Costa Rica’s residential property market is experiencing a robust recovery in 2024, propelled by a resurgence in tourism, growing foreign investment, and an expanding middle class. However, this growth occurs against a backdrop of slowing residential lending, rising affordability concerns, and uneven regional performance. This analysis, drawing on data from sources like the Global Property Guide, encuentra24.com, and the Central Bank of Costa Rica (BCCR), explores the market’s latest developments, price trends, demand drivers, and broader economic context.
Price Trends and Regional Dynamics
Residential property prices are on an upward trajectory across Costa Rica, though regional variations are stark. The most dynamic markets are in tourist-heavy and expatriate-favored areas like Guanacaste and the Central Valley (spanning San Ramón in Alajuela to Paraíso in Cartago). According to encuentra24.com’s June 2024 data, Guanacaste boasts the highest prices: apartments average $2,896 per square meter (up 16.35% year-on-year), and houses reach $2,221/sqm (up 38.15%). In contrast, Limón province remains the most affordable, with apartments at $1,133/sqm and houses at $971/sqm, reflecting slower demand and less tourism appeal.
In the capital, San José, apartment prices climbed 12.08% year-on-year to $2,343/sqm, while house prices rose modestly by 3.9% to $1,050/sqm. These figures underscore a growing preference for urban apartments amid declining homeownership, with rental rates also trending upward. Nationally, gross rental yields for apartments averaged 7.27% in July 2024 (per Global Property Guide research), up slightly from the prior year, with San José leading at 8.25%.
Sales and Demand Drivers
Residential sales have rebounded strongly since the pandemic-induced dip. Gutiérrez & Gallardo report 5,429 transactions in the Extended Greater Metropolitan Area (GAMA) in 2023, a 13.41% year-on-year increase. Houses dominated with 42% (2,266 sales), followed by apartments at 39% (2,096 sales), and urbanized condominium lots at 20% (1,067 sales). Demand is fueled by Costa Rica’s burgeoning middle class and its allure as a destination for expatriates and retirees, particularly from the US, Canada, and Europe. Foreign investment often targets beachfront properties and gated communities in Guanacaste, the Central Valley, and the Pacific Coast, where demand frequently outstrips supply.
Government policies bolster this trend, allowing foreigners to own property outright—unlike some Central American neighbors—though the Maritime Zone Law restricts direct ownership within 200 meters of the high tide line, offering concessions instead. This legal framework supports Costa Rica’s appeal as an investment hub.
Construction and Supply Outlook
Residential construction activity was stable in 2023, with a marginal 0.4% year-on-year increase in authorized units (24,525 per INEC data). However, the first half of 2024 signals a positive shift: housing starts rose 18.4% year-on-year, and intended projects jumped 19.7% to over 1.9 million square meters (CFIA data). Most new units are individual houses (over 80% in 2022), with apartments comprising less than 20%. The 40-70 sqm segment dominates, reflecting a tilt toward smaller, affordable units. Geographically, construction is concentrated in San José (21.2%), Alajuela (20.3%), Guanacaste (16.7%), and Puntarenas (15.3%), with Guanacaste showing the strongest growth.
Despite this uptick, concerns linger about housing quality and affordability. The housing deficit dropped to 9.5% in 2022 (from 10.2% in 2021), but less than 60% of occupied dwellings are in good condition, per INEC. Experts like Franklin Solano from the University of Costa Rica note a qualitative decline, with many homes needing upgrades and middle-income families struggling to access adequate housing.
Mortgage Market and Lending Trends
Residential lending growth has decelerated after years of rapid expansion. BCCR data shows the annual increase in outstanding credit fell from 16% (2004-2018) to 2% (2019-2023), with a 2% drop in 2023. Housing credit stock now equals 14% of GDP, down from 17.3% in 2020. Of the CRC 6.6 trillion ($13.1 billion) in housing loans as of April 2024, 49% are bank-issued in colóns, 27% in foreign currency, and 24% from non-bank institutions.
Interest rates reflect mixed dynamics: colón-denominated loans averaged 7.92% in June 2024 (down 1.61 points from June 2023, following BCCR policy rate cuts), while foreign currency loans rose to 7.88% (up from 2023 and 2022). Public and private banks offer the lowest colón rates, while non-bank entities like cooperatives lead in foreign currency loans. About 11.4% of households (200,000) have mortgages, with an average loan size of CRC 48 million ($88,000), per the Costa Rican Banking Association.
Economic and Tourism Context
Costa Rica’s economy is thriving, with real GDP growth hitting 5.1% in 2023 (up from 4.6% in 2022), driven by tourism and private consumption. The IMF projects 4% growth in 2024 and 3.5% in 2025. Inflation flipped from 7.9% (end-2022) to -1.8% (end-2023), prompting BCCR to cut its policy rate to 5.75%. Tourism, a key economic pillar (8.2% of GDP), saw 1.67 million stopover visitors in H1 2024 (up 12.2% year-on-year), per ICT data, with the US (58%), Canada (10%), and Europe contributing heavily. Forecasts predict over 2.8 million arrivals for the year.
Challenges and Outlook
While the market outlook is positive, challenges persist. Rising property prices and rents in tourist hotspots like Guanacaste and Puntarenas (19.4% and 19.3% unoccupied housing rates) strain local affordability, pushing residents out as developers prioritize tourist accommodations. The rental surge—up 8.8% in 2023—reflects this shift, with low-income (25.9%) and high-income (13.2%) groups driving growth. High interest rates and informal employment further erode homeownership among lower-income families.
In summary, Costa Rica’s residential property market in 2024 is a tale of growth and tension. Tourism and foreign investment propel demand and prices, but affordability, quality, and lending constraints pose hurdles. With economic recovery and construction picking up, the sector is poised for expansion—though balancing local needs with global appeal remains critical.
