Sunday, May 3, 2009

Coverage in the Sunday Times 23rd April 2009

‘Land-banking’ in Costa Rica lets you invest in a tree plantation to fund the building of a house there by Siobhan Maquire

Mention Costa Rica right now and many of us will probably think of Mel Gibson’s alleged beachfront frolics there with several women, including the singer Britney Spears. The Australian actor and director owns a 391-acre estate on Barrigona Beach in Guanacaste province on the Central American country’s northern Pacific coast, 300km west of the capital San Jose.

Apart from the Hollywood connection, Costa Rica has an unfortunate reputation as a sex-tourism hot spot and a seedy playground for wealthy Americans. These days, an alternative side to Costa Rica is being marketed to Irish investors — an opportunity to buy land on a teak tree plantation near the Gulf of Nicoya.

A Co Wicklow company, Costa Rica Invest, is selling plots to Irish plantation, between the town of Liberia and San Jose, as a long-term investment. Irish buyers can own a piece of Central America from as little as ¤12.60 “Our first investors bought riverview plots 18 to 24 months ago at ¤5.20 per sq m, but [now] those plots are selling for ¤12.60 per sq m, an increase of 142.3%,” says James Cahill, of Cost Rica Invest.

“Our land is the best of both worlds. It is not only a teak plantation with 12- to 14-year-old teak trees, which will provide a good return, but also the land is increasing in price.”

There is a catch: the minimum that can be bought is a 1,000-sq-m plot, which costs from ¤8,620, while the maximum investment is in a 30,000-sq-m piece of land, from ¤230,400. An acre of land on this teak plantation at Chomes, Puntarenas province, will set you back about ¤40,000.

The company is already selling to Dutch and French investors, many of whom hope to build properties on their plots. The owner of the land, a Dutch developer, Jos Van Veen, has plans to develop 19 holiday homes on one section, with a view to selling them on from August of this year. It may seem as though any teak plots bought by investors will go towards bankrolling this residential scheme, but Cahill says that landowners will able to do the same with their own plots. “Purchasing teak tree plots will go towards the development of these homes, but there is nothing to stop Irish investors from building homes themselves,” he says. “The teak plantation is zoned residential, so the trees can be cleared and planning permission applied for, which can take up to three months for approval.

“Investors are buying with a view to letting the trees mature over a six- to 10-year period, then selling on the timber and replanting the land, selling up, or earmarking it for residential use.” The company claims that the combination of teak and land values can turn ¤10,000 into ¤47,000 in just eight years, with a projected return on investment
of 30% per annum on teak and land investments over a six- to eight-year period.

Between 10% and 14% of this is from timber alone, while local land prices make up the remainder of the projection. Land values in the area increased by 40% in 2007. As with the rest of the world, however, Costa Rica, which can be reached in about 16 hours from Dublin airport including stop-overs, has been hit by a slump in prices in the past six months, and has a sluggish domestic property market. Selling in a recession is one thing, but selling land to wary buyers is even more difficult. Land banking, to give it its official title, though relatively new in the overseas market, should be approached with caution.
In Britain, there have been controversial cases that have exposed the uglier side of the practice. In one example, people spent ¤31,000 for an eighth-of-an-acre plot of field on green-belt land in the West Midlands for which planning permission would never be given. Cahill says that Costa Rica’s land laws allow no room for bogus land deals or cheats. “I understand that the idea of buying plots of land is something people are cautious of, and there have been bad examples in the past,” he says. “Our land transactions are completely upfront. What you buy is yours. Another person will not own that land or be able to buy it. The beauty of Costa Rica’s land registry means that once the deeds have been signed into your name on its online facility, then you own the land. “Even better is that constitutionally, you, as a non-Costa Rican, have the same ownership rights, so the land you buy rightfully belongs to you.”; 01 272 4184

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