The Costa Rica real estate market has changed tremendously after the world wide real estate boom.
Banks in Costa Rica never got involved with bad lending practices like what happened in the United States and Europe. So Costa Rica real estate prices have remained stable through the last 4 – 5 years. Will that go on forever?
To be able to get a mortgage on Costa Rica real estate, you usually need to pay 20 – 30% LTV of the home or lot. Then the bank finances the rest if you qualify for the loan and the property appraises right.
If you want to borrow to purchase an investment property, or a 2nd home, the bank will only lend 65% LTV. AND in today’s mortgage market you need to be a resident of Costa Rica.
Large International companies hiring in Costa Rica
The arrival of hundreds of foreign companies starting new businesses in Costa Rica is changing the Costa Rica real estate market tremendously. That is because Costa Rica has created huge benefits for high-technology multinational companies in the areas of Advanced Manufacturing, Life Sciences, Services, Clean Technologies, and more. These include regional distribution centers, infrastructure projects, and tourism.
Over 250 global companies have already taken advantage of these benefits. This is totally changing the Costa Rica real estate market.
Two earners in Costa Rica
Costa Rica offers the highest educated workforce in Central America and this is creating a new phenomenon in the Costa Rican economy: the two earners.
I know you are laughing now, but in Costa Rica, a large part of the population still functions as during the old times: husband works and wife takes care of the babies. The higher education than ever before is changing this. The millennials are functioning differently. This creates the two-earner system you have seen happening in your country 40 years ago and allows many to buy a home.
Applying for a mortgage as two earners
These international companies moving to Costa Rica are hiring the local college educated people at internationally competitive salaries. These salaries happen to be much higher than those paid in Costa Rica ever before. Before, the young locals would stay with mom and dad long after marrying and even after having children.
Now, to apply for a mortgage on their Costa Rica real estate purchase, these young professional couples apply with a household income and the banks are finding a great outlet for all the money they have been sitting on for the past 4 years. While there were few real estate developers in Costa Rica before 2006, this phenomenon changes the Costa Rica real estate market.
A boom of condos and townhouses
This has created a new Costa Rica real estate boom of condos and townhouses in gated communities. These condos are affordable, with great security (because both are working all day) and easy to finance based on two incomes. In today’s Costa Rica real estate market, I have counted over 50 developments on the west-side and east-side of San Jose.
There are plenty of newer locations around Heredia and Alajuela, offering condos and apartments, with nice common areas and amenities with financial packages ready to roll.
I am sure the banks and Costa Rica developers think this will go on forever, but it won’t.
Who pays the bills after a divorce?
Marriages generally don’t last as long as they did 30 – 40 years ago. I can see it already happening in Europe where divorcees are running into trouble with their bank financing. After a divorce, generally it is the wife who stays in the home (when there are children) and the husband finds another place to live.
But who will be paying for two homes? The mortgage was based on two salaries and calculated to pay for one house or condo. On top of that, condo fees are generally not taken into account when a mortgage is calculated and condo fees always go up, they never go down.
Can Baby boomers purchase at reduced prices soon?
How long will it take before we will see condos in Costa Rica being offered at drastically reduced prices because the owners cannot afford to pay the mortgage anymore after their divorce? Will banks foreclose soon on condos like never before? And they will have to get rid of those at reduced prices?
When will we see a next boom of baby boomers moving to Costa Rica because they will be able to purchase a condo in Costa Rica for a great price and retire in this beautiful tropical country?
To my opinion, soon these mortgages to two earners will start to influence the Costa Rica real estate market.
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