Ok, there are times when the economist in me just screams to get out. So, the following questions were the trigger:
1) Why aren’t there any Ticos trying to buy my home at only $250,000?
2) Why are rental prices so high?
Basically, we need to blame the banks and salaries. First, a very good salary for educated Ticos with university degrees generally run between $1000-2000 per month. Most basic salaries run in the $500-800 category. So, this makes qualifying for a loan quite difficult, especially if you run your own business and don’t have a salaried position.
Second, interest rates for mortgages run between 9-15%. So, for a home of $200,000, a 10% down payment (which takes a while to save up on an income of $1000/month), and a 10% interest rate, the monthly payment would be $1579. Again, a little hard to pay with only a $1000/month income, and even impossible to maintain at the $2000/month salary. So, that is why there are very few Ticos in the market for anything over $100,000.
If you have followed this so far, you can now see the answer to the second question above, “Why are rental prices so high?” Most North Americans would feel most comfortable with the more modern qualities that come with homes in the over $200,000 range. So, if the mortgage payment plus taxes come out at $1600, why would they rent it out for $600? And if you want a pool with your home, you won’t be looking in the $200,000 range, but in the $300,000 or higher range. Which means that someone with a mortgage would have a payment of $2400 and so therefore, you would have to expect to pay more than that for a rental in that price range.
I never push for higher prices and as a person who has to pay everything based on a local income, I understand the need to find the lowest price possible for a rental. However, this is the reason behind the high rental rates. So, don’t blame the Ticos, blame the bank for the extravagant interest rates.
And just in case you were wondering, mortgages are at the lower end of interest rates. Credit card rates start at 20% and go up from there. And all of these great offers through the appliance stores (Gollo, Monge, etc) which persuade people to only pay 15,000 colones every two weeks to own your new refrigerator, comes with a fine print of a 50-60% interest rate. It is completely ridiculous and it’s like receiving a beautiful package with a bomb inside. It absolutely kills the average Costa Rican or anyone who is willing to buy into the scam.
Tina Newton is the owner and agent for Tristan & Newton Real Estate, based in Atenas, Costa Rica and has lived in Costa Rica for almost 20 years. She has a Master’s in Economics and is emphatic about sharing information with others who live here and are thinking of moving here. She is the President of the Chamber of Tourism and Commerce in Atenas and Supporting Solutions for Atenas, CR, Inc. and has founded many charitable organizations in the town. She has raised two children and now a grandchild in Costa Rica and she is always willing to answer any questions about moving to Costa Rica or living abroad. You can contact her at firstname.lastname@example.org and through her company website at http://www.tnrealestatecr.com.