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Although a haven for expats, $1 million-plus properties aren't selling like before

Steve Bergsman
Inman News®

Recently, I was working on my computer when a Skype call bleeped through. I switched over to Skype and answered in video-call format. On my screen popped up Tor Prestgard, a fellow I profiled a year ago in a story about Costa Rica home markets.

At the time, Prestgard was trying to sell his 30-acre coffee farm located high in the central mountains about an hour's ride from the capital city of San Jose. Back then, I had Skyped with him from his Costa Rican property.

This time, we were talking France to the U.S. He had left Costa Rica so his children could attend school in France, and he and his family were happily settled in the Rhone Valley wine region.

Well, not exactly real happy, because, as Prestgard told me, he was scheduled for brain surgery in a few weeks.

OK, I thought, maybe I should change the subject and quickly asked him about his property. At least that should be a more salubrious subject. And it was.

Prestgard had a caretaker managing the farm and was still looking to sell. The price hadn't come down -- it was still at just over $1 million.

Just one year ago, second homes or hobby farms in exotic locations such as this one in Costa Rica were starving for investors. The global economy was very weak and investors were playing it close to the vest, avoiding anything that smacked of risk. In addition, the banks weren't lending. As result, Prestgard wasn't getting much action on his listing.

As his broker told me at the time, in the old days "anyone could leverage their house in Canada, (the) United States or Europe, get an equity line and buy a house in Costa Rica. The banks have clamped down, so that type of buyer would now have to sell his or her home before moving to Costa Rica."

Considering he had a serious operation ahead of him, Prestgard noticeably perked up when I asked if he was finally getting any interest in his farm.

Prestgard revealed that he had recently received two serious inquiries. One came from a U.S. company in the coffee industry. And just the weekend before, he had a good inquiry from a Canadian investor.

"More people are showing interest and going down to view the property," Prestgard said. "The market in Costa Rica has definitely bottomed, and prices are starting to move up again. I'm starting to see other properties being sold. There will be two visitors to my property this week, and another is scheduled a few weeks out."

I decided to check in with Dan Duffy, CEO of United Country Real Estate, a Kansas City, Mo.-based organization with five offices in Costa Rica serving San Jose, the central country and the entire Pacific coast.

"The velocity of sales on higher-priced properties had definitely taken a hit as it relates to the overall market," Duffy said. "However, we are starting to see those homes move."

There were a few areas of Costa Rica where the developers were not well capitalized and failed to finish projects, Duffy said. "That was mainly in the popular Pacific Coast region, and prices there fell anywhere from 25 percent to 40 percent."

Things were much different in the central mountains, where there was only a 5 to 10 percent adjustment in pricing, Duffy said. "There wasn't a lot of inventory to begin with. People who owned properties such as Prestgard weren't highly leveraged. They didn't have big mortgages, or the properties were bought with discretionary funds. There was also a lot of this real estate owned by locals."

Prestgard is a native Norwegian, and his wife is an American. Prior to moving to Costa Rica, they lived in the United States and France.

"Americans tend to stick to the coastal areas of Costa Rica," Duffy said. "When you get into the mountain areas, you tend to see a lot of Europeans. They don't have the affinity or the absolute requirement that they see the ocean or be in walking distance to a beach like Americans. Europeans like the mountain climate where often you don't even need air conditioning."