Costa Rica: Overview
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- Price History
- Rental Yields
- Taxes and Costs
- Buying Guide
- Landlord and Tenant
- Inheritance
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- Sq. M. Prices
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- Rental Income Tax
- Capital Gains Tax
- Landlord & Tenant Law
- GDP Per Capita
- GDP/Cap Growth 1 yr
- GDP/Cap Growth 5 yrs
- Economic Freedom
- Ec. Freedom 5 yrs
- Competitiveness
- Property Rights Index
- Currency +/- Value
The centre of it all
Costa Rica is in the eye of a spectacular property boom, which is being studied all over Central America.
Its beaches and central valleys have now been truly discovered by U.S. buyers, and the country’s attractions – sun and surf, climate microsystems, beautiful valleys, volcanoes, jungles, excellent security, good infrastructure, low costs and choice of climate (dry or humid, depending on whether Pacific or Caribbean) have proven irresistible attractions for tourists, buyers, adventurous young, and retirees.
Foreigners can freely purchase properties in Costa Rica except for beachfront properties. The first 50 metres above the high tide line is public property. The next 150 metres can only be leased to foreigners who have lived in Costa Rica for at least five years.
RENTAL YIELDS
Yields are good in Costa Rica at 6.6% to 9.2%
Alajuela and Heredia, bordering Nicaragua., have good yields with an average of 7.2%. The 100 sq. m. category of houses has the highest yields at around 7.6%. As the size of the house increases, the yields decrease. Per sq. m. prices are relatively cheap at around US$1,203.
Apartments and houses in Escazu and Santa Ana in the province of San Jose have higher yields. In Escaza, average gross rental returns on condominiums are around 8%. This can go as high as 9.23% on 120-sq. m. units. Santa Ana houses have slightly higher yields at around 8.3%
We have no yields figures for properties in Puntarenas and Guanacaste, along the Pacific Coast. Condominium in these areas sell for US$2,625 per sq. m., while houses sell for around US$2,9931 per sq. m.
TAXES AND COSTS
Progressive income tax rates
Rental Income: The first CRC1,434,000 (US$2,908) of non-employment sourced income, including rental income of residents, is exempt from income tax. Beyond the exempted amount, income tax is levied at progressive rates from 10% - 25%.
Capital Gains: If capital gains are not derived from habitual transactions, they are tax exempt. Otherwise, capital gains are taxed at the standard income tax rate.
Inheritance: Inheritance tax is levied at progressive rates from 1% - 2% of the property value.
Residents: Residents pay tax on their worldwide income.
BUYING GUIDE
Total transaction costs are moderate in Costa Rica
Total roundtrip transactions costs are around 8.58% to 13.58%, inclusive of the real estate agent's fee that ranges from 5% to 10%. It is customary for the buyer and the seller to share the costs equally. The buyer must be wary of buying a property with liens or squatters.
LANDLORD AND TENANT
Costa Rica's tenancy law is still pro-tenant
Despite the passage of a new law aiming to strike a balance between landlords and tenants, the rental market is still pro-tenant.
Rent: Rents can initially be freely negotiated between landlord and tenant. If rent for housing purposes is agreed in US dollars or other foreign currency, no yearly increases are allowed. Rent increases are allowed only in the case of agreements in colones, the Costa Rican currency.
Tenant Security: The minimum lease term is three years, but the tenant can cancel it anytime by giving a three-month notice. Unpaid rent can be very difficult to collect.
ECONOMIC GROWTH
Neutrality, peace and stability are hallmarks of Costa Rica
Costa Rica (pop. 4.3 million, GDP/cap US$4,646) is one of the most peaceful and stable democracies in Latin America, and indeed in the world. A democratic state was constituted in 1821 and continued with insignificant brief interruptions until today. The army was abolished in 1948 and a decree of permanent neutrality in international conflicts was enacted in 1983.
However Costa Rica is not problem-free. GDP growth has slowed recently. There are high local electricity rates, high telephone costs, poor road infrastructure, burdensome government bureaucracy, and chronic public sector deficits and high foreign debt.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Bubble fears prompt foreign ownership limits in China
America & Caribbean
The slowdown of the U.S. housing market
Middle East and Africa
Bahrain is open to foreigners and sizzling hot
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): $1,255 For a 120 sq. m. property, usually an apartment. | Rental Yield: 9.23% For a 120 sq. m. property, usually an apartment. |
| Rent/month: $1,158 For a 120 sq. m. property. | Income Tax: 30.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
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Roundtrip Cost:
11.1%
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 0.0 Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice. | |
APRIL 2008
MAY 2007
- Pensionados at peace under the palms - Telegraph UK
APRIL 2007
- Costa Rica Real Estate: Strong Outlook - Latin Business Chron
AUGUST 2006
- Companies eye pull-outs if CAFTA flounders - IPS News
- Costa Rica’s tax reform saga enters second act - Tax News
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