Costa Rica’s house prices falling, amidst signs of overbuilding

February 15, 2018

Due to the absence of official house price statistics, it is hard to assess the exact movements of house prices in Costa Rica, but the trend is clearly downwards. In San Jose, the country’s capital, the average listing price of houses fell by 2.2% y-o-y to US$1,142 per square meter (sq. m.) in November 2017, according to On the other hand, condominium prices in San Jose dropped slightly by 0.8% from a year earlier, at an average of US$1,716 per sq. m. over the same period.

Almost all other provinces in Costa Rica also registered falling residential property prices during the year to November 2017.

  • In Guanacaste, house prices plunged by 28.6% y-o-y to an average of US$1,158 per sq. m. while condo prices registered almost similar decline to an average of US$1,038 per sq. m.
  • In Alajuela, the average listing price of houses remain unchanged at US$974 per sq. m. in November 2017 from a year earlier while condominium prices fell by 6.2% to an average of US$1,007 per sq. m.
  • In Cartago, the average listing price of houses dropped 1.4% y-o-y to US$995 per sq. m. while condo prices fell by 11.9% y-o-y to US$1,150 per sq. m.
  • In Heredia, house prices increased slightly by 0.2% y-o-y to US$1,001 per sq. m. while condo prices fell by 4% to an average of US$1,356 per sq. m.
  • In Puntarenas, house prices fell by 22.7% y-o-y to US$1,270 per sq. m. while condo prices dropped 17.5% y-o-y to US$1,586 per sq. m.
  • In Limon, house prices rose strongly by 39.4% y-o-y to an average of US$888 per sq. m.

Costa Rica luxury oceanview properties

However property transactions have risen by double-digit figures since 2013, according to local real estate experts. Tourism, too, remains vibrant, with the total number of tourist arrivals increasing by 12.8% y-o-y to a record 2,925,128 people in 2016, according to the Costa Rican Tourism Board.

So, what might have caused the decline in residential property prices? This is mainly because of a supply glut caused by continued increase in residential construction, particularly condominium projects, over the past few years. In 2016, the number of residential building permits in Costa Rica rose by 6.6% to 24,188 units from a year earlier, with San José registering a huge 26.5% y-o-y rise, according to the Instituto Nacional de Estadística y Censos de Costa Rica (INEC).

A few years back, ERP Lawyers & Associates (ERP) already issued warnings about the development of a large number of apartment buildings and vertical housing projects in Costa Rica, particularly in the Greater Metropolitan Area (GAM).

“A clear example of this situation is that today, for every kilometer traveled, we’ll probably bump at least into one construction,” said Eduardo Rojas, founding partner of ERP Lawyers & Associates (ERP).

“The high prices are a problem that blocks the market. The kind of developments that have been implemented (from $120,000 up) are looking towards the middle-high class, because the middle-lower class cannot bear such a financial responsibility,” added Rojas.

Residential property prices in Costa Rica are expected to continue falling next year, or remain stable at best, until most of the excess supply is being absorbed in the market. However interest from foreign investors is projected continue to rise.

Costa Rica’s economy is expected to expand by 3.8% this year, after 4.3% growth in 2016, 4.7% in 2015, 3.7% in 2014, 2.3% in 2013, 4.8% in 2012, 4.3% in 2011, and 5% in 2010, according to the International Monetary Fund (IMF).

There are no restrictions on foreign buyers in Costa Rica.

Foreign investors buoy the housing market

US buyers are driving up property demand in Costa Rica. There are also an increasing number of buyers from Canada, France, Germany, and Belgium.

“They come here to vacation, fall in love and want to buy,” said Rodolfo Herrera, a real estate lawyer based in San Isidro, San José.

“Higher median prices in the USA are now driving buyer interest in higher priced and luxury real estate properties, particularly for ocean view, beachfront, and near beach properties,” said Chris Simmons, the founder of Re/Max Ocean Surf.

“Buyers from hot markets in the USA like California and Florida see Costa Rica as offering great value in comparison to similar beach real estate in the United States. We still have luxury condos for under $200 per square foot, pricing that is rare in the USA,” Simmons added.

Aside from its scenic beauty and lower cost of living, many Costa Ricans, foreign investors and High Net Worth Individuals (HNWIs) are increasingly attracted mainly because foreigners are entitled to the same ownership rights as Costa Rican citizens, and there are no property taxes and no residency restrictions.

