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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 41.1, which is an outstanding number.
Chile offers stability to investors due to its strong institutional framework, characterized by a robust legal system and transparent regulatory environment, which ensures the protection of property rights and adherence to the rule of law. Additionally, Chile's diversified economy, with significant contributions from sectors like mining, agriculture, and services, coupled with prudent fiscal management, provides a resilient economic foundation that attracts and retains investment.
Next, let's assess the economic projections.
Chile will see substantial development
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 2024 with a growth rate of 2%, which is promising. Regarding 2025, the figure we're looking at is 2.5%.
The pace will even accelerate since Chile's economy is expected to increase by 10.6% during the next 5 years, resulting in an average GDP growth rate of 2.1%.
The expected sustainable growth rate in Chile indicates a stable and expanding economy, which can lead to increased demand for real estate as more people and businesses seek properties. This growth can drive property values up over time, offering potential appreciation and returns for real estate investors.
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 -8 for Chile. It's a score that can be regarded as "worrisomee.
This is not new, business operators were not confident 12 months ago either. The BCI score, back then, was at -14.
A negative Business Confidence Index among local businesses in Chile can lead to a cautious property market characterized by reduced investment and slower price growth. Buyers may face limited property options and encounter difficulties in finding motivated sellers or suitable financing options.However, it's important to recognize that this negative sentiment alone doesn't automatically lead to negative growth. To obtain a more accurate assessment, we should analyze additional data points and indicators.
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 2025.
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 (+6% 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 2025.
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 2025.
Everything you need to know is included in our Chile Property Pack
In Chile, inflation is projected to remain minimal
Neutral
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 1.0% over the next 5 years, with an average annual increase of 0.2%.
This data is suggesting that Chile is expected to have near-zero inflation then. Unfortunately, buying a property now may not lead to significant price increases or high profits in the future.
Is it a good time to buy real estate in Chile then?
Time to conclude !
Chile is currently a stable and attractive destination for investors, with its economy expected to grow by 10.6% over the next five years. This translates to an average GDP growth rate of 2.1%, which is a promising sign for the country's economic health. Such growth typically leads to increased demand for real estate, as more people and businesses look to invest in properties. This demand can drive property values up, making it a potentially lucrative time for real estate investors to consider entering the market.
However, there are some factors that suggest 2025 might not be the ideal time to buy property in Chile. One of these is the decrease in building permits being issued. With fewer new properties being developed, the supply of available real estate could become limited. This scarcity can lead to increased competition among buyers, driving prices up and making it more challenging to find affordable options.
Additionally, while house prices in Chile are currently decreasing, there is a possibility that they could soar again in the near future. This potential for price volatility makes it difficult to predict the best time to buy, as waiting too long could result in higher costs. On the other hand, buying too soon might mean missing out on further price drops. It's a delicate balance that requires careful consideration and timing.
Chile's population is growing and becoming slightly wealthier, which can contribute to increased demand for housing. While rental properties in Chile offer gross rental yields ranging from 2.9% to 5.6%, these returns might not be as attractive if property prices rise significantly. Furthermore, with inflation projected to remain minimal, the cost of living and property maintenance may not increase dramatically, but the potential for rising property prices could still pose a challenge for prospective buyers in 2025.
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.
-Will real estate prices go up in Chile?
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.