The most stable country in Central America, Costa Rica’s tropical charms, and low tax regime are luring soon-to-be-retirees in their droves, says LAURA HENDERSON
The gourmet coffee shops of Escazu in Costa Rica are packed on Sunday afternoons, late lunchers chin wagging in the sun. They’re not upwardly mobile Latinos, but part of a growing cadre of foreign-born pensionados (retirees), who have chosen to put down roots, to fish, to play golf, to take it easy.
Bordered by Nicaragua and Panama, the tiny republic has avoided the political and economic turmoil that has characterised much of Latin America; the last rumblings of conflict were stamped out in 1948 and replaced by a stable democracy with a strong growth economy.
Thanks to a decades-old policy of offering tax incentives and other perks to attract English-speaking retirees, the country has also pioneered a popular economic development tool for emerging Caribbean basin markets like Panama and Belize; the drip-feed of a high-spending empty-nester class now being superseded by pre-retirees looking for a casita under the palms.
UK investor interest has also picked up
“Overseas residents number around 200,000,” confirms Richard Bexon of Costa Rican Holiday. “Most are from the States, but UK investor interest has also picked up, many buying ahead of retirement, so they can ease themselves gently into the sunshine lifestyle.”
“Quality of life is five-star,” adds Diana Duignan who moved from London to Escazu five years ago and now runs La Casa de Ali Baba, a bespoke furniture store.
“Infrastructure and communications in urban areas are excellent and the cost of living is minimal. I get by comfortably on £600 a month. The average annual income is only £6,000 with a price index and taxation bands geared to this level.”
Retirees contribute significantly to the £800m a year in direct spending by overseas visitors - the multiplier effect in terms of-salaries in health care, construction, retail and other services bolstering both public and private sector growth. The grey market wave is moreover synergistic: early pensionados having invested in second careers; running start-up businesses, B&B establishments and restaurants, now attracting more of the same.
“Foreign residents registered under the country’s pension scheme can pay into the social security system,” explains Willy Driessen of Nicole’s First Realty. “£50 a month qualifies you for full hospitalization and medical coverage, although many expats prefer to use public health facilities as a backup and tap into the private health care network.”
Resident status is secured in a number of ways-the two most common “entry” channels as a pensionado or a rentista (a foreign property owner): “Neither pay taxes on money earned outside of Costa Rica,” adds Bexon, “although retirees need an income stream of at least £300 a month from a qualified pension scheme or retirement account, £500 in the case of rentistas.”
Not everyone chooses to apply for residency: “It really depends on how much time you plan to spend here,” adds Bexon. “Non-residents can stay for up to three months at a time without a visa, many opting to interval visit during the December-April dry season, although some eke out their holiday weeks across the year.”
Home ownership has acquired a more complex demographic of late, with demand from an increasingly affluent Costa Rican middle class, the North Pacific, South Pacific and Central Valley, (where the majority of the four million strong population live), fuelling demand for prestige new build.
Hazards for the unwary buyer
“Buyers will find huge price discrepancies between the provinces,” explains Driessen. “In the last eighteen months for example, land prices have risen from £10sqm to £100sqm in Central Pacific Jaco Beach and doubled to £75sqm in Escazu in the Central Valley. That said, you can still pick up a luxury beachfront apartment for around £75,000.”
Real estate does carry hazards for the unwary buyer. The majority of beachfront real estate is classified as ‘concession property’, the first 200 metres of littoral land subject to strict planning rights, requiring investors to check zoning issues thoroughly before buying.
“It’s vital to check title insurance when buying an older property or a plot to build,” stresses Serge Galkine of agents Tropical Felgate. “Off-plan is more straightforward-although you need to ensure that a developer has a finished product to show as well.”
Finding an agent through the Association of Residents of Costa Rica is a good starting point. “They’re an expat membership group and don’t stand to make any money off you, so they’ll tell it like it is,” adds Driessen. “Buyers that really want to play it safe can always use the services of a title insurance company. It costs around one per cent of the property value, but it’s worth it for peace of mind.”