“Where else in the world can foreigners come to a country with no soldiers, a government that caters to investors and fee-simple real estate with no restrictions and where foreigners are entitled to the same ownership rights as Costa Rican citizens,” said licensed realtor Chaud Oskar Byers.

The most expensive and fastest-selling properties in Costa Rica are in the Central Valley, the greater metropolitan area (including San José, Alajuela, Heredia and Escazú) where most businesses are, and the Pacific coast. The least expensive properties can be found in new developments in the Costa Rica’s southern region, such as the Osa Peninsula.

Popular investment locations currently experiencing dramatic increase in demand include Tamarindo, Playa Langosta, Playa Grande, Drake Bay, Santa Teresa and Mal Pais, Montezuma, Puerto Viejo, and Nosara and Playa Guiones. Waterfront properties in these areas are priced from just US$100,000.

  • In Santa Ana, a 3-bedroom single family home currently costs about US$212,000.
  • In Ojochal, a similar property might cost around US$265,000.
  • In Tamarindo, 3-bedroom houses are priced at US$375,ooo.

Gated communities and condominiums are particularly popular among expats and foreign homebuyers. “In the last three years, 80% of sales in Costa Rica were at $200,000 and upward,” said Michael Klein of San Ramon Properties.

"Costa Rica has proven attractive to investors for its relatively open investment and trade policies, as well as for being the most politically stable country in Latin America," said Robert F. Davey of Century 21 Marina Trading Post.

Sales activity started to rise in 2013, when property sales transactions increased 14% from a year earlier. Property demand has been robust since then.

Most foreign homebuyers pay in cash, since mortgages are not easy to obtain and mortgage interest rates are relatively higher than in their home countries.

Residential construction continues to rise

In 2016:

  • The number of residential building permits rose by 6.6% to 24,188 units from a year earlier, according to the INEC.
  • The area of residential building permits increased 4.5% to 2.6 million square meters (sq. m.) over the same period.
  • The value of residential building permits increased 8.1% to CRC646.62 billion (US1.14 billion).

Costa Rica residential building construction

During the first semester of 2017, there were about 10,900 residential building permits with an area of 1.18 million sq. m. and a total value of CRC288.35 billion (US$510 million).


  Residential Buildings Annual Change (%)
Provinces Number Area (sq. m.) Value (CRC millions) Number Area Value
San José 6,211 796,870 213,411,336 26.5 -12.3 -3.1
Alajuela 5,201 537,996 132,717,842 1.2 22.7 28.6
Cartago 2,745 263,884 64,554,418 1.1 0.9 0.9
Heredia 2,596 403,312 103,309,974 -7.5 15.5 22.4
Guanacaste 2,346 235,846 53,076,902 2.1 39.7 25.8
Puntarenas 2,843 233,249 54,688,568 -8.1 -5.2 -10.3
Limón 2,246 127,068 24,859,067 6.7 11.2 8.1
TOTAL 24,188 2,598,225 646,618,107 6.6 4.5 8.1
Source: Instituto Nacional de Estadística y Censos de Costa Rica (INEC)

Visitor arrivals are increasing

In 2016, total tourist arrivals surged 12.8% y-o-y to a record 2,925,128 people, according to the Costa Rican Tourism Board.

  • By air: arrivals increased 13.8% to 2,114,865 in 2016
  • By land: arrivals rose slightly by 0.8% y-o-y to 799,824 in 2016
  • By sea: arrivals rose by 27.4% y-o-y to 10,439 in 2016

Then during the first eight months of 2017, total tourist arrivals increased 1.3% to 2,114,477 from the same period last year.

Costa Rica visitor arrivals

Costa Rica is the most visited country in Central America, capturing more than a quarter market share. Americans account for about 40% of all visitor arrivals in the country every year. It is estimated that about 100,000 American citizens live in Costa Rica and more than 1 million visit the country every year.

Rental yields healthy

Gross rental yields on residential property in Costa Rica remain generally healthy, at around 5.6% to 8.6% at end-2016, based on Global Property Guide research.  These are quite good returns, even when costs such as taxes and other costs are subtracted from the gross figures.

San Jose houses generate on average 8.6% returns - surprisingly good!

Apartments and houses in San Jose Province, in San Jose city, Escazu and Santa Ana generate around 7.5% returns.  There only appear to be minor differences in rates of return between houses and apartments.

Much the same applies in Heredia province, and in Alajuela. These returns are slightly below what one would have expected 5 or 10 years ago, but not much less.

The Global Property Guide research concentrates on the market’s higher end. Rental returns are likely to be higher on smaller properties in less desirable areas.

