South of the Border in Costa Rica

Services for Real Estate Pros with The Oaks Tamarindo

Since I live and work in Costa Rica, I found the Wall Street Journal's article on red hot real estate markets in Central America fascinating. Following are some excerpts, with my comments following, marked in italics and underlined.


South of the Border,
The Market's Still Hot

Americans Find Second-Home Boom
Endures; Wildlife in the Neighborhood

December 14, 2007; Page W12

The housing slump has sent many Americans shopping south of the border.

Existing-home prices in the U.S. dropped 4.5% in the third quarter from a year ago, according to S&P/Case-Shiller. But they are still climbing in much of Latin America and the Caribbean.

Buyers are being enticed by the kind of double-digit appreciation that has all but disappeared in the States. In addition, a growing number of new developments are targeting Americans looking for good deals and a lower cost of living.

In San Pedro, Belize, the average price of a 2,200-square-foot home was $697,500 in September, up 18.6% from a year ago, according to a study by Coldwell Banker; the price of a similar property in San Jose, Costa Rica, was up 20.7%, to $389,900, the study said.

At The Oaks Condominiums outside Tamarindo and Playa Grande, on the Northwest Pacific coast,, prices have gone up 40% in 2007, but are still more than 25% below the lender's appraisal of value when the first two phases are completed in July 2008. For good design and construction (see last comment below), prices routinely appreciate 15% between pre-construction and construction, and another 15% between construction and completion. Inflation in Costa Rica is running about 10% per year.

He snapped up the home on the advice of a gym buddy, who said his own Costa Rican properties have quadrupled in value over the past four years. Although Mr. Deitrick isn't looking forward to the daylong flight to Dominica when he visits for the first time in February, he says he's glad he bought the property: "It just doesn't make sense to buy in the U.S. right now."

Buyers need to ask the right questions, and to inspect the property.

There are additional downsides to buying in this part of the world. The weather can be violent and unpredictable: Last month Hurricane Noel slammed the Caribbean, causing floods and mudslides, and leaving 147 dead. And insurance to protect against natural disasters, including earthquakes, may be impossible to obtain.

Costa Rica is south of the hurricane paths. In Costa Rica, insurance is available through the INS, a government monopoly insurer. Insurance includes coverage for earthquakes and hurricanes. Regulated rates for condominiums vary from a high of $0.6215 per $100 on an individual policy to a low of $0.452 per $100 on a policy purchased by the condominium association.

In addition, many foreign real-estate brokers are unlicensed and don't necessarily adhere to the business standards that Americans expect.

Does the broker have an "exclusive listing" for one or more properties at a higher than normal commission? Is that why the broker is showing you that property? Is there a sales contest going on, where the winning agent gets a free unit or cash bonus? Ask the same questions of brokers in at least three different firms, and note the different answers.

Seasoned real-estate brokers say that to be successful, developments need at least some amenities and should be within an hour's drive of an international airport.


This means, for beach properties, the Guanacaste region along the Northwest Pacific coast. High scale development was opened up by The Four Seasons Resort four years ago.

Thanks to direct international flights from the U.S., Canada and the U.K., beach communities from Coco to Tamarindo are within an easy one hour drive. Tamarindo is the social hub of the area, within easy driving of lesser known and even better beaches such as Playa Grande. An apparent exception to the one hour rule is the booming beach town of Jaco, where a proposed highway from San Jose promises to bring the driving time from San Jose down from two hours to one hour. This new highway is promised for completion within three years. A word to the wise. This promise first was made thirteen years ago. Each year the promise remains unchanged.

Estimated buyer transaction costs: 3.8%

If the developer structures the sale properly, closing costs can be as low as 1%, including title insurance. How? The seller transfer shares of individual corporations set up for each unit, avoiding transfer taxes, side stepping "minimum" attorneys' fee schedules, and easing the opening of bank accounts.

 There are no capital gains taxes in Costa Rica (except in the case of "habitual" sales, in which case a 30% rate applies).

Do not assume that North American construction and environmental standards apply, or that developers accurately or consistently describe the number of square feet contained within a condominium or home. Remember, the market is basically unregulated.

According to Wikipedia, only about 15% of waste water in Latin America is treated before it is released into rivers and bays. Insist on compliance with environmental standards. Ideally, insist on tertiary waste water treatment systems that clean waste water to 95% or better purity, sufficient for reuse for irrigation purposes. To begin in Costa Rica, check and

Robert Irvin,


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Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Robert, You have some good information for us. I hate seeing "no comments." Please post this to both of my groups: Front Porch Majority and All Land.

I am looking forward to continuing the conversation with you.

Bill Roberts

Dec 20, 2007 03:34 AM #1
Jean Groesbeck
Compass - Anacortes, WA
Broker, CRS, e-PRO, ABR, ASP, CNE, IMS

Great information.  Maybe you should ask active rain to create a category for Costa Rica. More people will be using you for winter homes.  We are a summer home market there is good synergy between our markets!

Sep 15, 2008 03:04 AM #2
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