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COSTA RICA TOURISM AND BANKING INDUSTRY

After a trip to the USA last week where I had the chance to consult with family, friends, and others associated in some way in real estate there I found many people asking me about how the US downturn would affect the Costa Rican market.

Our real estate market here is in no doubt connected to the USA as most of the home and property buyers in our specific market are from North America. However, there are big differences in our market here and the market in the USA.

The current situation in the USA is, in large part, a result of people buying homes that they could not afford with the idea that prices would continue to rise. Unfortunately, many now find themselves in the position where they can't make the payments, and the subprime market is imploding like a house of cards.

In Costa Rica, foreign investment in real estate and subsequent appreciation has been fueled by investors with real capital. There are different forces that drive the US market (sub prime rates, job markets, growing families, downsizing families, job relocations, etc), and while it may be easy in the states to walk away from a property with 5% equity, here, most people are in at 100% equity, and if the market ever slows down, their tendency will be to hold on tight and ride it out.

We are mostly a cash market which has actually been a barrier to entry for many would-be buyers, but also serves to bring solidity to our values as they are not overly leveraged purchases.

Recently, we have seen very positive trends in banking here in Costa Rica: Citibank bought Cuscatlán, HSBC bought Banex, and Scotia Bank continues to grow. We now have real third party financing options available from banks and private financiers.

However, these groups are not allowing buyers to over leverage themselves. Unlike the states, there is no secondary mortgage market here, and the banks have to assume the final risk involved with the loan.

Investors, retirees, and value buyers are still absorbing loads of properties here. Our spectacular coastline, tropical rain forests, mountain vistas, and laid back lifestyle have attracted all of us that are here now and will continue to attract people from North America and all over the world.

Costa Rica is a small country, and each year our buyer pool gets bigger and bigger. Moreover the high end, recession proof buyers, and big time developers are also buying more land as we speak.

The Ritz, Four Seasons, St. Regis, Mandarin Oriental, Starwood, Hilton, InterContinental, Marriott, Hyatt, and other guys are here and they don't make their acquisitions with guess work. Their large scale and well funded advertising campaigns around the globe, by default, bring other buyers and vacationers to the country.

Our tourism numbers are growing exponentially, and Costa Rica is really just getting started as a renowned destination compared to places in the Caribbean and Mexico. We have tons of room for growth, and when guys like Steve Case - one of the founders of AOL - invest US$800 million here you can be sure that he has done his homework too.

Source: www.welovecostarica.com


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