Costa Rica’s rental market is covered by Law 7527 (General Law on Urban and Suburban Renting), passed in 1995. According to the law, rents quoted in colon cannot be increased by more than 15% unless inflation is beyond 15% - which it never has been since the law passed - while rents quoted in US dollars or any other currency cannot be increased at all.

What is most unusual about this law is that, in practice, it favours quoting rents in US dollars, since the colon generally depreciates, making foreign-currency denominated rents rise faster than rents quoted in colons.

Guanacaste’s real estate boom ends

Guanacaste saw the biggest decline in residential property prices during the year to November 2017, with prices of both houses and condominium units in the province plunging by about 30% y-o-y in November 2017, according to

By city:

  • In Santa Cruz, the average house price dropped by a huge 24.1% y-o-y to US$1,576 per sq. m. in November 2017.
  • In Nicoya, the average house price dropped 15.7% y-o-y to US$1,654 per sq. m. in August 2017.
  • In Liberia, the average house price fell by 8.4% y-o-y to US$816 per sq. m. in November 2017.
  • In Tilaran, the average house price fell slightly by 0.7% y-o-y to US$1,135 per sq. m. in October 2017.
  • In Carrillo, the average house price increased 7.3% y-o-y to US$1,350 per sq. m. in August 2017.

For years Guanacaste was a wild woolly territory, hard to get to, the domain of backpackers and surfers who appreciated its climate and stunning beaches.

Guanacaste then took off. The real estate boom in Guanacaste began after the opening of the Daniel Oduber international airport in 2002 (which is located in Liberia) and the opening of the Four Seasons resort, part of the 2,300-acre (9.3 sq. km.) US$400 million Península Papagayo project developed by the Costa Rican developer Alan Kelso, indisputably the most luxurious development on the coast. Since then, several luxurious hotels have been built in the area.

Another catalyst was the start of direct flights from Atlanta, Miami and Houston in 2005. Planes fly into the small airport at Liberia, the capital of Guanacaste.

Some of the most luxurious and high-priced properties are available here, though there is a wide range of condominiums in Guanacaste on a price range from $100,000 to $750,000, depending on location.

Guanacaste also boasts several world-class golf courses, including the Hacienda Pinilla Golf Resort at the southern part of Tamarindo, and the Garra de Leon course at The Paradisus Playa Conchal Resort. The Four Seasons Resort, the Royal Pacific Golf and Country Club in Playa Grande, the Tamarindo Diria Beach and Golf Resort in Tamarindo and the Costa Palmera Beach Estate in Playa Grande also offer popular golf getaways in the province of Guanacaste.

Tamarindo, the biggest coastal town with the most developed tourist infrastructure in Guanacaste, saw strong house price increases in recent years but started to decline by end-2016, as the supply glut becomes evident.

Central Valley saw falling house prices, too

Almost all cities in the Central Valley saw falling house prices during the year to November 2017, based on figures from Pérez Zeledón registered the biggest decline of 27.6% y-o-y to an average price of US$662 per sq. m. in November 2017, followed by Mora (-12.1%), Desamparados (-6.3%), Vázquez de Coronado (-5.9%), Moravia (-5.4%), Saint Ana (-5.3%), San José Capital (-4.1%), Escazú (-3.6%), Curridabat (-2.5%), Tibás (-2.1%), and Aserrí (-0.4%).

Only Alajuelita and Goicoechea registered house price increases of 8.7% and 0.2%, respectively, while house prices in Montes de Oca were unchanged.

Santa Ana, located just 15 minutes away from San Jose’s city center and host to modern amenities including the country’s largest mall MultiPlaza, modern CIMA Hospital and Medical tower, as well as several luxury hotels such as the Marriott Courtyard and the Intercontinental, has the most expensive housing in the region, with an average price of US$1,309 per sq. m. in November 2017. It was followed by Escazú (US$1,233 per sq. m.), Curridabat (US$1,154 per sq. m.), Montes de Oca (US$1,147 per sq. m.) and Mora (US$1,143 per sq. m.).

San Jose is admittedly rather ugly, but it is the country’s economic and cultural centre. Its population has fallen to 60,000 people, from around 70,000 people 20 years ago. To attract people back, San Jose’s local authorities have pushed projects to develop Paseo Colón, a downtown revamp, building parks, improving water and drainage systems, and improving traffic management. In addition, the construction of the US$1.3 million “Chinatown” project, covering 8,300 sq. m., was completed in 2012.

