This week Costa Rica's national currency appreciated almost 4% against the U.S. dollar, for the first time in over 20 years. One dollar now buys 496.6 colons. Three days ago it bought 516.8. From a price series provided by the Central Bank of Costa Rica, the dollar has appreciated between 4% and 13% annually over the last ten years, in a "creeping" devaluation orchestrated by the Costa Rican government. This has had the effect of negating local price inflation over that period for investors spending dollars.
No more. For all of 2007, the dollar is now unchanged against the colon.
What does this mean for real estate investors in this hot market? If this week's price movement is a trend (want to bet it's not?), then construction costs are going to go up by an amount equal to annual inflation in local prices, around 9% for 2007, plus (or minus) changes in the dollar/colon exchange rate.
To find out whether there is a trend, consider the following changes in the exchange rate: 2003, dollar up 10.5%; 2004, dollar up 9.5%; 2005, dollar up 8.3%; 2006, dollar up 4%; 2007, dollar unchanged; week ending November 23, dollar down 4%. Hmmm.
At our premier real estate condominium development along Costa Rica's booming northwest pacific coast, The Oaks Condominiums, we had the foresight (luck?) to buy our cedar wood, concrete and iron rebar in advance for the first two phases. Our luck did not extend to phase three. Prices will be going up soon.
No more. For all of 2007, the dollar is now unchanged against the colon.
What does this mean for real estate investors in this hot market? If this week's price movement is a trend (want to bet it's not?), then construction costs are going to go up by an amount equal to annual inflation in local prices, around 9% for 2007, plus (or minus) changes in the dollar/colon exchange rate.
To find out whether there is a trend, consider the following changes in the exchange rate: 2003, dollar up 10.5%; 2004, dollar up 9.5%; 2005, dollar up 8.3%; 2006, dollar up 4%; 2007, dollar unchanged; week ending November 23, dollar down 4%. Hmmm.
At our premier real estate condominium development along Costa Rica's booming northwest pacific coast, The Oaks Condominiums, we had the foresight (luck?) to buy our cedar wood, concrete and iron rebar in advance for the first two phases. Our luck did not extend to phase three. Prices will be going up soon.
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