Construction Defies Crisis
GARABITO, Puntarenas – Thomas Walker squints into the sun as he looks out over Herradura Bay, a picturesque inlet on the central Pacific coast dotted with million-dollar yachts. A crane towers overhead and a few construction workers survey the terraced hillside below, which sprouts rebar like tufts of grass.
In his hand are laminated floor plans for a series of four-story condominium buildings to be built where he stands. Each 4,300-square-foot condo sells for between $1.6 million and $3 million.
“It’s the sunset – the year-round sunsets right here,” Walker says, pointing out toward horizon where the hazy blue contours of the NicoyaPeninsula take shape.
Walker represents Punta Bocana, one of a few large-scale development projects still going forward in the Central Pacific, where the frenzied pace of construction and real estate sales of recent years has been nearly stopped in its tracks by the financial troubles in the United States.
Unofficial estimates from business owners and locals in Jacó, arguably the biggest tourist town on the central Pacific coast, say tourism here has dropped by at least 20 percent (see separate story, Page 5). Real estate shoppers, once a large portion of those who visited the increasingly upscale surf village, are even fewer and farther between.
“There’s definitely a lack of buyers out there, but we’re still making sales,” said Lisle Head, a real estate agent with Coldwell Banker.
Two years ago, his office was making 12 to 15 sales a month, he said. This year it has dropped to four or five per month.
With slowing demand and increasingly scarce credit, real estate construction has slowed dramatically as well.
According to Marvin Elizondo, the mayor of Garabito, the canton seated in Jacó, the municipal budget is likely to be cut by between 20 percent and 30 percent this year, largely because of a reduction in construction fees and taxes.
The municipality’s permit office says it has seen applications drop by 50 percent. Vanessa González, who heads the office, said 90 permits have been filed so far this year.
“And those are for a new roof or an addition to a house. There isn’t one big building project – maybe three or four are nice big houses, but the rest are just little things,” she said.
Around town, tall condo towers, once all the rage, sit gray and quiet. Just a year ago, all half a dozen cranes stood up along the beachfront skyline. Now, only three remain.
Locals comment on the disappearance of the mostly Nicaraguan labor force that had been a growing sector of the population in recent years.
“I had construction workers that came every week, but not any more,” said Kathya Salas, the owner of the popular Jacó Rústico, a traditional cafeteria-style soda. “They told me that the projects won’t be back until 2010.”
But not everybody has drawn their shutters, and according to a handful of developers The Tico Times consulted this week, projects that have managed to secure financing, or are self-financed, are moving forward and seeing a silver lining.
The price of construction materials such as steel and concrete has dropped, and with fewer projects under construction, builders have a larger pool of workers to draw from.
DayStar, the region’s most prolific condo developer, is nearing completion on the first phase of its Diamante de Sol project, two massive beachfront condo towers: one eight stories, one 10 stories – that will total 156 units. Meanwhile, it continues construction on two more projects expected to be completed this year a 10-story tower called The Palms, and a 15-story tower called Breakwater Point.
Add to these, three completed, sold-out DayStar projects in town that total 114 condos, and another 110-condo tower expected to begin construction in 2010.
Pat Hundley, the owner of DayStar, says he estimates the company has invested $50 million in the region, and plans to more than double that going forward.
“We’re pretty fortunate right now,” he said. “I’ve never pulled a dime out of Costa Rica. I don’t fly in a personal jet; I fly coach. Everything we’ve done, we’ve reinvested.” Hundley said he’s seen a “substantial decrease in real estate investment,” as well as fewer buyers.
“There are more qualified buyers, but less of them,” he said.
Farther south along the Pacific coast, Aaron Dowd is continuing with a 450-acre project called CaboCaletasOcean and Golf Club, in Esterillos Oeste, which includes an $11 million golf course, a 150-to 200-room hotel, 130 homes and hundreds of condos.
The vision is to unfold over 12 to 15 years, he said, and he is currently in construction on the golf course and condominiums, both expected for 2010.
“We’ve had to time some things, for instance the buildings, but because of this, we’ve been able to get better pricing,” he said.
“Building costs drop 20 percent, and that’s a significant savings on construction, which we then have to reinvest into the project.”
Dowd believes that the economic crisis will turn around, and when it does, the Central Pacific will be back in business. Like nearly every real estate agent and developer consulted this week, Dowd cited the construction of theCaldera Highway
, which is to go from southwest San José to just north of Jacó.
“Eighty percent of tourists coming to Costa Rica go through the JuanSantamaríaInternationalAirport (outside of San José),” he said. “They’re going to be at our gates within an hour, and that bodes extremely well.”
Many are also forecasting an increase in property prices once the market does turn around. Prices on higher end condos and homes have yet to drop significantly, while the slowdown has decreased the number of units expected to come on the market in the coming years.
“There are not a lot of units for what Jacó is becoming,” said Head, from Coldwell Banker. “Prices are going to spike again like three years ago.”
According to Jeff Fisher, who runs C.R. Beach Investment Real Estate, developers are holding their prices steady, while desperate owners trying to resell properties are lowering their prices, although by less than 20 percent.
The reason prices aren’t lower, he says, is that, until recently, banks in Costa Rica did not lend to foreigners. As a result, U.S. citizens – the majority of foreign buyers – paid cash or received financing directly from the developer with a standard 30 percent down.
“There can’t be liquidations here because Mr. and Mrs. USA bought a condo for $300,000 and they’ve got 30 percent invested, and the rest is owner-financed,” he said. As a result, people are not walking away from their contracts or letting the bank foreclose.
“The advantage that Costa Rica real estate has is that people aren’t as highly leveraged,” said Tim Kopatich, a real estate agent and developer living in Jacó. “They have equity in it.”
But the resellers and the developers are still awaiting the return of buyers, who have slowed to a trickle.
Walker, standing above the Punta Bocana project – which, in addition to eight villas going for as much as $5 million and 56 luxury condos, plans for a 150-slip, inland marina, a 150-room hotel and a smaller 75-room boutique hotel – is confident. He has made two sales this year, each for more than $1 million.
“I have a very unique product, and there’s a group that will always have money for that,” he said.
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