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Construction Grew 64% in 2006

Early this month, the Costa Rican Construction Chamber confirmed what any wide-eyed visitor to the palm-fringed beaches, curling waves and once wild coastline already knows: construction in Costa Rica is booming, and at unprecedented rates.

In 2006, construction grew by 64% in Costa Rica, boosted largely by the growing popularity, and desirability, of popular beach areas.

“Prices still remain lower than they are in more developed countries, and that’s driving the continuing growth in construction,” said Jaime Molina, president of the chamber, at a press conference in early January.

The overwhelming majority of new construction – 70% in 2006 – continues to be residential, as opposed to office buildings or commercial centers, and of these, 40% are single-family homes and 31% are apartments or multi-family homes or condominiums.

This distinction was evident in chamber statistics, which showed development moving away from central San José and toward outlying areas such as Santa Ana and Escazú, west of the capital, and beach areas, largely for primary and second homes.

In total, almost 6 million square meters were developed in Costa Rica, a staggeringly large figure that is as exciting for the booming construction industry as it is alarming to those who value Costa Rica’s expansive vistas, open space and undeveloped beaches.

“The construction boom is nothing new, but we need to look at the good and the bad. Primarily, Costa Rica needs to benefit,” cautioned Molina, who said it is important that such growth is properly supervised.

According to statistics released by the chamber last month, the Pacific province of Puntarenas led the construction boom, with 137% growth, thanks in part to its relative proximity to the Central Valley and JuanSantamaríaInternationalAirport. The Caribbean province of Limón, which has become the focal point of government efforts to increase tourism (TT, Jan. 26), placed second with 122% growth, with the ever-popular northwestern province of Guanacaste close on its heels with 107% growth.

Guanacaste’s Santa Cruz, home to the development-studded beach areas of Tamarindo and Flamingo, was the canton that saw the most investment in development and construction, followed by Garabito in Puntarenas, home to the Central Pacific’s Playa Jacó, and Santa Ana and Escazú in the Central Valley.

San José, which five years ago ranked a top the list, fell to eighth. Molina was discouraged, but not surprised, by this development, especially considering the rise of neighboring Panama City, which has seen an incredible boom in high-rise construction in recent years (see separate story).

“San José is getting depopulated,” Molina said. “We need to get people back into the center, where we can take advantage of the existing infrastructure.”

The more land that’s eaten up by ever-popular single-family homes or condos, the more expensive prices get, and the harder it becomes to turn a profit on a development project.

“We need to change our customs in this country,” he said. “We don’t need a patio and a backyard with an orange tree; we need to start building up, not out.”

Investment in construction and development projects – whether second homes or office centers – trickles through the Costa Rican economy, and not just in the need for electric wires, cement and other building materials, many of which saw dramatic increases in sales last year.

Such investment also benefits the country’s labor force; construction jobs grew by almost 10,000 in 2006, and the industry now generates almost 7% of all jobs in the country.

In addition, 32% of the loans given by Costa Rican banks to investors pertained to construction, a number that is growing year after year.

Molina feels confident that as long as waterfront land prices remain below those in more developed countries, particularly in the increasing global market of waterfront real estate, there is likely no end in sight to Costa Rica’s exponential growth in construction and foreign investment.

But he cautions that the country’s stampede of elephants in the living room – burgeoning crime, lingering trade-agreement doubts, pothole-ridden roads and red-tapeinfested government – could eventually put a damper on an otherwise bright spot in the economy.

“We need to work on our infrastructure issues if the development is to continue,” he concluded.



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