180 2023 v 2019 and what 2024 looks like for the Central Pacific of Costa Rica

Transcription:

[Richard Bexon]

Okay. Good morning, David. How are you doing?

[David Karr]

Good morning, Richard. Good to see you as always.

[Richard Bexon]

Yeah, you too, buddy. I think that you are the person that's been on the podcast the most and I'd love to get you on here and I know the listeners do as well. And it's always good to get a market update and also get an update of kind of like what else is happening in the Central Pacific area there as well.

Because I know it's, you know, it's the closest beach area to the San Jose airport. Typically, it's been the strongest area. You know, I think the, you know, San Jose arrivals, you know, a bit down, I would say in 2023 over, you know, pre-COVID.

But I think a lot of that's business as well. You know, the business is just not traveling as much. Whereas, you know, Liberia is up, you know, close to 20% over the year.

But maybe you could give us an idea of, you know, I mean, markets had a bit of a big comeback, you know, in 2023. Real estate, interstates, you know, around the world is kind of flatlined or declined. But I mean, what happened in 2023 in your area?

[David Karr]

Well, we're still seeing a lot of traffic. We're seeing plenty of activity. I mean, it's definitely, you know, come down from 2022, where just you don't have, I would say, as quick movement on certain properties.

But plenty of demand. And I think probably the summary for 2023 in the Central Pacific market has been new construction, right? That's just been coming in full force.

You know, I kind of foresaw this a few years ago, and I actually kind of talked a lot about it. And it was a little bit of a delay. And I had talked about it years ago, where I think we're just going to see more and more merging of the HACO market, the Central Pacific market, with San Jose.

And it seemed like there was a delay on that, but it's really starting to take shape now. So that's what we're starting to see is more of that influence of San Jose from San Jose buyers, San Jose renters, San Jose developers. All of that, more so than probably some of the other markets, is really impacting the Central Pacific.

[Richard Bexon]

Well, I think that's something to bear in mind here, because, you know, Guanacaste property is 90% foreigners and 10% locals. And I think I'm being nice with the 10% locals. Whereas, I mean, what would you say HACO is as a percentage of buyers?

[David Karr]

Costa Ricans are making up 20% to 30% of the market. I mean, if you look at a lot of these new projects, what's happening and what's changing, right? And I think what a lot of people need to understand is when the market first kind of started, I always tell people back in the day and in the past generations, Costa Ricans came to the beaches once or twice a year.

And as infrastructure has changed, as economy and disposable income has changed for Costa Ricans, now they're coming to the beach once a month. And they realize that they can rent out these properties as vacation rentals. So that was the first wave of that movement.

Now, the second wave is a lot of these Costa Ricans are becoming property owners. They're owning their property in San Jose. They're buying a small condo.

And now they're finding that they can finance and get maybe a beach property. So that's kind of the second wave is now you're going to see not just people renting here, but you're going to see the people that have the means. They're going to say, it makes sense for me to have a place at the beach an hour, hour and a half away, especially if it's affordable, especially if they can finance.

So that's the area that I see trending. And that's what's kind of coming.

[Richard Bexon]

I mean, you know, real estate is demand and supply, dude. So, I mean, the good thing about the Central Pacific is there's always going to be demand from locals here. And I think people, what they don't understand is how much money locals have.

Like Costa Rica is doing very well. Costa Ricans are doing very, very well. Like, you know, I mean, the cost of living here is about the same as the States, you know, with food and living.

People are like, how do they live? And I'm like, well, because they earn pretty well.

[David Karr]

Well, and they can finance, right? The locals can finance. So that's a big swing.

And we're talking about affordable properties right now. Are Costa Ricans dropping half a million, million dollars like, you know, some of the foreigners? Not necessarily.

But in our market, where we're seeing under $200,000 inventory pop up, I mean, for Costa Rica to finance on, you know, something for $180,000, that's obtainable, right? And the developers are seeing that. They're recognizing that.

And I think you're just going to continue to see those markets merge, where if you look at the trends in San Jose, right, in Escalante, in Sabana, in Escazú, and vertical development, smaller condos, all of those patterns we're seeing here in the Central Pacific. It's coming. The developers are coming in full force.

