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Colombia is fast becoming one of the best options for international investment, both for internal and global situations. Diversity and vastness are its main features, besides its really low prices, compared to the global market.
When comparing a property in Europe, with another one with exactly the same features in Latin America, we can talk about prices differences that range from four, six, or even ten times cheaper. For example, a two bedrooms apartment in London costs about US$600,000, while a similar one in Bogota, is around US$120,000.
In the long term, terrorism and environmental issues are just some of the reasons to see the whole of Latin America as one of the most safe and sustainable resources in the world.
The Prices for Property in Colombia
Property prices in developed countries can’t grow forever. They are more likely to stabilise, if not, to drop after the well known “real estate bubble” bursts.
On the other hand, in Latin America property prices have just started to react to the increase of demand. Despite circumstantial economic ups and downs, price tendencies are definitively on the raise.
Profits for Colombia Properties
The average rental yield for a property in Colombia is about 10% to 12% a year, over the value of the property, for permanent rentals. For holiday rentals, it may vary, depending on the area the property is located and the demand it faces in a particular period of time. It is commonly higher, but seasonal variations it make it harder to estimate average profits.
In case you need more information or have doubts on any of these issues, the specialised staff in January First Real Estate will be glad to answer all your questions, click here.
Buying Real Estate in Colombia
Colombia’s tourism drive bears fruit
Colombia launched an aggressive tourism drive backed by President Alvaro Uribe’s iron-hand command. The government wanted to show that Colombia is now a safe country for tourists to enjoy the beauty of the Andes and the Amazon basin.
The drive to boost tourism saw fruitful rewards, with the number of cruise ship arrivals jumping by 45% from 2003 to 45,000 in 2005. There was a 65% increase in foreign visitors from 2002 to 925,000 in 2005.
Security threats continue
Ensuing paramilitary issues threaten the growth of tourism. Uribe’s administration, through his leadership, has been successful in investigating deeply into the operations of the paramilitary Autodefensas Unidas de Colombia (AUC). AUC was responsible for kidnappings and mass murders in the past.
Some 30,000 paramilitaries demobilized due to Uribe’s persuasion, and are now volunteering to testify about AUC’s operations in exchange for reduced sentences and non-extradition. This investigation uncovered more of the paramilitary’s possible links to Colombian legislators. Recently, the Supreme Court has ordered arrests of several legislators suspected of having financed AUC and being involved in the planning of attacks.
These developments are hurting the government’s image just as locals and foreigners are starting to believe that Colombia has become safe, especially with impressive improvements like a 73% fall in kidnappings since 2002. Now, there is pressure to assure that the present administration no longer has any connection to the AUC.
Economic stability
Colombia remains to be one of Latin America’s stable economies. Its inflation rate has also seen continuous decrease from 7.1% in 2003 to 4.7% in 2006. From 2005-2006, its GDP per capita grew by 3.05%.
Property prices have not yet reached their 1995-peak level, which may partially be caused by the persistent political troubles. House prices in Colombia now are still around 40% cheaper than 10 years ago. Apartment prices only rose by an estimate of 2.17% in 2006, while detached house prices only by around 2.3%.
Apartments in Bogota are in the market for an average of US$ 736 per square meter (sq. m). On the other hand, house prices in the city sells for an average of US$ 646 per sq. m.
Property collapse
The fall of house prices after 1995 was largely caused by very high interest rates. In the 1990’s, there were around 320,000 defaults. Banks repossessed 12,000 real estate properties, putting severe strain on the banking system. The government is progressively working on decreasing interest rates further.
Bank Colombia (a private bank) dropped interest rates for mortgage debt to 12% and that has really activated the interest of home buyers, and is giving the real estate industry a very active market. Other private banks have followed.
High-end property, luxury condominiums have increased in value by 30% or perhaps a little higher, compared to five years ago. But this movement is very restricted to upper end property. The lower end is very slow. This is due to the large volume of dispossessions, which mainly affected middle and low income house-buyers.
Housing deficit
Colombia is still a poor country and most of the population is not well housed. A 2005 survey revealed that 34% of respondents do not live in their own houses, and 79% of these find it unlikely they will ever own one.
The housing deficit amounts to 2.4 million houses. This is about 26% of the entire housing stock. To address the deficit, 185,000 houses must be constructed annually, but in 2006, the housing stock increased only by 96,970.
Owner-occupation is slowly declining from 67.4% in 1988 to about 63% in 2005. At the same time, the share of renters is rising from 24% to 30.6%. This should not be welcomed as good news by landlords because, of the 15 million people living in rented dwellings, about 90% belong to low-income groups.
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