On April 11, 2020, less than a month after Costa Rica closed its borders on March 16, I posted that there could be a “silver-lining” with regard to the effects of the pandemic on the Costa Rica real estate market.
Did my prediction come true?
You betcha it did!
Granted, it wasn’t until the latter part of 2020 that the market started turning around. Then in 2021 all hell broke loose as Costa Rica experienced one of the strongest bull real estate markets ever!!
How about 2022?
Will the bull continue to buck strong in the Costa Rica real estate market??
Before getting right to the prediction, let’s address a few questions that could lead to problems in the coming year (or years)…
What Will Happen to the U.S. Dollar (and Economy)?
One of the phenomena noted in that 2020 post was that although the COVID crisis had and would take a dire toll on the U.S. economy, the stock and real estate markets there had stayed relatively strong…
Why?
Mainly because the U.S. Government and its Federal Reserve Bank made sure it was so. How? By printing money and lots of it!
Now 2022 has come along and we are beginning to see inflationary effects rising for the first time in decades as a result of all that stimulus. Could that weaken the U.S. dollar going forward? Well, so far it hasn’t, but it certainly might.
If history shows us anything it’s that even though a country like the U.S. (with the world’s reserve currency) can get away with printing money to solve its economic woes better than other countries that don’t enjoy the luxury of a reserve currency, sooner or later the rooster has to come home to roost.
In order to tame the beast unleashed by washing away its problems with newly-minted greenbacks, the government will ultimately have to put on the brakes to avoid run-away inflation. That could in-turn put downward pressure on the portfolios of my would-be Costa Rica buyers and cause them to rethink their expat plans.
What Will be the Ongoing Effect of U.S. Internal Political Strife?
I just finished Ray Dalio’s new book, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail. Dalio, who is widely regarded as one of the word’s greatest investors, says that the U.S. is at Stage 5 of the 6 stages a country passes through before it succumbs to outright civil war. Dalio says this is so due to the unprecedented internal political strife that currently exists and only seems to be worsening.
There are some things in 2022 that could happen to accelerate this worrisome trend…
First, there’s the 2022 mid-terms. With Joe Biden’s popularity steadily sinking, mainly due to the never-ending pandemic, together with rising inflation, there is a good chance that the Republicans will take control of Congress in 2022. And if they don’t, you can bet your bottom dollar cries of “election-stealing” will be blamed for the debacle.
If the Republicans do take control it might calm those claims and fears, but it will also hamper Joe Biden’s ability to do anything about the economy and only insure 2 more years of absolute grid-lock in Washington.
The other question looming in 2022 is the specter of Donald Trump actually getting locked up due to the revelations of the Jan 6 commission, or any of the other scandals he is enmeshed in.
While I am not going to make predictions with regard to either of the above, I will say that all this makes the prospect for continued (and growing) internal political strife even more of a threat to America’s societal well-being, as well as its place as a bastion of democracy.
In my previous post I noted that the political strife was one reason so many people were wanting to move to Costa Rica. And if the U.S. inches closer towards an actual “shooting” civil war, I would think that would continue to be the case.
Will COVID-19 Finally Dissipate as a World-Wide Threat?
The advent of the Omicron variant might signal that the virus is mutating itself into nothing more than a routine common cold. And with the vaccines and other meds that have been introduced to help with the more vulnerable elements of the population, it might be that the world is finally poised to escape from this ugly situation, or at least there’s light at the end of the tunnel.
However, since COVID seemed to be such a factor in stimulating demand in the Costa Rica real estate market in 2020 and 2021, could an end to the pandemic have the opposite effect?
That’s a damn good rhetorical question that I really don’t have an answer to. However, I can say that the pandemic unleashed some genies that will probably be hard to put back into the bottle, like the increased desire to work from home, even in a home located in a foreign country!
Will Costa Rica Be OK?
Costa Rica continues to struggle with an ongoing fiscal deficit problem. The pandemic has certainly made things worse and in 2020 it basically decimated the very important tourism sector…
However, it seems that “things” are being managed. COVID-19 has hit Costa Rica hard, but vaccination rates are high and hospitalization rates appear to be under control. People are now visiting again, both for tourism and to explore the idea of actually moving to Costa Rica. So, the tourism industry seems to be on the verge of a comeback. And all those dollars of foreign investment in 2021 couldn’t have hurt. The government also appears willing to make legal changes that will encourage even more wanna-be expats to make Costa Rica home.
Yes, I think Costa Rica is going to be OK – gracias a dios – barring that the rest of the world (especially that part to our north) doesn’t completely go to hell!
Having said all of the above, I predict that the market will again be strong in 2022…
What will happen beyond that is much harder to predict due to the noted “dark clouds” that continue to loom on the horizon.