They have their markets that they're right. They even have their databases. They're not even relying on us to sell to them.

They're coming in here and they're selling them out already on their own. So I think that is a very much of a different dynamic that these other beach areas are not seeing. And where I see that changing and I see that affecting is I think that vertical development is going to be primarily in Jaco, because the developers can do that and develop that at a price that's affordable.

And then I think you're going to see more pushing of then into those other areas of the Central Pacific. So because you're seeing more growth and built up in Jaco, well, then there's going to be more alternative people seeking Hermosa and Estorios. And you're starting to see that.

[Richard Bexon]

Yeah, yeah. So, I mean, do you think that 2024 in Jaco, well, I mean, it's going to continue to, I mean, you said that it's going to continue to push out into Playa Hermosa, Estorios, you know, that area. And I think you're seeing that at the moment.

But I mean, if you've got your crystal ball out of 2024, do you think that there is still, you know, is there still room for a good investment? Absolutely.

[David Karr]

Yeah. I mean, in my opinion, where I've seen some of the best returns and gains in real estate in Costa Rica have been the opportunities when you can get in in that entry level price point of pre-construction, right? If you can get in at that ground level, you can get a discount, then it also raises because it always is higher after it's finished.

So that's been a good strategic spot if you're looking to see growth on investment.

[Richard Bexon]

What do you think the impact is going to be? Again, you mentioned there's a lot of pre-construction stuff happening, you know, new towers about to go up. I mean, in the next two to three years, it looks like Jaco's inventory is probably going to double or close to it.

You know, I mean, what do you think, what's going to be the impact of that?

[David Karr]

Definitely, it's going to impact the rental market. I mean, we're already seeing signs of it. The latest wave of the new construction is about to be complete this year.

So probably in the next six months, we will see new delivered inventory come to the market. And a lot of those are going to flood the rental market. However, right, however, there are some things to keep in mind.

We're still growing on those rentals. We're getting more of those long-term rentals that need to fill in those gaps. So you are going to see some help there.

But by no, I mean, don't want to sugarcoat it, it's going to saturate the market. But I think depending on people's expectations were, there's some people that have been, I think, a little too optimistic into what they should be expecting in the rental market. And those people might be disappointed because it's going to affect them.

But it all comes back to what I usually tell people. If you're happy that it's just going to cover your bills, you're going to have a place in Costa Rica that you can use. And the rest of the time, pays for your vacation to come down, pays for your bills.

Even in a saturated market, you should still be able to achieve that, no problem.

[Richard Bexon]

I mean, I say that to people as well. There's probably nothing in Costa Rica you're going to invest into that you're going to lose money. Like, you know, I mean, there are a couple of things.

But like, if you're smart, like you just have your wits about you, you're not going to lose money. You'll cover your costs. Again, as you said there, you'll be able to travel down.

It's that lifestyle investment. And you'll probably gain some equity over the long term. But I mean, if you're...

[David Karr]

The loss, Richard, is an expectation, right? The loss is mentally, if you're thinking you're going to make a 10% net return and you only made three, right, then yes. You know, psychologically, yeah, you're losing.

And that's the biggest difference. So I think as long as expectations are met, that, hey, this is a vehicle for you to enjoy and it's going to pay for you to enjoy it and use it. Even with a saturated market, I think you're still going to achieve those.

[Richard Bexon]

Yeah. I mean, what areas beyond HACO do you think people should be looking at?

[David Karr]

I mean, Hermosa and Estorilos are definitely in the next place. I don't foresee us going north in the HACO area. We're still affordable.

That's the good news. And I think especially with what the rest of the country has done, we still see options that I consider affordable. We still see...

We have new condos that were just a block from the beach that we just started selling. There's still some available. Under $200,000, right?

You can't really find that anywhere in the country at this point. We still have options under $300,000. We still have single family homes close to the beach in the $300,000.

So I think that we have enough inventory and we have options that I think anywhere in the area, depending on the goals and your likes, definitely should be looked at.

