Costa Rica is one of the most beautiful places I could imagine living - and no place is without problems.

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After much research, I started favoring Ecuador, simply because I'm a little late in the game for CR. Appears that the changes in 'welcoming' policies (for X-pats from north, OR globally) are being tossed out. Would assume that the PTB (powers that be> which exists everywhere) have attained their goal of economic 'boost' from these policies, and are now retracting them. Ecuador, on the other hand, is trying to follow same formula to 'welcome' X-pat investment. However, that being said, with 'chain reaction' global economic dynamics, smaller (quicker) policy changes make for difficult navigation WRT making more permanent decision-making difficult. I would definitely put a LOT more focus on EXIT STRATEGIES.

 

I have a friend who has spent the last two months 'on the ground' in Ecuador, and has reported a 'surprising' issue (to both of us). We had thought that like in North America, higher elevations would reduce/mitigate a lot of the 'biting' insects (mosquitoes, fleas, biting flies, etc). Much to our surprise, it did not appear to be the case in all parts of Ecuador (mid Feb thru mid Apr), regardless of the elevation (from sea level of 0 to 8000+ elevs of Quito, Cuenca, etc). Only seemed to be smaller concentrations in dryer areas such as Loja, Vilcabamba, and Malacatos. Not to be 'nit-picky', but, even if a small irritant, I'd still put it on the planning list; 'eyes wide open' and all.

 

So, what opinions do you have WRT current economic issues as they affect CR, now that we are seeing a much greater potentiation for 'connected' affects? to continue this thread?

 

ciao for now,

roccoco

 

roccoco:

 

Not to inject a sour note into the thread, but I would take Ecuador of my list if I were in your shoes. ANd not becase of the biting insects!

 

My concern would be with the political life in Ecuador. Unfortunately, they are leaning more and more towards the project being led by Mr. Hugo Chavez of Venezuela.

 

If they continue on this path, you will soon see how authoritarianism will raise its ugly head, and how foreigners (especially gringos) will see more vitriol hurled at them by official government sources.

 

You can also expect them to follow the Venezuelan path of declaring all property to be the Governments, and basic human rights will be seriously abused as they are today in Venezuela.

 

From all that I have read and researched, I see no other country in Latin America (except Chile) where a retiree ex pat can have a modicum of freedom and peace other than Costa Rica.

 

Now if living under Communism is your cup of tea, then you can look at Venezuela, Bolivia and Ecuador as your best bets for that.

 

And no, I don't mean Socialism, I mean Communism.

 

( For the record, I am not the reincarnation of McCarthy)

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