Construction costs vary in Costa Rica, just like anywhere else in the world, and these costs will depend on some of the following factors:
- Site access and location which influence the transportation costs for materials
- Soil conditions on the site which will influence the design for the foundation
- Topography of the site which also influences the foundation design as well as the possible need for retaining walls
- Local labor costs and the experience of the tradesmen that are available where the property is located
- Architectural style and the building materials specified
Building costs in the central valley, (where the capital of San Jose is located), are more predictable because most building suppliers and professionals are based here in the greater metropolitan area (GAM). Costs for a modest home can be around $70 per sq. ft. ($753 per m2), upgraded North American standards can cost around $93 per square ft., ($1000 per m2) and luxury upgrades will increase the costs to around $112 per sq. ft., ($1200 per m2). Note: This construction cost information is current and has been updated annually since this article was first published in 2007.
Outside of the central valley, the costs will increase due to transportation costs, availability of quality building materials and skilled labor.
The bottom line is that the actual building costs per square foot or meter are determined by the building contract and construction specifications agreed to between the owner and the contractor. Without detailed building specifications and consistent construction management provided by a builder who has years of experience in Costa Rica, the costs usually end up increasing as the construction advances.
In Costa Rica, the construction problems that can cause delays and end up costing you more money are not predictable problems anyone from another country could have anticipated based on knowledge acquired elsewhere.
Many times foreigners that want to build homes here, enter into fixed price construction contracts with local contractors who cannot communicate fluently in the foreigner’s native language. Likewise, the foreigners can’t communicate fluently in Spanish, so the relationship is constantly strained by the lack of communication. The only thing they share in common is the fixed price construction contract they both entered into, and once a fixed-price contract has been agreed to and the contractor has begun the project, making changes to the contract and/or the materials and the work specified, becomes difficult for all parties. The purpose of entering into a fixed price contract is to establish a specific price for the labor and building materials to be installed by the contractor and this type of contract has no provision for negotiating changes.
The largest problem with fixed price contracts is that the owner is required to advance a substantial amount of money to the contractor in order to purchase the initial building materials and organize the construction crew for the first phase of the project. Every payment from the owner to the contractor is in advance of material purchases and weekly payrolls. This creates a situation where the owner is always at a disadvantage in case of delays, defects or misunderstandings during the project.
I am frequently hired to inspect construction projects by foreigners who have gotten themselves into difficult situations with local contractors who have run out of the owner’s money and have not completed the construction agreed upon in the fixed price contract. This usually results in losses to the owners and replacement of their original contractor. When this occurs, the owner has already paid for the original materials, labor and the construction management fees during the primary phases of the project. Then the owner needs to find someone else to pick up where the first guy left off and pay a new contractor to finish the work. This usually becomes costly for the owners and creates a lot of stress
A more flexible and secure type of agreement is a cost plus contract, which allows the owner to specify and change the building materials and installation procedures to complete the project up to his/her standards and personal tastes. And more importantly, the owner is not required to advance a large sum of money up front. In a cost plus contract, the owner agrees to pay the contractor based upon the cost of all the labor provided by the contractor as well as all materials purchased to complete the construction; plus a percentage of all costs to compensate the contractor for the construction management of the project. With a cost plus contract, the owner never has to advance large sums of money to the contractor, keeping the majority of the construction funds in the owner’s bank account and the overall costs manageable and predictable.
To begin the process of identifying the costs to build your project, make a list of all the items that you want and need in your home. Then your list of items to be installed, (building materials specifications), can become an addendum to your construction contract. With a well prepared contract and detailed building specifications, you will be able to complete the construction of your project without a lot of unpleasant surprises and cost increases.
The writer, Tom Rosenberger, has been building and inspecting housing in Costa Rica since 1992.
If you want to deal with a professional, who has over 24 years of construction experience in Costa Rica, click here to schedule a consultation.