Ben’s Predictions

Wouldn’t it be nice to have a crystal ball that you could rely on to foretell what was going to happen? In the present “down” condition of the world’s economy, everyone is guessing what is going to happen. If one were to guess correctly, there is no doubt some opportunity out there. It is interesting to hear Nobel laureates in the media using the now well worn phrase “we’ll see”, ad nauseum.

I am having daily discussions on the current state of the market with regards to Costa Rica real estate. I suppose that my position in the Costa Rica land marketplace makes my opinion of value to some. But really, nobody knows what it is that is going to happen. There are just so many factors at play now. But, having said that, I’m going to stick my neck out and make some concrete predictions about what we’re going to see here in Costa Rica’s southern zone.  But my prediction disclaimer remains in force… we’ll see.

I think that this coming season, which is starting now, we’re going to see some land banking (see below) sales, some of which will likely be higher end, and I think that we’re going to see some determined relocation buyers here. Here’s why.

Land Bank raw land sales

There are a number of sellers that bought large parcels here during the development land grab of the last few years. It’s not hard to understand that things change and development plans get set on the back burner for one reason or another. In our listings database, we are getting some properties that were all the rage a short time ago. They were snapped up and we didn’t expect to see them back on the market as single parcels again. Large parcels of gorgeous, tropical rain forest land with rivers, waterfalls, ocean views and other qualities that make them highly desirable properties.

At the very core of investment strategies is: can I sell this thing when I want to, and will it yield a reasonable rate of asset appreciation at that time?

Land banking is the term used for acquiring land for the sole purpose of storing money. The land is simply a vehicle for storing, and preserving those funds until the property is sold at a later date for a higher price. The then selling price should provide a decent rate of return. This is usually compared with what some money market rates would give for the same term.

I have already seen this occur on a number of occasions. A recent buyer, who had made a number of land purchases over the past 3 years made the statement: “I thought I was done, but when the markets started going down, and I lost $200k out of my portfolio, I decided to buy some more Costa Rica real estate”. And so he did.

Others that have made recent acquisitions feel fortunate that they got their money out of their portfolios and into land here as well. They feel that in so doing, they avoided some of the losses incurred by many in the global markets, and the value of their Costa Rica land is holding its value.

So, my crystal ball says that we are going to see some land banking going on this season.

Land Banking Properties to look at:

• Commercial property in Uvita Costa Rica. Uvita is exploding with growth as it develops into the social and cultural hub of the southern zone. Do a good buy on some of this type of land and then when the cycle swings back up, which it always does, sell it at a reasonable profit.
  Commercial plug for a commercial, 2.4 acre lot in Uvita: Price $350,000

• Commercial property between Uvita and Palmar Norte. Anywhere in this zone, the buy-and-hold strategy is promising. A recently finished hospital is there, plans, permits and funding are in place for an International Airport for Palmar Sur, a marina in Golfito, and a golf course in San Buenas, are all in the works.
• Good quality ocean view lot. This should be good for a single family, or a possible income generating multi-site property where rental villas or cabinas can be built.
• Good quality non-ocean view lot. These are almost always a good value here, due to the demand for ocean views. Consequently, all other virtues of a property being equal, the lack of an ocean view brings the price down considerably when compared to its ocean view counterpart. Also, such properties often times compensate for their lack of ocean view with size. I think that in the coming years, we are going to see an increase in the value of such properties for their ability to be cultivated for organic fruits and vegetables, perhaps even going off the grid.
  Commercial plug for one such listing I have: A property located about 10 minutes from the beach that is 15 acres, and has tons of usable space on it. There is also a year ‘round creek on its border that could be investigated for a hydroelectric plant. Priced at $189,000, a comparable ocean view lot could conceivably be double (or more) of that.

Relocation Buyers:

Even though the word on the street is good about Costa Rica, both with tourism and real estate, there are still some motivated sellers. There hasn’t been an across the board price reduction here in our market, but in isolated cases, we’re seeing folks that need to sell what they have here, to protect what they have there. This is resulting in some below market deals. Consequently I think we’re going to see a number of couple’s, and maybe even some families here searching for their new home lot.

Relocation Properties: single family, and multi-site, income generating properties are likely going to be enjoying some strong attention in the coming season. The reason for my guess on this one has a few facets. One is disillusionment with the U.S. economy and its prognosis.

Commercial plug for two such multi-site listings that I’ve got:

• 4 acres, massive ocean view in Uvita.  Numerous building sites, $290,000:
• 3.1 acres, small ocean view in Ojochal, extra building sites, $139,000:

There are a number of other factors in place: war, health care cost, taxes, environmental and ecological concerns, population density, corporate corruption and media saturation, to mention just a few of the reasons that I hear from people looking for property in Costa Rica.

I know that we’ve lost a lot of buyers from the economic downturn. I think that there is some compensation in the overall scheme of things that may come close to making up the difference. I am actually busier now than I was this time last year. So, contrary to the concern that the sky has fallen, my crystal ball is reading that things are going well, relatively speaking, in Costa Rica real estate. However – we’ll see.