Buyers and sellers countrywide have been shaken by the economic downturn, and, according to experts across Costa Rica, more difficult times await.
Ellie Watland of Costa Rica Tropical Paradise Properties (2265-4282, www.costaricatropicalparadiseproperties.com), who mainly sells properties in the Central Valley, attributes the Costa Rican slump to financial woes in the United States.
“Three or four years ago, people could sell their houses in the States for about $500,000, come down here and buy a house for $250,000 and then put $250,000 in the bank. Now, with the housing crisis, maybe their home could sell for $250,000 and they could come down here and buy a house for $250,000 and have nothing to put in the bank,” says Watland, who moved to Costa Rica from the United States eight years ago and has been in real estate here for three years.
“And still, that means they have to sell their house in the States, and right now that’s hard to do at any price,” she adds.
Watland says she remembers when prospective buyers would come to Costa Rica for vacation, walk into a real estate office and ask what they had, be shown a property and buy it immediately, without a second thought. Linda Gray, a real estate agent for Coldwell Banker Coast to Coast Properties in the beach community of Playas del Coco, in the northwestern Guanacaste province (2670-0805, www.coldwellbankercr.com), agrees that the U.S. market directly affects Costa Rica.
“I think everybody’s sitting on the edge, waiting to see what happens, especially with the new president and the new stimulus package,” says Gray, originally from California.
She says she’s seen about a 40 percent drop in activity within the last year at her firm, with closings few and far between.
“It’s just getting harder and harder to get them to sign a contract,” she says.
Arturo Guzmán, who founded Properties in Costa Rica (2291-4054, www.propertiesincostarica.com) in San José in 1999, deals with properties in the Central Valley and on the Pacific coast.
“Some real estate agencies seem to forget that the housing boom in Costa Rica was largely a product of the housing boom in the United States, so the crisis will have the same effect,” he says.
Guzmán says some of the developments he was working on are now on hold or completely halted because they did not achieve the necessary presales to get off the ground, or because of the risk involved in starting up a project in today’s economy.
He says his agency has been directly affected, specifically in the second half of 2008. “Some anticipated sales did not close because of the sudden and unexpected lack of financing,” he says.
Francisco Alvarez is a real estate agent based in Tamarindo, Guanacaste. His agency is in the midst of constructing Pacific Park, an exclusive designer condominium aiming to imitate New York-style condo living on a white-sand beach (2653-0192, www.pacific parkcr.com).
Twenty-nine of 34 condos remain to be sold, Alvarez says. The project is trying to target different markets, such as Europe and other parts of Latin America, but so far the results haven’t been encouraging, he says. Properties in Costa Rica’s Guzmán says his properties in the coastal region have suffered the most, because “they are traditionally areas for vacation homes and secondary residences, and people don’t have the disposable income for that now.”
Watland, Gray and Alvarez began to feel the effects of the crisis about a year ago, while real estate agents in other parts of the country didn’t acknowledge a slowdown until a couple of months ago.
Manuel Pinto, owner of Caribe Sur Real Estate in Playa Chiquita, on the southern Caribbean coast, says he thinks it has been worse elsewhere than along the Caribbean.
“Up until October, I was saying the crisis hadn’t touched us at all,” Pinto says. “Then October came around and it just died.”
Pinto attributes the slowdown to three things: “One, November and December are slow times of the year, anyway. Two, the crisis. Three, we had the rainiest month we’ve had in the last 60 years, along with floods and earthquakes. So there were (very few) tourists and of course even fewer buyers in town. So November and December – zero.”
After a terrible end of 2008, things seem to have picked up recently, Pinto says, adding that his agency and the Caribbean in general are better off because of their regular clientele, which is approximately 60 to 70 percent European and only 30 to 40 percent North American.
“On the Pacific coast, the common response we get from Europeans is that it’s too American or too developed,” Pinto says. “What they like here is that it’s more lush, it’s low-key development, and they’re more attracted to that kind of lifestyle.”
Coping With Crisis
After meeting with little success targeting the European market, PacificPark is now turning its attention to the national market and is holding open houses on weekends to show its condos to prospective buyers in the area, Alvarez says.
Pinto is also looking to the local market. He says Caribe Sur has been cutting down on advertising and marketing expenses, compensating by focusing on a new buyer demographic.
“Other than cutting costs and having the Europeans keep us afloat, the most surprising aspect has been the Ticos,” he says.
According to Pinto, Costa Ricans are discovering the area and wanting to buy. Thirty percent of his clients today are Ticos looking for weekend homes, he says, adding that his last sale of 2008 was to a wealthy family from San José.
Pinto says that historically Ticos have had a prejudice against the Caribbean coast because “there are blacks, because it rains a lot and because there’s a lot of crime.”
“But then they come down here and change their vision a bit,” he adds. “The crime’s not out of control here, the rain’s not out of control here and the blacks – well, if you’re prejudiced, then you’re prejudiced. They’re what make this area wonderful and different.”
Costa Rica Tropical Paradise Properties’ Watland says she isn’t necessarily looking for new markets; she’s just working harder than ever before. She notes that people are looking for more information before they make a commitment to buy or come to the country to look at the property.
“I’ve had a lot of communication with people by e-mail or by phone,” Watland says. “They’re not just coming here cold and falling in love with the place and buying something (anymore). That happened so often before.”
Watland adds that whereas she used to close one sale a month, now she’s lucky to close once every two months.
Properties in Costa Rica has become more aggressive in expanding its marketing budget and using all available means of communication, including the press and the Internet, Guzmán says.
“We are also educating our sellers and buyers on creative ways of closing transactions and fair market values for their properties,” he says. “It’s our policy not to list overpriced properties.”
In Guanacaste, agents say prices don’t seem to be dropping, despite the reduced number of buyers. Tamarindo’s PacificPark hasn’t lowered its prices, and Coldwell Banker’s Gray says sellers in the region are more inclined to sit tight and see what happens.
“We’re not seeing the drastic price reductions you’d expect,” Gray says. “And it shocks me because the prices are still sky-high.”
Guzmán, however, says he has seen prices fall more on the Pacific coast than in the Central Valley. He adds that though foreigners are willing to lower their prices in the present market, it’s difficult to convince Costa Ricans that their property isn’t worth as much now.
On the Caribbean side, Julie Foudre of Tropical Dreams Real Estate in Cahuita (2755-0631, www.tropicaldreamsrealestate.com) says the area has experienced drastic price reductions.
“Prices are falling for the first time in a long time.” Foudre says. “People are looking at deals starting at $20,000, and that just wasn’t possible before. Clients are looking to negotiate, find a bargain and see what financial help is available.”
In the Central Valley, Watland says the downturn brings more serious buyers to the table, but doesn’t bring the prices down.
“These people are looking at good properties and seem to have the resources,” she says. “As long as you have the home they want, they’ll buy it.”
Guzmán agrees, saying Central Valley prices will never fluctuate as much because the homes are usually primary residences. He also thinks that some good may come of the crisis.
“Less established companies will not be able to withstand the pressure of a declining market and will probably close, along with some newer firms,” Guzmán says. “However, increased market share will benefit and further stabilize the true professionals.”
Both he and Watland agree that agents will feel the effects of the crisis no matter what part of the country they are in.
“Anyone who says the crisis hasn’t affected Costa Rica is either lying or in self-denial,” Guzmán says.