[Richard Bexon]

Okay. We had Maria a while back from Mystico. We were chatting over there.

What's your viewpoint on Mystico? You think that that's something that people should be looking at?

[David Karr]

I love Mystico. I'm quite bullish on it. There's some controversy out there between the surfers and not being happy with some of the things out there.

I love it. I think it has a ton of potential. I'm pretty bullish on it.

It is something that you have to carefully evaluate, understand why I'm bullish on it, what is the potential. Overall, I think it's a great option and a good alternative to what some people are not wanting in Hakko any longer. It's really interesting because Hakko is going two different directions.

As it gets more built up, there's actually people that like it even more because it's even more infrastructure. It's even more of a city. I would say that a lot of the masses actually like it even more.

They're saying, no, I want to be here. But then there's others that are saying, it's kind of built up for my taste. They want more of the space and the green and all of that.

That's where a place like Mystico is a good option.

[Richard Bexon]

We see it all over the country. People go to Tamarindo for the first time. They like it.

Then after they spend a little bit there, it's too touristy. There are too many tourists, the traffic. They go either north to Playa Grande or they go south down to Avianas.

In Hakko, it seems to be south to Playa Hermosa. We're building a variety of different luxury homes in the hills of Hermosa. There's some stunning homes up in those hills, like multi-million dollar homes.

Mystico, yeah. Look, I think the big thing, the potential about Mystico is you've got big Costa Rican developers behind it that have done a lot of stuff before.

[David Karr]

Yeah, and now's the time. It's just something to have a conversation. If someone's interested, there's a conversation to be had to explain why.

I can guide and consult where the spots are within there that I feel are good. Also, Playa Bajuco, I think, has always had all the potential in the world. That is a stunning beach.

You're centrally located. You're close to Hakko. You're close to Manuel Antonio.

You're close to both marinas. It's quiet. It's more of that old Costa Rica charm, and that area is really about to take off.

I met with some developers, again, from San Jose that are about to do a big project out there. There's just a lot of stuff coming this way, and rightfully so. Again, the Central Pacific, I feel, has always been undervalued.

I think now, as things have gotten more expensive, what happens is people come through this area by default because they're priced out of the other markets.

[Richard Bexon]

Also, we develop all over the country, and the water infrastructure and road infrastructure is very good as well in the Central Pacific. We don't have the big water issues that Guanacaste is having at the moment in some areas. We just don't get them in the Central and South Pacific because, again, you've got the mountains behind, and it pulls all the water down.

[David Karr]

Yes. It's just amenities, services. Everything's just easier here.

You want to go from Jaco to Los Sueños? No problem. You want to go to Hermosa and get on the highway?

No problem. You don't have to then turn around and get on another road and loop over 30 minutes. Beach them all over.

[Richard Bexon]

I always like to ask. A lot of people are looking to potentially relocate down here to Costa Rica full-time, find a job here, start a business, or potentially just do it part-time. I mean, what services or businesses do you think are missing in your area that somebody could look at doing?

[David Karr]

I mean, I would say everything, right? I mean, as we grow and get to more of a city, but I think a lot of that's coming. I mean, there's works of a $5 million K-through-high school school here that's going to be accredited, and it's going to fill that need.

I think all of that's coming as far as more services, right? The more people we have, the more vets. Personally, I think we need a good grocery store.

I know that sounds like money, but I think that they should just rebrand the Maxi Poli to Walmart, get more of a good established central spot to get a little bit more other than Auto Mercado. So I think it's just going to be all those services, maybe a few more specialty clinics, right? More of a clinic where you have your dermatologist, your gynecologist, radiologist, things like that, where you don't have to go to San Jose for a special trip.

If that can be done in the Jaco area, stuff like that will help as well. But all of that is definitely coming.

[Richard Bexon]

You know, the one thing that keeps buzzing around in my mind is an automatic car wash. They are not here in Costa Rica, right?

[David Karr]

I don't know logistics. Yes, you're absolutely right. A car wash is not...

Washing your car is not cheap here.

[Richard Bexon]

Correctly. And it's by hand. It takes like 30 minutes.

