There is good news, however, for investors looking for the "next Costa Rica": If history is a guide, it can take a decade or more for the amount of investment capital being

Lifestyle changes

There are several longer-term demographic changes which are beginning to intersect with one another.  First, there is the increased mobility of society brought about by the relative affordability of airline fares to the mainstream public.  Forty years ago, it was primarily the wealthy who went on international excursions or vacations to an island paradise.  For the last twenty years, everyone goes.  Look at where honeymooners have gone since 1975 versus where they went in the 1950's and 1960's.  These sorts of trips are now viewed by many, not as a luxury, but as a right.

Secondly, is the passionate love affair people have with ocean and beaches.

The third factor is the increasing affluence of the baby boomer generation.  Many of these dual income households are reaching their peak earning years and beginning to realize the amount of money they've put into their 401-K programs since 1990.

All of these factors are resulting in a march to the beach. These buyers will begin, in earnest, to aggressively seek out second homes on beaches somewhere far away from it all.  And by acquiring beachfront property at the earliest stages of this wave, before the rush of the crowds, the long and short  term profit potential is staggering.  Demand to this point in time has only shown us the tip of its iceberg. The real markets and profits have not been even partially tapped.  But let's get back to a good U.S. beach example for a minute.

Beachfront history

A life-long friend of mine bought a nice two story bayfront beach house straddling two lots along the New Jersey shore in the mid-1970's for $70,000.  He had always wanted a second home on the beach, away from the hustle of Philadelphia. Twenty years later, he had spent $130,000 to move the existing house over a few feet and add onto it. He's left with a beach house selling for $1mm and a lot worth a solid $400k. 

Think Malibu and Boca Raton.  Though buyers always have needed to keep any eye to where they are in an economic cycle, ocean front real estate has typically been an excellent investment over the medium and long term.  But can these prices keep going? Actually, my friend's property in New Jersey hasn't appreciated much since the late 1980's.   He has a few thousand neighbors in the same boat.   Ditto Calfornia.  Florida still chugs along given the national population shift to the southeast, but this too will normalize over time.  Bottom line, the big money on coastal real estate in the U.S. has been made.  I do not believe anyone will get hurt if they are prudent on the buy, but the year in, year out 15% returns for U.S. and European beach front are over.