Half-hour away from the capital are the mountains of Heredia to the north, Alajuela to the northwest and Cartago to the east, which offer small-town charm. The warm climate on the hills of Escazú, west of San José, is another favourite with North American expatriates.

Central Valley has the highest number of developments underway, especially in places such as San José, Alajuela and Heredia, according to The Association of Engineers and Architects. In fact the pre-crisis construction boom has made houses more affordable. Buyers can have a decent house for as low as US$50,000 up to US$250,000 in Tico neighborhoods. Low-end condominiums sell at a minimum amount of US$150,000 in Ezcazú and Santa Ana. The eastern part of San Jose had seen a construction boom in recent years.

Costa Rica’s last frontier is the Osa peninsula area, which is very rural, not easily accessible, with a small airport and terrible roads. It is also much more tropical, an area known for its heat and mosquitoes and snakes.

The Central Valley has a temperate climate suitable for year-round living, and has easy access to San Jose, the country’s capital.

Interest rates are rising gradually

Costa Rica interest rates

In November 2017, the average interest rate on CRC-denominated housing loans in private commercial banks increased to 13.53%, from 12.12% a year earlier, according to the Banco Central de Costa Rica (BCCR). Likewise, the average interest rate on U.S. dollar-denominated housing loans was 8.39% in November 2017, slightly up from 8.07% a year ago.

In state-owned banks, the average interest rate on CRC-denominated housing loans dropped sharply to 8.12% in November 2017, from 10.38% a year earlier. In contrast, interest rates U.S. dollar-denominated housing loans increased slightly to 8.79% from 8.54% a year earlier.

The BCCR’s benchmark rate was raised by 25 basis points to 4.75% in November 2017, after raising it six times in the past seven months from just 1.75% in April 2017.

“Before the absence of clear signs of greater inflationary pressures and a slowdown in local economic activity in recent months, this measure, in my opinion, could seek, fundamentally, to preserve the premium for investing in colones, in the face of a very likely increase in the reference rate of the central bank of the United States, the FED, in this next month of December,” said economist Alberto Franco.

Mortgage market expanding rapidly

The size of the Costa Rican mortgage market expanded to 13% of GDP in 2016, up from only 3.7% of GDP in 2000. From 2001 to 2008, the amount of housing loans outstanding grew by an average of 36% per year. However after the global crisis mortgage growth somewhat slowed. In 2016, housing loans increased 9.8% from a year earlier.  In April 2017, total housing loans outstanding rose by 10.5% y-o-y to CRC4.18 trillion (US$7.4 billion).

Costa Rica housing loans

Solidarity tax helps owners

Rental property owners welcomed a new “solidarity tax” in October 2009, which changed the tax rules for homeowners and tenants.

Under the “solidarity tax” taxpayers can choose between two taxing options:

  • Pay 15% tax on rental income (income from rent only), with the taxpayer entitled to 15% deductible expenses without documentation;
  • Pay taxes the traditional way, with all deductible expenses subtracted and corresponding rates applied.  Under the old rules, the taxpayer was allowed to subtract deductible expenses (e.g. depreciation), but must pay income tax at up to 30%. Smaller and medium companies pay income taxes ranging from 10% to 20%, and individuals who receive rental income pay 10% to 25% tax.

The solidarity tax, also known as the luxury home tax, applies only to owners of houses whose price exceeds the taxable threshold modified by the government annually, currently set at about US$220,000. Owners of houses with lower appraisal value are exempt from paying it.

There is also a solidarity tax to support social housing, which is not standard for all properties but for those which have a residential building and exceed the taxable threshold defined by the authorities annually, currently set at around US$220,000. 

For the current fiscal year 2017, the tax brackets in effect are:


Property Appraised Value Rate
Up to CRC316 million 0.25%
On excess of CRC316 million and up to CRC634 million 0.30%
On excess of CRC634 million and up to CRC950 million 0.35%
On excess of CRC950 million and up to CRC1.268 million 0.40%
On excess of CRC1.268 million and up to CRC1.584 million 0.45%
On excess of CRC1.584 million and up to CRC1.903 million 0.50%
On excess of CRC1.903 million   0.55%

Widening fiscal deficit remains a concern

Costa Rica gdp inflation

Costa Rica’s economy is expected to expand by 3.8% this year, after 4.3% growth in 2016, 4.7% in 2015, 3.7% in 2014, 2.3% in 2013, 4.8% in 2012, 4.3% in 2011, and 5% in 2010, according to the International Monetary Fund (IMF).

