Top 10 reasons to invest in Colombian Real Estate in 2014

Top 10 reasons to invest in Colombian Real Estate in 2014

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#1 – The tax law in Colombia makes it easy.  You simply declare (Form 4/Formulario 4) and file (Form 11/Forumlario 11) your investment with the Banco de la Republica (Colombian central bank) and if you ever need to sell and repatriate the funds back to your home country you can do so tax free (after paying a 33% capital gains tax like everyone else here of course).

#2 – Your Dollar (or Pound, Euro or Shekel) goes a long way.  Higher end Colombian real estate (save for some parts of Bogota) still comes rather inexpensively by foreign standards at $175-200 per square ft.  Sky’s the limit of course if you have the budget and there’s ample inventory of $1M+ apartments and houses in Medellin, Cartagena and Bogota.

#3 – Property rights.  People always ask this.  It’s pretty simple; you send your money, you register the title (escritura), and you own the property.  According to the heritage foundation Colombia property rights are on par with Brazil, Costa Rica, Mexico and Italy and way ahead of Ecuador, Belize, Panama and Argentina.  Go figure.

#4 – NOT everyone is doing it yet.  That means prices are still low.  Get ahead of the curve!

From Google search trends (Global, English searches):

  • Belize Real Estate – 33,100 (searches per month)
  • Ecuador Real Estate – 9,900
  • Nicaragua Real Estate – 5,400
  • Puerto Rico Real Estate – 5,400
  • Jamaica Real Estate – 4,400
  • Puerta Vallarta Real Estate – 3,600
  • Panama Real Estate – 1,300
  • Brazil Real Estate – 1,000
  • Colombia Real Estate390

#5 – Colombia has one of the best performing economies in Latin America over the last 10 years.  People always talk about Brazil but Colombia has done just as well as Brazil from a GDP perspective and with much lower inflation.

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#6 – Colombia has one of the best performing housing markets in Latin America over the last 10 years.  This has been well reported and it is primarily a function of domestic demand as foreigners are still a fraction of 1% of all buyers according to the Colombian central bank.  Colombia is a true emerging market with a young, educated and fast growing middle class, who need housing and can pay for it (or borrow it).

#7 – Colombian banks don’t lend recklessly.  Minimum 30% down is the law and 10-15 year mortgage terms are the norm.  I don’t believe HELOCs exist which means Colombian’s don’t think of their homes as ATM machines.  And as the housing market continues to mature mortgage amortizations should extend to 20-25+ years (inevitable) and the minimum down payment thresholds should also fall (also inevitable) which is an opportunity for long term price gains.

#8 – Mortgage interest rates are high.  At 11-13% a buyer can only afford to pay so much for a property with interest rates at these levels and this keeps a lid on prices.  Rates have come down (as the cost that Colombian banks borrow money at has decreased) and we can probably expect that to continue as Colombia continues to progress.  Lower rates should be wind in the sales of rising prices over the long term.

#9 – With good property management, double digit rental yields are the norm.  If you have room in your portfolio for a income property then putting that property in Colombia will serve you well.

#10 – Colombia is a fantastic country to visit and to live in but most people (even those who “travel”) haven’t figured it out yet.  Big modern cities, to small colonial towns, 2 coasts, islands, beaches, history, food, great weather, great culture and great people.  What else do you need?

At Casacol, we’re glad to help foreigners and locals alike make smart Colombian real estate decisions, let us know if we can help.  You can start your Medellin apartment search here.

 

Brad Hinkelman – brad@casacol.co

Founder/Owner – Casacol SAS

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