Buy in recession? Here's what you need to know -

In this 2023 we are seeing the results of a period of changes at international level that are affecting the lifestyle and economy of all countries. The effects of a recession can be broad and profound. Rising unemployment and declining consumer spending have resulted in reduced demand for goods and services. This, in turn, has led to a decline in investment and production both at local and international level.

But what is a recession?

Normally, a recession is defined as a period of contraction of GDP, although it can also be measured by other indicators, such as the unemployment rate or business investment. Recessions can be caused by various factors, such as changes in fiscal policy, financial market fluctuations, trade imbalances, among others.

The effects of a recession can be broad and profound, affecting individuals, businesses and governments alike.

Can you invest in real estate in the middle of a recession?

The short answer is yes; But what are its pros and cons?

During a recession, property values tend to decline due to decreased demand. This means that investors can acquire properties at lower prices than in times of economic growth. If investors have the capital available to invest, a recession can be an opportunity to get real estate at affordable prices. As long as it is taken into account that the ROI can be long-term.

On the other hand, investing in real estate in times of recession can be risky, especially if investors need financing.

Investing in real estate in times of recession can have as many pros as cons. On the one hand, prices may be lower and the rentals may be more stable. Yet investors may face financial risks, which can result in a loss of income and a decrease in property value over time.

What do real estate consultants recommend?

In times of recession good opportunities can be found. Choosing a property with an strategic location can be key so that when the recession cycle ends, the value of the property increases along with market demand.

To negotiate in the best way, you must know the seller and the reasons that motivate the sale. As an advisor I recommend to do some research before investing to study the local market and its demand in periods of economic affluence.

The trends in recessionary cycles is 5 to 10 years, however with the covid-19 pandemic we have experienced more volatility, the cycles tend to be reduced and the return on investment may be more effective.

Daniel Goren, Nativu Guanacaste

Money is make during recessions. Costa Rica is a challenging market for foreign investors simply because they are not able to leverage their capital through means of getting a low interest mortgage rate. At the same time, those who are able to pull out capital in 2023, are struggling with the fact that they cannot diversify their investments, because of the volatile factor in the stock market and bitcoin.

On the other hand, this country is potentially a very good location to invest in and expect a return in the mid- long term. Even though Costa Rica is a cash-based market, which is not very investor-friendly, it is a safe place to invest, with proximity to the US and Canada; it is a neutral country with many advantages for foreigners such as visas and tax exemptions.

Because of this, during a recession and a global crisis, the property value here will not drop as much as it could in other countries; for this reason investing in this market can ensure an almost certain return on investment.