Since the beginning of 2024, there has been a notable decline in property sales, primarily due to rising mortgage rates and home prices in North America. This trend has discouraged potential buyers from investing in rental income properties in Costa Rica. Traditionally, a common strategy for buyers has been to leverage their fully paid-off properties in the US or Canada by taking out mortgages on those properties to finance investments in Costa Rica. However, current conditions have made it difficult to secure mortgages abroad for Costa Rican properties, rendering this strategy less viable at the moment. High interest rates further complicate matters, making it challenging to achieve a favorable return on investment from rental properties in Costa Rica. Typically, a very good rental property yields a return of around 4-6% over its purchase price, whereas current interest rates are closer to 8%. We have seen an increase in buyers opting to take mortgages from Costa Rican institutions - the typical rate is similar to the US rates, turning around 8 to 10%. These buyers are primarily individuals relocating to Costa Rica rather than seeking investments abroad.
For many prospective buyers, particularly first-time and lower-income purchasers, entering the market remains challenging. The median price for existing properties in our area has risen significantly, now 40 to 50% higher than before the Covid-19 pandemic. However, prospective buyers can take heart in the current market dynamics, as the slow pace of new property sales has resulted in new inventory levels not seen since 2019-2020. Buyers who are still active in the market are beginning to gain more negotiation power. Sellers are compromising, accepting lower offers, assisting with closing costs and funding or doing repairs. We do not have multiple offers like we have seen in 2021-2022, and properties stay longer on the market before finding the right owner. But we still have buyers moving here - retiring, changing lifestyle and/or coming to invest on larger high end properties.
It's interesting how elections in the US directly influence Costa Rica's real estate market in the touristic beach areas. Typically, we observe a surge in interest from buyers who are either looking to invest abroad or considering a move to Costa Rica. The outcome of the election often shapes these decisions, reflecting broader economic and political sentiments. Stay tuned for updates — I'll provide more information after the election unfolds.
Isabelle Emond, Broker/Owner