Costa Rica: Overview
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Baby boomers just love Costa Rica
Costa Rica is in the eye of a spectacular property boom. 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 proved irresistible attractions for tourists, the adventurous young, retirees – and investors.
Because of a short recession in the early 90's, the prices of land and housing went down considerably. However, they've gone up again because of the rise in tourism. With a $1.9-billion-a-year tourism industry, Costa Rica stands as the most visited nation in the Central American region, with 1.9 million foreign visitors in 2007, which translates into a relatively high expenditure per tourist of $1,000 per trip.
It is no longer so cheap. “People think that you can buy something here for US$50,000 - but you cannot,” says Brad Butler of Heredia’s Emerald Forest Properties. “This is the Switzerland of Latin America. You will pay US$200,000 minimum for a house, US$300,000 for a livable house, US$400,000 for something nice, and US$500,000 for a beautiful house.”
Foreigners can freely purchase properties in Costa Rica except for beach front 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
Last Updated: Nov 24, 2008
Excellent yields of 8.05% in San Jose
Condominiums in the cities preferred by expatriate residents in the province of San Jose (Escazú and Santa Ana) enjoy excellent average rental yields of 8.05%. Houses in the same cities enjoy somewhat lower yields, as would be expected, but higher average rental yields, at 6.99%, compared to the neighboring cities of Alajuela and Heredia, where houses earn average rental yields of 6.57%.
The coastal provinces of Guanacaste and Puntarenas have the highest square metre prices in the country. The average price/sq. m. of condominiums in Guanacaste and Puntarenas is US$2,446. Houses sell for an average price/sq. m. of US$1,708. However for these provinces, the scarcity of rental properties available long-term means that the Global Property Guide’s research team is unable to reliably determine a typical rental figure.
Square metre prices for houses in Alajuela and Heredia province were the lowest found by the Global Property Guide, with price/sq. m. of US$839. This is despite their proximity to country’s capital city, San Jose, and also to the expatriate-oriented cities in San Jose Province, Escazú and Santa Ana, where the price/sq. m. of houses averages US$1,139.
TAXES AND COSTS
Last Updated: Feb 18, 2009
Progressive income tax rates in Costa Rica
Rental Income: Rental income is taxed at progressive rates, from 10% to 25%. The first CRC2,599,000 (US$4,561) income is not taxed.
Capital Gains: If capital gains are not derived from habitual transactions, they are tax exempt. Otherwise, capital gains are taxed at the standard progressive income tax rates.
Inheritance: Transfer of Costa Rican properties, even by way of inheritance, is taxed at progressive rates, from 1% to 2%.
Residents: Residents pay tax on their worldwide income at progressive rates. Income from non-employment sources are taxed separately from employment income.
BUYING GUIDE
Last Updated: Dec 05, 2006
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
Last Updated: May 30, 2006
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
Last Updated: May 21, 2008
Neutrality, peace and stability
Costa Rica 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.
According to the CIA world fact book, Costa Rica is a ‘Central American success story.’ Costa Rica has a population of 4,133,884 and GDP per capita is US$4,968 (2007). Costa Rica is the most visited nation in the Central American region, with 1.9 million foreign visitors in 2007. Economic growth was a healthy 6% in 2007. However, inflation was high at 9.30%.
The government of Costa Rica is keen to expand this country’s success and have announced the implementation of a seven year plan for the economic expansion of the country. Right now the real estate market in Costa Rica is booming as a direct result of the Costa Rican government's commitment to promoting the property sector. This is due in large part to the implementation of a series of a tax breaks and incentives that have been made available to overseas real estate investors.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Looming housing slump in China
America & Caribbean
The great U.S. housing market crash
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): $1,651 For a 120 sq. m. property, usually an apartment. | Rental Yield: 7.17% For a 120 sq. m. property, usually an apartment. |
| Rent/month: $1,183 For a 120 sq. m. property. | Income Tax: 30.00% Assumptions: Owners are a non-resident couple drawing US$ / €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 2009
- There’s a Silver Lining in Costa Rica’s Gold Coast - New York Times
OCTOBER 2008
MAY 2008
- South of Costa Rica next property hotspot - Property Wire
APRIL 2008
MAY 2007
- Pensionados at peace under the palms - Telegraph UK
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