[David Karr]

Forever. It takes... Oh, 30 minutes.

They'll take like two hours. Well, you want it polished, David, as well. So, yeah.

Yeah. But, yeah. Or even the ones where I can do it myself, right?

That has everything there and I put my quarters in there. Maybe we're thinking too ambitiously. I don't know.

And I don't know how much that really makes sense for someone to make money off of. I mean, look, at the end of the day, the best ideas have to make sense and make people money.

[Richard Bexon]

Yeah. What do you... I mean, again, I think when we look at comparisons year to year, comparing to 2022 was like the steroid era.

It's like baseball. I mean, there's always the steroid era in it. If you go pre that, so say 2019, say, because I think that's probably the good benchmark.

How do you think 2023 lined up against 2019? And how do you think 2024 is going to line up against it? Meaning is the tide higher?

Is it going to be about the same?

[David Karr]

I say probably similar to 23, right? I don't think that we're going to level off a whole lot. I think we're kind of flatlining.

But still above 2019. Oh, absolutely above 2019. Yeah, for us, 2019 was on the low side.

So if you look at overall volume of sales, if we actually had those real numbers, I think that you find that they're significant. Now, it is a little bit more spread out, which means competition, which means there's going to be spots in the market that aren't going to be as easy to sell, right? Because you're competing with new construction.

So it is a little bit more competitive and that doesn't mean if you're a seller, well, great, David, this is a good time to sell. Well, what are you selling? What price do you have it at?

And what are you expecting? Because we have plenty of sellers that are interpreting that as thinking that they can get their top dollar and sell in 30 days.

[Richard Bexon]

Yep. Well, yeah, I mean, I think that probably, I mean, there's still product that will sell top dollar and will sell within 30 days, but I think it's very limited as you say there. I think that that crazy ship has sailed now and I think that the drunkenness has kind of worn off and it's kind of the hangover is starting to kind of take place and people are starting to wake up.

So we'll see how it goes.

[David Karr]

And the other thing too that I would add to that that we've seen, in 22, we saw people that said, I'll take it, right? Yep. There was so much desperation there where they just settled and they took it.

We're back to where traditionally with Costa Rica, with cash buyers, Americans are selective. In fact, their pain in the ass are picky, especially people with real money.

[Richard Bexon]

Yep.

[David Karr]

I mean, I'm not shy saying that. They are. They are.

And guess what? If it's not perfect, if it's not what they're looking for, they'll wait or they'll pass. And in our area, we see plenty of product that was delivered in 05, 06, 07, of people that have never changed that property.

And we're seeing people that say, that's why the pre-construction is doing well, because it's new, it's dated. They don't have to go in and remodel. So that's a transition too, that I think we'll see.

And I think those people that are willing to put money, invest, update their properties, those are going to be the people that are going to be more successful moving them.

[Richard Bexon]

I agree. I agree. Well, David, I've kept you long enough.

It's always great chatting with you. But my last question to you, which I love to ask everyone is if you inherited $500,000 and had to invest it into a business or real estate in Costa Rica, what would you invest it? Is it an automatic car wash?

What is it going to be David?

[David Karr]

500 today. Yeah. Kind of changing.

I've been, you know, in the past I've been focusing on commercial properties. Yep. And I've been like, Oh, today.

No, I might, I might go with. I don't know. I might, I might, I might be going Hermosa Estorios.

You know, maybe, maybe going that route, looking at something over there. I did just find Mystico personally disclaimer there. Yep.

Who knows? I might be looking at something else there, but I think residential, I think I'd probably shift a little bit from the commercial side of things. And probably buy something that makes sense more in that area.

I'm kind of bullish with what I see coming. I think those, those areas are going to be really good. Awesome.

Awesome.

[Richard Bexon]

Well, man, I really appreciate your time. As always David coming to the podcast, giving us a bit of an update and getting you giving everyone a bit of perspective on what's happening in the central Pacific. Anyone that wants to reach out to David, all of his contact details are in the description, but really appreciate buddy.

[David Karr]

Good catching up, man. I'll talk to you soon.

[Richard Bexon]

Awesome. Catch you later.