The market has changed. It’s currently very active, but there’s a large gap in prices and trends and also the expectations between sellers and buyers, with significant price adjustments. – Clari Vega
LX Costa Rica maintains an active market research team that monitors residential luxury properties in Costa Rica’s Central Valley. Although most of the research is destined for internal use by our luxury agents and the LX team as part of the planning and investment guidance for clients, in some instances we share parts of our research results with clients and LX Network partners that can build on the study with their own real estate and luxury market research.
This study builds on market monitoring and the active LX Costa Rica Consulting database of market availability, offers, and sales and rental transactions in over 24 luxury residential communities on the west side of San José, mainly in Escazú and Santa Ana. Specifically, this summary presents four luxury communities as the most representative of the luxury real estate market in the area, with the highest volume of interest and transactions valued over $1 million USD: Cerro Alto, La Hacienda, Valle del Sol, and Villa Real. This part of the study used 161 listings and sales transacciones as a significant sample, without necessarily including all transactions realized between June 2014 and May 2016.
Sales prices in the main luxury communities on the west side of San José show a downward trend. Listing prices still show an average 16.5% overpricing above the levels the market is willing to pay for these homes according to final transaction values. Cerro Alto and La Hacienda offer the most realistic listing prices closer to final sale amount (0 to -17%) while Villa Real luxury properties have the highest overprice with respect to final purchase amount, with adjustments ranging from -6% to -42% of published price. The final transactions aren’t only requiring significant discounts, but also important concessions and negotiations with regards to timing, payment terms, financing, furnishings and additional remodeling.
The market changed faster than what sellers have been willing to accept. Although many sellers have adjusted their listing prices, in general the market still shows significant overpricing. Within and outside of the LX property portfolio, properties sold within the first two years of publication average 1.5 significant price drops (larger than 10% of the initial asking price) within that time.
Overpriced luxury homes tend to stagnate in the market and result in less interest from buyers. Buyers perceive the long time on market as a reflection of property faults though it’s usually just a pricing issue. – María José Barrios
The market punishes initial overpricing with significant adjustments during negotiation proportional to the time on market. The average time to sell a luxury home in this market varies a lot, from 3 weeks to years without selling. The average luxury home that sold within the first two years took 11 months to sell with 1.5 significant price adjustments during that time. Even after price reductions and lowering the published selling price, buyers tended to get an 11% additional price reduction during final negotiations.
Agents focused on the luxury market have begun a strong education effort with sellers to reduce the price gap between sellers and buyers and try and speed up the sales cycle which has grown considerably in the last two years. Nobody wants a published listing to be stuck on the market for several years. As is to be expected, the average age of the homes presented in this study is directly proportionate to the date since start of the residential community. La Hacienda and Cerro Alto both present the newest homes in the study.
With current market conditions, it’s very likely that buying a luxury home is a much better investment than building your own. With significant market supply and strong adjustments, many of the sales transactions for luxury homes in the past 14 months have finished below the actual replacement cost. – Clari Vega
The right price can be more important than specific promotional and communication efforts. Up to 1/3 of the exclusive properties managed by LX Costa Rica are also “private listings”, properties and homes that are not openly published. Although the need for privacy makes communication efforts a bit tougher, the likelihood of selling this property is not significantly different than the likelihood of selling openly published listings, so long as the listing price is in the appropriate range right from the start.
Even within the same luxury residential communities there is significant price variability of up to 100% between homes. Although all four residential communities in this summary have average prices above $1.2 million and individual home sales above $3,000,000, only La Hacienda has the lowest home price above $900.000. Villa Real has shown the greatest price range within the community both for land and built area prices, with sale differences up to 100% of $/m2 of land and variability of up to $800/m2 of built area.
Size matters, but it’s not a decisive factor. The residential communities of La Hacienda and Cerro Alto offer on average the smallest land area plots in this study. They also show the highest average price per square meter, almost 20% above the average for Villa Real and Valle del Sol.
Many factors influence the square meter price of the land for luxury homes within these luxury residential communities in Escazú and Santa Ana, including community ammenities, but the factor of greatest variability and influence are the ease of use of the land ( (inclination and distribution), views, and ease of access. Villa Real offers on average the largest plots (1.678m2) amongst the luxury residential communities, while La Hacienda offers the largest homes (637m2) and the highest price per square meter of construction ($1.722/m2).
NOTES: There are other luxury residential communities in the area with sales above $1,000,000, including many that are part of the LX property portfolio; however, these communities have less inventory of available luxury homes or they do not offer enough reference information for significant calculation. It’s also important to mention that 50% of the properties and transactions above $1,000,000 tracked as part of this research were independent homes that are not located within gated residential communities and are not considered although they generate strong impact on the market, transactions and movements in the area.