The real estate market is cyclical, that’s why for an investment to be profitable, it must be planned for the long term. We spoke with Melizandro Quirós, economist and executive director of CENFI, about the projections in the real estate market in Costa Rica for 2023.
In general, the real estate market in Central America, like the rest of the world, has been recovering post-pandemic. There have been adjustments, closures and vacancies of spaces that have affected the average income.
This recovery is slow and has affected the main variable of the real estate market: the interest rate.
Is it advisable to enter the real estate market in Costa Rica 2023?
The interest rate is the cost of funds that investors have; and with the changes that have affected the market, income models have changed. Therefore it is advisable to invest if you have a long-term plan.
Now varied rents are more common, these have a minimum fixed percentage plus a percentage of total sales. It’s a win-win for both sides.
But how is this reflected in each investment model?
Housing & Tourism
The cost of funds directly affects this market. A quota of middle-class housing in Costa Rica ranges from $800 to $1000 a month. This means that more than 65% of a family’s income is compromised.
To make a smart investment there are two options:
- Invest in high-end properties and get tenants with the ability to pay.
- Invest in low-cost properties and rent to several middle-class families.
In Costa Rica the rental market is encouraged since many do not have the possibility of being subject to credit. Therefore, rents adjusted to the value of the house is recommended whenever there is the possibility of investing in more than one home for the middle class or in luxury properties.
On the other hand, the issue of tourism has many variables to consider. Despite being the main economic activity in the country, with digital nomads and remote work, the reality of the real estate market has changed.
Investing in properties for long-term rentals can be a good investment because there is a capacity to pay, however it is necessary that the homes meet certain characteristics that raise the value of the property. Some of these are:
- Location: Foreigners looking for long-term rentals are interested in properties from specific markets such as luxury properties or homes near the beach and with strategic location. This can raise the cost of entry for the investor. It is also necessary that they are close to shops, health centers and areas that allow a comfortable lifestyle.
- Luxury market: As there is a capacity to pay, they are willing to pay more, in exchange for comfort and status. A foreigner is not necessarily going to start his search in the same way as an average national. It is a more competent market and more educated in its needs.
Bureaux
Bureaux
The main phenomenon that has affected office building owners is home office. Operators return spaces or reduce demand and this affects the monthly flow of investment.
The growth dynamic is maintained, however, more and more owners make adjustments in rents and invest in adapting to new needs; re-distributing areas, creating open rooms, integrated spaces and fewer cubicles.
Industrial Activity
Industrial activity has had a lot of movement driven by the growth of free trade zones. More international companies enter the country and invest in Costa Rica as a strategic point for their development plans.
This encourages activities such as housing, shops and health centers around the area. A good investment strategy to take into account for 2023, are the markets of Cartago, Alajuela and Grecia.
CENFI is made up of an interdisciplinary team of professionals from the Economic Sciences and the Construction sector, who analyze financial and real estate markets in Central America and the Dominican Republic. It is a platform for the generation of data, information and critical thinking about the current and future development of the market.
The financial and real estate markets move all social, political, private and public sectors throughout the country. The analysis of the final impact on the environment and its effects on society, businesses and agents (consumers, suppliers, financiers, among others) of the submarkets or countries under study is essential for those interested in investing.
If you want to know more about CENFI or its services you can do it to the email: melizando@cenfi.org
This is the perfect time to invest; Costa Rica’s real estate market in 2023 continues the growth trend it has been experiencing since the pandemic. With any of the investment models it is important to take into account that this market is cyclical and therefore must be planned for the long term.
If you are interested in knowing the investment options that we have available in our portfolio, do not hesitate to contact our specialized advisors.
