With an intelligent strategy, real estate is one of the best, and in most cases, one of the safest investments a person can do in their life. But when you compare how the market works in your country (as a foreigner) with how it works in Colombia, you will definitely see some differences, both positive and negative, that might help you decide whether this is a country/market that you want to participate in.
Happy new year! My name is Juan Charry (firstname.lastname@example.org) and I’ve recently joined Casacol here in Medellin, you’ll find me based in our new office on the “Via Primavera”, 1 block from Parque Lleras and across from Cafe Pergamino, Cra 37 #8A-96. I previously lived in Brisbane, Australia for 4 years and had the opportunity to work in the real estate business for part of that time.
However upon moving back to Colombia was almost like learning real estate all over again and that’s why I decided to write this post and help you understand the main differences between Real Estate in Australia (which I think is pretty similar to most developed countries) and the process in Colombia.
1) Pricing Process
In Australia the demand for houses is massive! The banks are willing to lend freely and the agents know that very well, so if they price a property correctly, this brings heaps of buyers that will be more than happy to offer a little extra to get the deal. There is actually an auction process where literally show up and bid on the front lawn, but this may be unique to Australia. And given the amount of public data on comparable priced properties available it tends to be a very efficient market.
In Colombia, pricing things works a little bit differently. While you can hire a certified appraiser or “avaluador” for a fee he/she is likely to be shooting in the dark due to the lack of public records for real sales prices. Many times a Colombian seller will say “well we heard that unit #705 in our building sold for X so we are asking X plus 5-10%”. In many cases Colombian sellers will try to price high and buyers will try and low ball, but Colombian’s are also famous for having a lot of time and wasting a lot of time of real estate agents.
It’s our job as real estate professionals to filter them out and find serious buyers/sellers with high quality properties looking to do business.
PS, the best local/online resources for pricing data tend to be these.
New projects: https://informeinmobiliario.com/
In developed countries, you trust your RE agent to do a great job in pricing, marketing, showing, representing you in the transaction and closing the deal with minimal involvement on your behalf. That’s why you’re paying them. And for that you sign a contract for a period of exclusivity to give your agent an incentive to spend their time/money in order to get the job done. If the time expires and there is no sale you will probably find another agent and give them the same opportunity.
In Colombia however, things work differently. There is no professional licensing for real estate professionals in Colombia so anyone can decide tomorrow morning to be a real estate agent. This leads to a low quality of real estate professionals and the local buyers and sellers know this. Therefore the locals prefer not to contract with any single agent or agency. Many times you’ll see multiple for sale/rent signs in the window from multiple agencies because the seller doesn’t trust any of them to get the job done. And buyers will work with whoever it takes to find what they need.
By the way, here at Casacol all of our agents (including myself) have gone through the rigorous 6 month training/certification process with the local real estate association of Medellin known as “La Lonja”. This is the closest thing you get to a real estate license in Colombia.
Another thing that I noticed when I was working in Brisbane, is the way “prospecting” is done. In developed countries your best prospects are often your previous clients, even if they were from 10-20 years ago, you keep a database and keep in touch. There is a long term relationship between the real estate agent and his/her client.
I used to go door to door, speaking with neighbors, asking for referrals, and writing hand written thank you cards to maintain that personal touch with the clients. In Colombia however, apartment buildings are private/secure and there is no public phone book to cold call, so what’s a young agent to do? Many times we are forced to deal with apartment complex security staff who will only give information in return for a cut of the commission (for doing almost nothing!). It’s a sad but true reality of the Medellin real estate market.
Over time however, agents and agencies build a reputation for doing a great job representing buyers and sellers and I’m proud to see that both foreign and local buyers and sellers walk into the Casacol offices everyday looking for professional real estate representation.
4) Technology and resources
It is not secret that we are far behind from the technology and resources that developed countries use in real estate. If you work within the industry in Australia you can go to RPdata (Zillow/MLS in USA) and get a great deal of information regarding any property. And you can find not just the name of the owner of the property across the street, but also the history of sales, the contact and address of the owners, who sold it, how many days was or has been on the market for and even the number of properties they own and their location.
In Colombia, real estate title records are public data but actual price recordings are not. This is because it is a legal and common (if not standard) practice to write a title value for less than the actual sales price. A topic for another article.
However, even though those public records can be accessed by anyone in Colombia, you need to have the actual title number for the property to do that background check. You can’t just walk in/log in with an address and get the info you want unless you have a copy of the tax documents or authorization from the owner.
FYI: IF you had all the title data you needed this is the system where you could retrieve an electronic title certification and from there physically retrieve a copy of the title from the local notary.
5) Investment vs. Value
In large metropolitan cities in developed countries you are likely to find prices that most people would call “high” or even unaffordable for many people. When money (mortgages) are cheap and wages are high, people will take out 15-30 year mortgages and push prices up as long as they can make the monthly payments.
However what you see in Colombia is that we don’t really like debt. Especially in wealthier areas like El Poblado, Medellin it’s quite rare that we sell a property with a mortgage, maybe 10%. Whereas in Brisbane it was quite rare to sell a property WITHOUT a mortgage, also maybe 10%.
The price per square foot/meter in many developed markets can be such that the rental yield barely or doesn’t even cover the monthly costs of mortgage, tax, upkeep, building fees, etc. You’ll spend 20-30 years waiting for those rent payments to pay off the mortgage and your cash ROI could be close to 0% (just waiting for appreciation).
In real estate markets like Medellin for example, while the acquisition price and the rents are lower on the properties in general, the ROI will be much higher. And with the Casacol specialty being furnished/executive rentals, we’re always trying to boost that net ROI to 10% and in some cases even higher.
Although the price of properties might seem low to you, is going up very quickly for Colombian standards in COP. Many Colombians living abroad are bringing their funds home to take advantage of the low COP and foreigners are starting to become a bigger and bigger part of the market all the time as they come to invest and retire to cities like Medellin.
I would be very happy to meet existing and prospective Casacol clients for a coffee any time to discuss the market in our new office Via Primavera Cra 37 #8A – 96 on the street level. And if you need any further information about the market or investment opportunities please do not hesitate to email me at email@example.com.
Juan Manuel Charry – firstname.lastname@example.org
Real Estate Specialist – Casacol SAS