Real estate development firms are turning to lower middle class clients in an attempt to benefit from the lack of low-cost housing opportunities, according to José Miguel Porras, president of the Cámara Costarricense de Corredores de Bienes Raíces.
These developments are located close to low income neighborhoods, such as Alajuelita and San Sebastián. In these places land is cheaper so it makes it possible for companies to offer houses with prices ranging from $65,000 to $80,000, said Porras.
“In order to protect future residents from potential crime, houses are designed to be bubbles where groceries and basic services are offered to the people, so they don´t have to get out of the neighborhood.” he explained.
This market niche is supposed to grow in the years to come, and more developers are figuring out a way to reach it. However, their main challenge is how to keep prices low.
“Usually their low cost is achieved by building smaller units with simpler details.” said Porras.
This trend has increased since 2013 and it offers an affordable way for people to buy their first property, specially younger people who are either single or married without kids, according to data from the real estate chamber.
“Usually these people are granted two years to save their down payment, which is a great advantage for those who do not have a big cash flow. After that, bankers are waiting to finance the remainder of the cost.” added Porras.
Dagoberto Hidalgo, president of the social housing committee from the Cámara Nacional de la Construcción, explained this
trend has become more visible in the last three years, partly because selling higher priced properties is now more difficult .
“That places a lot of pressure in the market, so businesses are now exploring new opportunities.” he said.
Hidalgo also points out that much of the social housing developments has increased thanks to government grants delivered by the Banco Hipotecario de la Vivivienda and Instituto Nacional de Vivienda y Urbanismo.
According to Instituto Nacional de Estadística y Censos, as of 2013, 63 percent of houses in the country were already paid off, 18 percent were rented and 9 percent still have a mortgage.
Luis Javier Chavarría is the business manager of Rock Construction, a company that developed Málaga City, one of these lower priced projects. He explained that new markets imply changes on how people afford a house.
“Part of the reason we are into this kind of construction is our social commitment as a company. Our duty to find a way to serve people and keep the business profitable.” he said. “The idea is that mortgage payments be the same as rent prices. That´s what we tell the bankers. Look, if a person is not granted a loan, then they will go ahead and rent for the same amount of money if not higher. It´s a expense people will have to go through anyway.”
In the case of Málaga, the project will have 1,600 houses. Chavarría explained that, in order to keep it profitable, it needs to be huge. That way, the financial gain will come from high volume sales.
“We believe that little by little this type of housing will become more popular because gone are the days when people aspired to own big properties. Somehow we`ve learned to live with less,” Chavarría adds.