The Secret is Out About the Costa Rican Real Estate Market!

The Right Place Developers are currently in discussions with numerous major hotel chains whose market research point to Costa Rica as the next Puerto Vallarta corridor in Mexico. The opening of the 2300 acre 5 Star Four Seasons Hotel started this trend quickly followed by the announcement of 310 more rooms for the luxurious JW Marriott Hotel Flag. Recently the Hyatt Hotels and Resorts committed to a 557 acre ($100 million) project with a Greg Norman golf course. The Rosewood Hotels and Resorts have reportedly signed a deal for 150 acres and The Ritz-Carlton is looking at the land bought by Mr. Steve Case co-founder of American On-Line (AOL). Regent, Ritz Carlton and Aman Resorts International, just to name a few, are all vying for beachfront property along the northern Pacific Coast. Most are planning five star hotels and up-scale residential communities. It is almost certain Walt Disney Company will join the ranks of high end hotel and resort destinations staking their claim in Costa Rica. In the summer of 2006 Disney launched their highly publicized Pura Vida Tours. Rumor has it that Walt Disney Corporation bought an Island in the Gulf of Nicoya 40 years ago and recently it has been confirmed that the company purchased other large tracks of land.

The Right Time Foreigners are moving to Costa Rica faster than developers can build the homes for them. Since 2005 prices have doubled and in some cases quadrupled and all indications point to land prices continuing to skyrocket. Nobody is talking about the bubble bursting and it is not too late! Local realtors, developers and investors say turnover like this marks only the beginning of what is possible in Costa Rica. As an emerging market, Costa Rica still offers real estate investments at prices significantly lower than any other top retirement locations like the Caribbean or Mexico. This high yielding market trend just got started and all signs point to its continuous growth. With decades of economic and governmental stability as its foundation and progressive governmental policies dedicated to fostering foreign investment overall economic growth. Costa Rica’s future looks very bright!

Stable Government and Booming Economy Costa Rica is blessed with a history of social, economic and political stability and as such has the second best social indicators in all of Latin America; 80 year life expectancy, 95% literacy rate and a 1.3% infant mortality rate. The country’s economy is characterized by controlled inflation and low unemployment. Direct foreign investment has increased significantly largely due to favorable tariff concessions. The Costa Rican Gross Domestic Product is rising making it an excellent time to invest. With the recent election of president Oscar Arias and his progressive policies towards business and foreign investment Costa Rica’s economy will surely experience unprecedented growth. President Arias intends to ratify (CAFTA) Central American Free Trade Agreement which will prove to be a major step towards transforming Costa Rica into a developed nation. The country has come a long way from it roots as an exporter of mainly agricultural products, today the countries major export is micro chips. Costa Rica is host to a dynamic business environment which has the needed infrastructure for investors to compete globally. The highly educated English speaking labor force and significant economic concessions continue to attract countless large corporations including Intel, Acer America, Alcatel, Baxter, Panasonic, Lucent Technologies, Conair, Siemens, Hitachi and many more.

Foreign Friendly Real Estate Laws Constitutionally Protected Many of us are leery of investing in a foreign country because we fear that our property rights may not be respected. Unlike bank trust leases affecting many other foreign real estate investments, one can own property with the same rights as a Costa Rican, the only exception being shoreline property. Ownership of land is protected by the Constitution and is considered to be a right of any person, whether they are citizens or not.

Pay Less Property Taxes In addition to a growing economy, decades of stable government and equitable laws, low property taxes makes investing in Costa Rica even more enticing. Under current legislation property taxes corresponds to 0.25% of the property value. In reality it is common practice when purchasing property to under value the property for property and transfer tax purposes. This two tiered registration practice results in negligible property taxes. Beyond that the onus is on the owner to provide a sworn statement every 5 years for appraisal purposes reporting any upgrades which would affect the value. Obviously this system provides considerable leeway and savings for an owner who was able to de-value their property for tax purposes upon initial registration. However one should note that this declaration can be amended by the tax authorities but procedures are available for the owner to contest the new appraised value.

No Capital Gains Tax Capital gains on transfer of real and personal property, irrespective of consideration paid are NOT treated as taxable income, provided the income is not derived from a habitual activity. Costa Rican case law has defined a habitual activity as the main and predominate activity to which an individual or company dedicates the majority of its time, and which is carried out both publicly and regularly.

Pay Less Income Taxes Income taxes are also treated with the same lack of stringency as property taxes. In reading the Tico Times I quote the Former President (Abel Pacheco) in saying; “Dodging taxes is like a national sport in Costa Rica”. The new President (Oscar Arias) recently rejected the new tax reforms claiming that the process to pass the tax bill was a violation of Constitutional Rights. Local corporations do not always have to file income tax statements at the end of each fiscal year. (September 30th in Costa Rica) Consulting with an accountant will help determine any tax obligation one may have, for those interested in current corporate and personal tax rates please contact me, however be assured that they are much lower than in North America.

