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Everything you need to know is included in our Chile Property Pack
Are you considering buying real estate in the land of Poets? Are you wondering if it's more advantageous to buy at this moment or defer until next year?
Different people see market timing differently. Your friend from Santiago might advise you that now is the worst time to buy property, whereas your relative who actually lives in Chile may have a different opinion and suggest waiting for better opportunities.
At TheLatinvestor, when we create articles or update our pack of documents related to the real estate market in Chile, we use factual data and statistics to analyze information, minimizing biases and uncertainties caused by opinions.
We have thoroughly examined all the official reports and statistics available on government websites. Now, we have a comprehensive database of reliable information and we can help you determining whether it is currently advantageous to purchase real estate in Chile.
Enjoy your reading!
How is the property market in Chile now?
Chile offers, today, a lot of stability to investors
Positive
If you want to invest in real estate, prioritize stability as it ensures a supportive economic and social framework. It is an information you need as a foreigner looking to buy real estate in Chile.
You probably know it already, Chile is very stable. The last Fragile State Index reported for this country is 43.2, which is an outstanding number.
Chile has a strong and diversified economy, with a stable political system, and a business-friendly environment that is attractive to foreign investors. Additionally, the country has implemented a series of economic reforms that have helped to ensure macroeconomic stability and a low inflation rate.
Next, let's assess the economic projections.
Chile is positioned for growth in the coming years
Positive
Before diving into real estate investment, the initial step is to consider the country's economic well-being.
As per the IMF's forecasts, Chile is likely to finish 2023 with a growth rate of -1%, which is sad to see. Concerning 2024, the figure we're looking at is 1.9%.
The economy is getting too hot because of strong policy support, which is causing high inflation and the end of financial help. There are also other problems like low productivity and inequality that need to be fixed, along with environmental challenges that we can turn into future opportunities.
However, the negative growth rates are not here to stay since Chile's economy is expected to increase by 6.3% during the next 5 years, resulting in an average GDP growth rate of 1.3%.
A moderate growth rate in Chile is still a good thing for someone who wants to invest in property because it suggests a stable and predictable market, with consistent returns that are unlikely to be affected by sudden fluctuations. Additionally, a moderate growth rate provides assurance that the value of the investment is likely to increase over time.
Nonetheless, there are other indicators to watch.
Chilean business owners don't have faith in the economy
Negative
How does the Chilean population perceive their economy? Relying solely on the GDP forecast is not enough. Fortunately, in Chile there is an official metric that is consistently updated. This doesn't apply to every country, so we're in luck.
The Business Consumer Index (BCI) is a metric used to gauge the confidence of business leaders in the present and future economic conditions. Surveys and assessments are conducted to determine it.
According to the Instituto Chileno de Administración Racional de Empresass's data, the latest Business Confidence Index value is -17 for Chile.
Business sentiment in recent months has likely been affected by uncertainties surrounding global economic conditions, the domestic policy agenda, and the outcome of the constitutional process.
This is not new, business operators were not confident 12 months ago either. The BCI score, back then, was at -7.
A lack of confidence among local businesses in Chile can create a cautious property market with reduced investment and slower price growth. Buyers might have limited property options and potentially encounter challenges in finding motivated sellers or suitable financing options.
However, it's important to note that this "sentiment" alone doesn't necessarily result in negative growth. To gain a more accurate assessment, we should analyze additional data points and indicators.
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Chile is dispensing less building permits
Negative
If you're thinking of investing in property in a country, the tally of permits delivered for property development serves as a valuable indicator. When there is an increase in building permits being delivered, it shows that people have more trust in the property market.
Unfortunately, the number of building permits issued is declining in Chile.
In the past 12 months, according to National Institute of Statistics, Chile, the number of building permits delivered by the Chilean municipalities fell by 15.3%, from 120,684 to 102,169 units.
Without a doubt, this is a discouraging signal. Let's analyze more data.
But before that, keep in mind that if there is a reduction in building permits, it will result in a diminished supply of real estate. Consequently, there is a higher chance of property prices increasing in Chile in 2024.
