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25 March 2008

Property Investment in Costa Rica

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by Brian Turner

Property Investment in Costa Rica

Guide to Property Investment in Costa Rica

Costa Rica is one of those areas dream holidays are made of, but also represents a very promising place for property investment due to its strong market.

Positve pointers:

– strong property market
– booming investment
– easy buying process
– bargains still available

Negative pointers:

– weak rental market
– ensure property managed

Costa Rica is in the middle of a property boom that doesn’t show signs of weakening anytime soon. Even though the market has been exciting and enticing for the last decade, experts predict that it will show continued success in 2008. Costa Rica offers amazing landscapes, strong infrastructure, low costs and good security. All of these (along with the amazing climate) are sure to have property values on the rise for a long while.

The last four years have shown a 25% price growth. Prices are not as low as they once were, but you can still find good deals even along the pristine beaches. The property market in Costa Rica is currently catering to the vacation and retirement investor.

Rental property in Costa Rica is not the strongest investment at present. Only about 17% of the country rents housing and the rental incomes are less now than they were almost 15 years ago, but you can still expect around 7% yield for most rental property. Rents that are quoted in foreign currency can not be increased, and currently the depreciation of the local currency makes quoting rents in the colon a risky venture.

Everyone enjoys the same rights of ownership in Costa Rica (foreigners and nationals alike) and they also suffer the same restrictions. The Maritime Zone (the area along the shoreline) is owned by the state and can not be developed. The land right on the shore is public property and also protected from development. You can receive a grant for the property (but only if you have residency for over 5 years), but that will not change the development options.

The transaction cost for property in Costa Rica is relatively low – with the expense split evenly between the buyer and the seller. Typically you can expect to pay just under 7% of the purchase price for your portion of the transaction fee. The entire process of purchasing and registering the land can take up to 21 days to complete.

Some thoughts about property in Costa Rica

• Be sure that all tenants before making a purchase otherwise you may be locked into using that property only to lease to that tenant.
• Untitled and Unattended land can be occupied by squatters. After only three months, a squatter will begin to establish rights on land they are occupying without opposition.
• Absentee owners should hire a manager to oversee property to prevent problems with squatters.

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