Real Estate Market Report - Costa Rica March 2022
You may be looking for a property in Costa Rica at the moment and wondering how much the condo you are dreaming of is worth. Are the asking prices inflated because of the pandemic or the high demand? Since there's no MLS in Costa Rica, it may be difficult for you and your realtor to get a real evaluation on a property. Let me help you a little. We can use Tamarindo properties as an example because it's in high demand, with many properties built so we have some references to work with.
Until 2003, there were a few hotels in town such as the Diria built in the 60's and Captain Suizo, as well as a few homes and businesses. The roads were not paved and neither in conditions for a car to drive on. There was very little infrastructure built. The town was not ready to receive a massive amount of tourists the way we see it now. In October 1995, the Liberia airport was re-inaugurated as an international airport but it is only in 2003 that it started to be known by the tourism industry. Before, people were typically flying to San Jose and driving on the old road for 6 hours to get to our area. In Tamarindo, there were very few phone lines, one or two internet connections for the village, and very few people in town. Things changed in 2003 when some developers started investing in town, building condos such as The Sunrise, The Diria, and pretty much all condo complexes built in Tamarindo and Langosta those days. With the construction of those properties came the tourists looking for a comfortable place to rent, own, and some seeking potential investments.
I like using The Sunrise Condos as a good reference point to evaluate a property in Tamarindo as it's located in the center of town, across the road from the beach and with all the commodities that the tourists and investors are looking for. The Sunrise Condos were built in 2003-2004 and were very popular. They were listed in a reasonable price range for a second property, in an excellent location. They were flying off the shelves, selling fast and at full price; unfurnished at that time.
In 2003, the developer was advertising and selling pre-construction a 2 bedroom condo on the second floor for US$ 169,000, while selling a 3 bedroom penthouse with ocean views at US$ 289,000. By 2005, they were all sold out. In 2006, this same 2 bedroom unit was worth US$ 275,000 and the 3 bedroom unit closer to US$ 400,000. When the great recession started in 2007, the prices started to fall down and those properties took a little hit, as well as all properties in the area. Not as much as in the States - people were paying cash for their condo so did not have to worry about foreclosure, but mainly wanted to release some financial pressure off their back. In 2008-2010, when the market was at its lowest, the same 2 bedroom unit we are referring to was selling furnished for US$ 235,000, while the 3 bedroom ocean view penthouse was selling furnished for US$ 330,000.
We have to take into account that those condos may have been overly selling in 2006 due to the thrill of Tamarindo's development, but were selling too low in the recession period. So, let's make an average between their highest price and lowest price, and consider the value of this 2 bedroom unit at US$ 255,000 in 2005.
How much is worth that 2 bedroom condo today, in 2022? Let's crunch some numbers and talk about what's been happening in our area since the pandemic. We've been in a seller's market since November 2020. Because of Covid, many people are looking to buy a property in Costa Rica, and more people than normal from San Jose have been relocating to a warmer area. In this new world we live in, most of us can work remotely so why not being at the beach. Properties are selling very fast, and at full price. We have very few properties for sale at the moment, partly due to foreigners staying for longer periods than before, some relocating permanently, while others are staying until the pandemic is over.
We now have a new element to consider, the possibility of a new world war. Since last week, we are having a lot of inquiries from Europeans wanting to relocate here. Costa Rica is a peaceful country with a lot of sun, beautiful beaches, fruits and vegetables accessible year round. Although, it's not interesting for the world leaders looking for petrol, minerals and such. Hence, it is quite the right place to be if you are looking for peace and love. What's happening in Russia and Ukraine at the moment is adding some pressure to our market and may affect the value of our properties in a near future.
The Sunrise Condos have a great location, in a very high demand area, and in a town with better infrastructures and amenities than back in 2005. The evaluation of a property should take into account many factors such as the depreciation of the complex and unit, or the appreciation due to its unique location that cannot be duplicated with the new laws, but for the good of this article, let's keep it simple. What we can definitely take into account is the inflation rate. Your dollar in 2005 doesn't have the same purchase power today as it did 17 years later. Therefore, considering an inflation rate of 45.3% from 2005 to 2022, this 2 bedroom condo may be worth around 370,000.00 today. Of course, the inflation itself is not a magic way to evaluate a property but it is definitely a good base to work with. Offer and demand is also an important factor when evaluating a property, and it cannot be calculated just with the inflation rate. If it's been renovated, it can be worth more. If it needs a lot of love, it can be worth less. Your agent will be able to help you with the right evaluation.
At the moment, if you are looking to buy a 2 bedroom condo at Sunrise listed at US$ 400,000 (which is basically just the reflection of the inflation of the last 17 years), don't feel like you are overpaying. It's close to its real value and will allow you to settle in paradise. You may have to refresh it, buy new appliances and upgrade the furniture but it will certainly be a good buy, easy to resell and rent out. We are available to help you finding your dream property or to evaluate and sell yours. Contact us!
Isabelle Emond, Owner/Broker - March 12, 2022