Given the close economic ties between the two nations, it is unsurprising that the subprime mortgage crisis and attendant economic instability in the United States is having an effect on Costa Rica’s economy and real estate market as well.
In an interview earlier this year, Central Bank president Francisco de Paula described Costa Rica’s overall economic situation in positive terms, noting that the economy grew by by 6.8% in 2007 and 8.8% the previous year. According to de Paula, a dynamic export sector and a high proportion of foreign direct investment have met the country’s need for foreign currency reserves.
The Central Bank official identified inflation as Costa Rica’s main concern, with 2007 year-end figure of 10.8% exceeding official forecasts of 8%.
Economists’ suggestions to counter the effects of the weakening US economy include increasing productivity, spending public funds on education and infrastructure, working toward regional trade agreements, and implementing the terms of CAFTA.
While foreign investment in real estate is variable, and does not correspond directly to the rise and fall of the US market, the situation is expected to affect the price of residential real estate, with a lesser effect on lots and farmland.
Foreign investment in Costa Rican real estate slowed to $103 million in the first trimester of this year, a 35% drop from the same period in 2007, signaling what some describe as a return to a buyer’s market in Costa Rica.
