Will Costa Rica boom or bust?
It feels like it's time for it to boom again, following its last significant downturn in 2007–2008. To understand this, let's recap insights from an article titled "Nation confronts a sizzling market," published back in 2005.
The Cycle of a Tourist Destination
There are various theories explaining the growth cycles that tourism destinations undergo. As a destination matures and attracts different types of tourists, its growth process naturally changes. This phenomenon dates back to Roman times: newly discovered "paradises" typically follow a defined cycle, encompassing phases of: exploration, involvement, development, consolidation, stagnation, and eventually, decline and/or rejuvenation.
Tourist attractions emerge from the exploration phase, much like Nosara, which was merely a dream in the seventies. Gradually, the "drifters and explorers" characteristic of this phase involve locals in providing tourism services. Over the years, more visitors arrive, leading to increased development.
Time passes, and at some point, the market begins to consolidate, visitor numbers might slow, or a major event can cause a market crash, as happened fourteen years ago when financial markets collapsed globally.
Real Estate Cycles and Current Trends
Real estate analysts believe property markets operate in approximately 15- to 20-year cycles. Typically, four to five of those years are spent in recession or a downturn, with the remainder seeing a slow climb back up. Costa Rica is likely at the very beginning of its upturn cycle, given that the market has been relatively stagnant for around fifteen years.
Some Costa Rican notaries specializing in property transactions have indicated in recent interviews that their earnings from property sales have been higher in the past year than over the previous five years combined, pointing to increasing activity.
Many elements are contributing to the real estate market heating up:
- U.S. Economic Stimulus: Funds from U.S. government grants, low-interest loans, and other pandemic-related financial assistance are partially flowing into Costa Rica.
- COVID-19 Escapees: More U.S. citizens are traveling to Costa Rica to escape COVID-19 restrictions in their home country, with some deciding to stay longer or relocate.
- Stable Global Markets: Global financial markets are largely stable and performing well, fostering investor confidence.
- Enticing New Laws: Costa Rica is enacting new laws designed to encourage people to extend their visits or retire in the country, such as the Digital Nomad Visa and new investor residency options.
Is Now a Good Time to Invest?
Is it a good time to invest in real estate in Costa Rica? Is the market going up?
Property is generally a good investment over time, but like any other asset, great care must be taken in its acquisition and maintenance. The adage, "You make money when you buy, not when you sell," holds true. Common sense is the main factor determining future property value. No one should rely solely on an appreciating market or wishful thinking to create a profit margin.
Costa Rica offers many advantages: it's a friendly country with a stable government, close proximity to the United States, ample connections to the rest of the world, and a great, diversified climate, among many other benefits.
Navigating "Shark-Infested Waters"
However, investors need to watch out for "shark-infested waters." Many people came to Costa Rica during the "feeding frenzy" twenty years ago to invest in property, and some are still recovering because they jumped into the real estate market unprepared and paid too much.
The secret to any investment is thorough homework. Nowadays, it's easier than ever to get details on any property online from the Registro Nacional. Several years ago, this wasn't the case, and most had to rely solely on attorneys and notaries for due diligence. Now, savvy investors can do much of the investigative work themselves.
It's also crucial to remember that Costa Rica is not the United States or Canada. Laws are different here. Many foreigners arrive thinking the laws are similar, which they are not. The mindset of someone saying, ". . . but in North America, we can do this or that," demonstrates ignorance and such individuals should be cautious about investing in this country.
Beware of Scams and "Dream Developments"
Now for the bad news: with increased interest in the real estate market, so too are the scams and "dream developments" in the middle of nowhere. Next month's article will review past instances to help those interested in investing in Costa Rica avoid headaches and nightmares.
The information provided is for informational purposes and does not constitute legal or financial advice. Consult a qualified Costa Rican professional for your specific situation. ©2004-2025 Costa Rica Expertise. Free use permitted with attribution (CC BY 4.0). 1210906 XX!
