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Friday, January 29th, 2016  |  USD: Buy 531.29 / Sell 543.92
20 years

Costa Rica construction activity has fallen across the board in 2015

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(ICR archive)

August 18th, 2015 (ICR News) Construction activity fell across the board in Costa Rica during the first half of this year compared to the first half of 2014, including residential, commercial and industrial building, according to a report published by the Costa Rican Chamber of Construction (CCC) based on figures from the Association of Engineers and Architects (CFIA).

 

Overall construction activity fell by 6.8 percent and affected every province in the country with the exception of Puntarenas, where activity increased by 5.9 percent.

 

The hardest-hit provinces were Guanacaste (-14%) and Limon (-18.6%), followed by Cartago (-13.6%), Heredia (-12.4%), Alajuela (-8.6%) and San Jose (-0.5%).

 

By construction type, condominiums (-18.5%) and office space (-22.7%) have shown the largest slowdowns.

 

Source: Costa Rican Chamber of Construction

Source: Costa Rican Chamber of Construction

The figures stand in stark difference to a year ago, when construction grew by 24% during the first half of 2014 compared to the year prior.

 

The chamber said that the figures were especially concerning at a time when the Solis administration is pushing to implement a universal value-added tax (VAT) which the chamber warned last week would increase construction costs in the country by as much as 14 percent.

 

Under the reform, contractors such as engineers, architects, construction crews, welders, and electricians, amongst others, would be forced to charge a 15% VAT tax on the services they provide during the construction of a home, an additional cost that would be directly passed on to homebuyers, the chamber warns.

 

“This proposed [reform] will affect the [construction] sector, as the increase in costs will result in lower investment and higher unemployment,” Randall Murillo, the chamber’s executive director said last week.

 

In addition, the increase in housing prices would make home ownership even more out of reach for many Costa Ricans, resulting in less government revenues in the form of property taxes, Murillo said.

 

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  • Ben

    Just drive around all you see in Forsale and rent sign´s everywhere in Costa Rica. Why would anyone invest in Costa Rica make me wonder if they want to lose everything they have the country in the next Greece and maybe worse if these Public Sector Union get there wish. Costa Rica could become Venezuela soon do not Invest you will lose your money if you want to stay rent and take the bus everywhere.

    • duke ster

      I wish You were around to talk sense into me a few years ago Ben-then I would not have lost my life’s savings buying land and building here in CR.. Everyone listen to Ben!

  • Ken Morris

    I have already posted that I suspect the construction chamber of fuzzy math, and here we go again. The numbers don’t add up to the totals listed, so somebody needs to replace the battery in their calculator.

    Since we don’t know what the true numbers are, it’s hard to draw any inferences for certain, but it would appear that only two-thirds of the total is made up of residential construction, and actually the construction of single family homes is up a little bit.

    Although it might be a bad sign that single family home construction is up, since the measurement is square meters rather than number of units. This might only mean that fewer larger houses are being built, when the country needs more smaller houses.

    The biggest losers are condominiums, offices, and “other” (resorts?). However, we hear that the banks are overextended on their commercial mortgages, so we would hope to God that they cut back on these frivolous ventures.

    We also know that as a rule construction spending isn’t a great sign of economic vibrancy, since that spending tends to be a one shot deal. The more important question is whether anyone continues to make any money out of the stuff that is built, and just building it is no guarantee.

    Meanwhile, we once again read misleading whining about the VAT. Yes, if your construction company consists only of you, a tape measure, and a cell phone, then you may well pay the VAT, since you are subcontracting out all your labor. However, if your construction company already has things like, duh, employees, no you won’t pay the VAT on them. Plus, the VAT on materials will only inch up 2% after a couple years–not exactly a kick in the teeth.

    And oh yeah, 40% of the population will even get a rebate on the VAT, though I guess this doesn’t apply to the construction industry. I doubt these folks are among the 40% low income entitled to the rebate or are building houses for the 40% entitled to it.

    I understand that these guys don’t want to lose any money as a result of a fiscal reform plan, but in this attitude they’re just like everybody else looking out for their self-interest. If they want my sympathy, they need to start offering a fuller picture of what’s really going on and likely to go on in their industry, as well as use numbers that make sense.

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