Although real estate prices in Costa Rica are among the highest in Latin America, the Chamber of Construction does not seem to believe that speculation is affecting property values in the housing market. In a recent interview with journalist Diego Bosque of national news daily La Nacion, Chamber President Guillermo Carazo explained that current profits earned by large residential projects are not indicative of reckless real estate investing.
Mr. Carazo stated that it is very difficult to see 12 percent returns in a large planned residential development these days. He guessed the current profit margin to be between 5 and 15 percent, but that even 10 percent is difficult to achieve in Costa Rica. He added that home builders could very well come up even once they complete a project and the housing units are sold, but that such cases are fortunately not seen too often.

 

Still, housing prices keep climbing across the nation, even as the Chamber of Construction issues warnings about building activity receding by more than 10 percent this year. On the issue of how real estate prices could be lowered to a level that can actually be afforded by the middle class in Costa Rica, Mr. Carazo explained that one way to do so would be to reduce the size of lots and living space, something that is already underway in the burgeoning high-rise condo market.

 

Mr. Carazo also believes that lowering construction costs could also stop home values from rising by utilizing materials of lower durability, but this may also have a cheapening effect in terms of quality home building. According to Mr. Carazo, one of the major costs that home builders pass on to house hunters comes from the road and utility improvements they are forced to undertake. Such expenditures should be the responsibility of the government as part of the national infrastructure; alas, this is far from being one of Costa Rica’s strengths.