Costa Rica had robust economic growth from 2003 to 2007, with annual average real growth of 5.6%, according to the IMF. However, the economic growth slowed to 4.7% in 2008 and contracted by 1% in 2009, due to the global crisis.

Despite healthy growth and manageable inflation, Costa Rica continues to face liquidity problems. The fiscal deficit stood at 5.2% of GDP in 2016, down from 6.4% in the previous year. However the deficit is expected to rise again to about 6.1% of GDP this year, according to the Banco Central de Costa Rica.

As of October 2017, fiscal deficit has reached 4.6% of GDP, above the 3.9% registered in the same period last year, according to the Ministry of Finance.

Costa Rica “faces liquidity problems in paying its obligations and guaranteeing the provision of services,” said President Luis Guillermo Solis. “Despite all the public calls and efforts we have made since the start of my administration to contain spending and increase revenues, there is still a gap that we must close with fresh resources,” Solis added.

Both Standard & Poor’s and Moody’s Investors Service affirmed their negative outlook on Costa Rica in February 2017. In addition, also downgraded the country’s government bond rating to Ba2 from Ba1. In 2015, all three leading credit rating agencies had cut Costa Rica’s credit rating to junk status, citing the country’s weakening public finances.

Costa Rica exchange rate

“The key driver behind the downgrade to Ba2 is the continued weakening of Costa Rica’s fiscal profile, reflected in its rising government debt burden and persistently high fiscal deficit,” said Moody’s.

The country’s consolidated public debt was equivalent to 49.2% of GDP in 2016, up from 45.4% in 2015, 42.8% in 2014, 41.8% in 2013 and 24.2% in 2008. Total debt is projected to increase further to 51.9% of GDP this year and 54.1% next year, according to the IMF.

The current account deficit fell to 3.2% of GDP in 2016, from 4.3% in 2015 and 4.9% in 2014, according to the IMF. However, it is expected to rise again to 4% of GDP this year.

During the third quarter of 2017, unemployment stood at 9.4%, up from 8.5% in the previous quarter but down from 9.7% in the same period last year, according to INEC.

Consumer prices in Costa Rica increased 2.33% y-o-y in October 2017, up from 1.64% in the previous month and 0.55% in a year earlier.

In January 2015, the BCCR adopted a managed float exchange rate regime, with a range of 500 to 800 colones per USD1, and vowed to intervene only when the currency shows excessive fluctuations. In September 2017, the average monthly exchange rate stood at US$1 = 575.83 colones.

Beautiful, unspoiled Caribbean beaches

Costa Rica´s Caribbean beaches, especially those near the Panamanian border, are some of the most beautiful and unspoiled in the country and they are seeing enormous price increases.

Rental occupancy rates at Jaco beach were boosted when the new San Jose to Caldera highway became accessible. The highway was completed in early 2010, reducing the travel time from San Jose (and the Central Valley area) to around 1 hour, according to

Some of Costa Rica’s stunning beaches include the following:

Playa Conchal

Playa Conchal, in the Province of Guanacaste, boasts stunning white sand beaches, perfect for swimming and snorkeling. Visitors will love the deep sea fishing, and can hike in nearby nature reserves or national parks. Visitors can stay at the luxurious Westin Playa Conchal Resort.

Manuel Antonio

Manuel Antonio, on Costa Rica’s central pacific coast, is one of country’s most beautiful beaches with sparkling white sand, calm water, rich wildlife, and lush rainforest landscape. Visitors can enjoy a wide range of activities such as swimming, surfing, and hiking the Manuel Antonio National Park, among others.

Playa Flamingo

Playa Flamingo is a mile-long, crescent shaped beach north of Playa Conchal. Mangroves are abundant in the area, and Salinas Point offers a perfect view of both the Potrero and Brasilito Bays. Popular activities include scuba diving, sailing, and sportfishing. Playa Flamingo has exclusive beachfront private properties and expensive villas. The vibe is upscale and relaxed.


Tamarindo is the country’s surf and party destination.  It is in Nicoya Peninsula on the northern pacific coast of Costa Rica. It hosts international surf competitions, and sport fishing, scuba diving, snorkeling, swimming, and horseback riding.

Punta Uva

Punta Uva, a small town south of Puerto Viejo, offers quiet, clean and beautiful beaches. In addition, visitors can also enjoy its beautiful butterfly garden full of various species of exotic butterflies. There are also indigenous community reserves, home to the tribes of Bri-Bri, Cabecar, and  KeköLdi, and the Yorkin.

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