Enjoy a Lower Cost Of Living Most living expenses in Costa Rica are a third of the cost in North America and even less when compared to most places in Europe. Many foreigners enjoy the services of domestic help at a cost of $10 a day. One can rent a small studio for as low as $250 or a charming 2 bedroom villa for $500 a month. The cost to purchase is also much lower and maintenance is a fraction of the cost than it is in North America or Europe.

World Renowned Health Care Costa Rica is renowned for its excellent health care and the industry continues to enjoy incredible growth. Many foreigners come to have procedures done from heart surgery to cosmetic surgery. All medical professionals are tightly regulated by the Colegio De Medicos Y Cirujanos The Colegio requires equally stringent credentials for medical graduates as we have in North America, and in the case of foreign graduates the passing of a comprehensive exam is required. A great majority of physicians are specialists in different fields and many of them have undergone studies abroad and in very reputable institutions. There are also skilled and reasonably priced dentists and a variety of other medical and holistic services.

Public And Private Health Care 90% of the population is covered by the national health care system called the “Caja. This public system requires a nominal fee and all pre-existing conditions are covered as are dental and eye care exams. The private health care system is accessed by obtaining medical insurance with the (INS) Instituto Nacional de Seguros. All insurance in Costa Rica is a state monopoly recognized by private hospitals through the country. This insurance covers 75 % of all medical costs incurred except it does not cover pre-existing conditions, dental or eye exams.

Strong Educational System In 1869 the country became one of the first in the world to make education both free and obligatory. Also significant is that Costa Rica abolished their National Army in 1948 to allocate funds for improved education and health care, consequently it has one of the highest literacy rates in the world. Since the 70s the country has invested more than 28% of the national budget on primary and secondary education. Although the country lacked a university until 1940, Costa Rica now boasts four state-funded universities.

Public And Private Education Available As a world pioneer in free tax supported education it is not surprising that the country is loaded with first rate public and private schools. Parents looking for English speaking, bilingual or even trilingual schools will find the best selection in the Central Valley. But that is quickly changing as other areas are becoming increasingly populated by expatriates. Tuition fees for private education vary but the cost is a third, and all diplomas are equivalent to the USA.

Ideal Climate and Enjoyable Life Style One of the reasons Costa Rica is in the top five for retirement locations is its perfect climate. The country sports an average temperature of 78 degrees and historically has not been threatened by the destructive forces of hurricanes. Unfortunately in recent years the world has witnessed the devastation of climate changes which has severely affected real estate values in other retirement locals. Costa Rica is a heaven, with two beautiful Coasts (Pacific and Atlantic), white and black sand beaches, rolling hills that look like the European country side, crystal lakes with towering volcanoes looming overhead, the natural beauty is unequivocal. Supporting 6% of the world bio-diversity Costa Rica is the most biological diverse region in the world for its size!  This tiny jewel of a country is an oasis of pristine sun-drenched beaches and is well-known for its National Parks Reserves that cover over one-third of the land. Given the natural abundance it is not surprising that Costa Rica is famous for its ecological adventure tourism. Enjoyable activities include; rainforest canopy rides, ATV and horseback riding tours, volcanic hot springs and world class surfs. All of these activities are within four hours of the urban amenities we are used to in our lifestyle.

Culture in Costa Rica Foreigners are able to assimilate to the Costa Rican culture as its principles are based primarily on Western traditions. The main characteristic of the Costa Rican culture seems to be one of moderation, as opposed to other countries that offer a culture full of extremes and excesses. The Tico identity encourages compromise and peace, instead of revolution and violence. Perhaps this respect for the middle ground is the reason why so many foreigners have chosen Costa Rica as a travel destination or as a permanent residence. Costa Ricans welcome foreigners in their country and typically make every effort to be helpful even to those who do not speak the official language of Spanish. In most areas English has become Costa Rica’s second official language.

Safe And Secure Environment Costa Rica is different from the rest of Central America because its wealth, land and power are far more equally distributed; as a result it is the most stable country in the region. Most of the population is middle-class, and even though extreme poverty exists, it is not as large of a problem as it is in other Latin countries. By the standards of a developed country, Costa Rican incomes are very low, but when compared to their other Central American neighbors, salaries and earnings prove to be much better. All this being said Costa Rica is not a utopia…..petty crime is a problem BUT violent crimes are uncommon and can be easily avoided without much effort. In addition unlike most of Latin America the water is drinkable and safe.