House prices in Chile are decreasing, before soaring again?
Neutral
Chile's home prices have increased by 21.3% in 5 years according to Chilean Chamber of Construction.
It means that if you had bought a cabin in Patagonia for $400,000 five years ago, then it would now be worth around $485,000.
These days, house prices are decreasing, is it due to a temporary market adjustment? Actually, this trend have been observed multiple times in the past.
It's not necessarily a negative signal. If it's a market correction, then it's definitely the perfect time to buy a property in Chile.
You can find a more detailed analysis of the real estate prices in our property pack for Chile.
Everything you need to know is included in our Chile Property Pack
Chile's population is growing and getting (a bit) richer
Positive
Thinking about population growth and GDP per capita is essential when buying real estate, mainly because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Chile, the average GDP per capita has changed by 3.2% over the last 5 years. It's not much, but the growth is here. Furthermore, the Chilean population is growing (+2% in 5 years).
This means that, if you purchase a modern penthouse in Santiago and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the demand for rentals is likely to go up in Peruvian cities, such as Santiago or Valparaiso in 2024.
Rental yields are average in Chile
Neutral
Rental yield is a common measure in real estate investing.
It reveals the expected return you can get from renting the property, giving you a sense of whether it's a worthwhile investment.
According to Numbeo, rental properties in Chile offer gross rental yields ranging from 2.9% and 5.6%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Chile.
It means that your income potential is relatively moderate.
As we mentioned before, the amount of available real estate will stay the same (and housing prices may be stable), but more wealthy people will be looking to rent properties. Then we can conclude that rental yields might increase in Chile in 2024.
Everything you need to know is included in our Chile Property Pack
In Chile, inflation will intensify
Positive
Inflation is when prices for things you buy keep going up.
It's when your favorite glass of pisco sour in Santiago costs 4,500 Chilean pesos instead of 4,000 Chilean pesos a couple of years ago.
If you're about to invest in a property, high inflation can benefit you:
- property values tend to increase over time, leading to potential capital appreciation
- inflation can result in higher rental rates, increasing cash flow from the property
- inflation reduces the real value of debt, making mortgage payments more affordable
- real estate can act as a hedge against inflation, preserving the value of the investment
- diversifying into real estate provides stability during inflationary periods
- tax advantages, like depreciation deductions, can help offset the impact of inflation
As indicated by IMF projections, the inflation rate in Chile will increase by 15.9% over the next 5 years, with an average annual increase of 3.2%.
This data is suggesting that Chile could experience inflation, resulting in rising prices. Therefore, it's worth considering buying property now as a potential opportunity.
Is it a good time to buy real estate in Chile then?
Time to conclude !
Considering the current factors, 2024 might not be the most favorable time for property investment in Chile, given the range of indicators that raise concerns. While stability is attractive, other factors could overshadow its benefits. Despite projected growth and a population that's both expanding and improving financially, the combined negative signals temper the investment outlook.
Neutral aspects like fluctuating house prices and average rental yields suggest a level of uncertainty in the Chilean property market. The potential decrease in house prices followed by soaring values could introduce volatility, making it challenging for investors to predict their returns accurately.
Chilean business owners' lack of faith in the economy casts a shadow on investment prospects. Their skepticism hints at potential economic challenges that could affect property demand and returns on investment, and it's important to consider the broader business sentiment when assessing investment opportunities.
The reduction in building permits is another notable negative signal. This indicates potential limitations on property development, which could impact the supply of available properties and potentially drive up prices, affecting the attractiveness of property investment in the country.
In summary, while Chile offers stability and growth potential, the combined effects of uncertain house price trends, average rental yields, business sentiment, and limited building permits suggest that 2024 might not be the most optimal time for property investment in the country. Investors should weigh these factors carefully before making a decision.
We genuinely hope this article has provided you with helpful information.. If you need to know more, you can check our our pack of documents related to the real estate market in Chile.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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