Previously the domain of die-hard surfers and backpackers-the northern Pacific province of Guanacaste has seen headline real estate growth in the past few years, with a jungle run of coastal developments, big names hotels and smaller more speculative endeavours breaking ground. At the centre of the transformation is the international airport in provincial capital Liberia, with daily flights from the US and a growing European network including a direct charter service from Gatwick with First Choice starting in May. A region of savannah and sabaneros (cattle ranchers), new homesteaders, are looking forward to a community ‘up-grade’ with the requisite brand-name golf courses, marinas and beach-club trimmings.
Real bargains lie further north
“Tamarindo, Conchal and Playa del Coco are prime areas,” adds Bexon, “but the real bargains lie further north in Brasilito and Playa Junquillal, a luxury villa with pool setting you back £200,000. “Prices here are 30 per cent lower than the Mid Pacific and South Pacific regions,” adds Galkine. “Infrastructure isn’t in place as yet, but local authorities are working full bore to make it happen.”
Popular front-runners with weekending ticos (locals), the lively beach area of Jaco and the national park of Manuel Antonio in neighbouring Puntarenas offer a hip and holistic combo-offshore islands and expensive white sand beaches backed by swatches of canopied forest.
“Condos in Jaco currently start from £40,000,” adds Bexon, “ocean view homes with pools upwards of £160,000, but values will shoot up once the Ciudad Colon-Orotina-Caldera highway from San Jose opens.”
A safe distance from off-the-peg tourism, hippy residents in the region’s Southern Nicoya Peninsula are also enjoying the trickle of ‘new blood’ into their community.
“We’ve some unusual offerings,” confirms Andrea Drost of Tropisphere Real Estate, “under-valued frontline lots for example selling for £15sq metres near Montezuma. They’re owned by a local businesswoman, but she’s holding out for a “holistic buyer”. We’ve had one enquiry from a yoga instructor, but it’s still early days.”
A former equity trader for Lazard, Yan March started renovating his million pound luxury beachfront home March House in nearby Mal Pais seven years ago, before re-locating in 2004. Now run as an exclusive “A list” holiday retreat, with the likes of Gwyneth Paltrow and Leonardo DiCaprio as guests, upping sticks has proven to be his “best call yet.”
“I’ve done my share of reccie visits here,” he explains, “but Mal Pais hits the spot. Everywhere is barefoot, with miles of premium surfing and swimming beaches. We’ve maritime projects like Cabo Blanco up the road-a natural habitat for tree squirrels, iguanas and monkeys, plus it’s a good five hours transfer from San Jose, which keeps it nicely under the developer radar.”
As to the downsides: “Potential over-development, particularly in Guanacaste, which has a high concentration of ‘little America’ gated communities. There’s also talk of a new international airport near Palma Sur in the Southern Osa Peninsula, big enough to take the Airbus A380, with concerns about the project encroaching on Corcovado National Park-where the majority of Costa Rica’s biodiversity lies.
“Petty crime in urban and beach areas is also on the increase, but it’s still a very safe place to live: Quality of life here isn’t measured by efficiency and material things-it’s having wildlife come right up to your front door, squirrel monkeys lolling on your balcony and picking fresh-fruit for breakfast every morning. Living takes that bit longer here. But then you’ve got the time to take it all in.”
Buying in Costa Rica
The property system grants foreigners the same rights as citizens. Many buyers choose to purchase real estate through a limited company Socieded Anonima or S.A, where they own 100 per cent of the shares. The purchase process on future sale tends to be simpler plus associated costs are minimal compared to a transfer of title to an individual.
- Registered land can be title searched in the Folio System in the Public Registry Offices in San Jose and is available to search on-line. www.registronacional.go.cr
- Transfer costs including registration fees, stamp duty, notary and lawyer fees amount to around 4 per cent of the buying price.
- Annual property taxes are 0.25 per cent of the declared value of the property. An owner of a £500,000 property would pay £1,250 per annum in taxes.
- There is no CGT (capital gains tax).
Tropical Felgate estate agents www.1costarica.net
Nicole's First Realty www.nicolesfirstrealty.com
Association of Residents of Costa Rica www.arcr.net
Tropisphere Real Estate www.tropisphere.com
The March House www.costaricaluxuryvillas4rent.com
Guanacaste province near Playa del Coco Pacifico Beach Resort Townhouses – from $620,000 www.costaricaproperty.co.uk