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Everything you need to know is included in our Colombia Property Pack
Are you thinking of investing in property in Colombia? Are you questioning whether it's wiser to make a purchase now or hold off until next year?
Different individuals have different perspectives on market timing. The Colombian real estate agent you consulted might advise you that now is the opportune time to buy property, while your childhood friend from Bogotá may suggest exercising more patience before making a decision.
At TheLatinvestor, when we create articles or update our pack of documents related to the real estate market in Colombia, we facts and data that are backed by evidence, not just opinions or rumors.
We've done extensive research on official reports and government website statistics, resulting in a comprehensive database. Here's what we've learned, which can provide valuable insights for your decision-making process regarding real estate purchase in Colombia.
We hope this article proves valuable to you.
How is the property market in Colombia now?
Colombia is, today, a relatively stable country
Neutral
Stability is a necessary condition when investing in real estate because it reduces risks and provides a secure investment landscape. It is an information you need as a foreigner looking to buy real estate in Colombia.
In today's context, Colombia can be regarded as a country that has achieved stability to some extent. The last Fragile State Index reported for this country is 78.4, which is a respectable number.
Colombia has made significant progress in stabilizing the country, both through increased security measures and by implementing economic reforms. This has led to a reduction in violence and improved economic conditions, making the country more stable and attractive to investors.
Let's analyze other data now to assess whether it's a favorable time to purchase property in this country.
Colombia will see substantial development
Positive
Second thing to do before buying a property: determine if the country's economy is in good shape.
Based on the IMF's outlook, Colombia is likely to finish 2023 with a growth rate of 1%, which is somewhat disappointing. Regarding 2024, the experts say 1.9%.
However, this modest figure is only temporary, as Colombia's economy is expected to increase by 10.5% during the next 5 years, resulting in an average GDP growth rate of 2.1%.
The expected sustainable growth rate in Colombia is a good thing for someone who wants to invest in real estate because it indicates that the country's economy is strong and growing, which makes it a good place to invest in real estate. This growth rate also provides assurance that the value of real estate investments in Colombia will increase over time.
On top of that, there are other indicators to pay attention to.
Colombian business owners are not confident anymore
Negative
The GDP growth is a valuable measure, but may not fully account for business community expectations. Thankfully, in Colombia there is a designated metric that is regularly reported. It's not the case for every country, so we're lucky.
The Business Consumer Index (BCI) is a metric that evaluates how confident business leaders feel about the present and future economic conditions. It's determined by conducting surveys and assessments.
According to the Fedesarrollo's data, the latest Business Confidence Index value is -6 for Colombia. It's a score that can be regarded as "worrisomee.
Data shows that, one year ago, it was different. Business operators were confident, and the score was at 10.
A lack of confidence among local businesses in Colombia can lead to a sluggish property market with subdued investment and growth. There may be limited appreciation potential, and buyers could face challenges in finding available properties and motivated sellers.
Nevertheless, it is crucial to recognize that this "sentiment" alone does not exert a direct influence on growth. History has shown numerous instances where a negative BCI was followed by subsequent growth. Therefore, it is imperative for us to consider a broader range of data points in order to gain a more comprehensive understanding.
House prices are increasing without interruption in Colombia
Positive
Colombia's home prices have increased by 37.9% in 5 years according to Dane, Colombia.
It means that if you had bought a hacienda in Cartagena for $625,000 five years ago, then it would now be worth around $862,000.
Nowadays, we can observe a relentless surge in house prices, with continuous increases observed across the real estate market.
It's definitely a green flag for whoever wants to invest in the Colombian property market. However, you might want to wait for the next market correction, so you can get better prices.
You can find a more detailed analysis of the real estate prices in our property pack for Colombia.
Everything you need to know is included in our Colombia Property Pack
Colombia's population is growing and getting richer
Positive
Before you buy a property in a country, think about population growth and GDP per capita, 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 Colombia, the average GDP per capita has changed by 8.5% over the last 5 years. It's a good number. Furthermore, the Colombian population is growing (+3% in 5 years).
This means that, if you purchase a penthouse in Cartagena 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 expected to increase in Colombian cities such as Bogotá, Medellín, or Cartagena in 2024.
Rental yields are average in Colombia
Neutral
It's time to analyze the rental yields..
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Colombia is purchased for 500,000,000 COP and generates 30,000,000 COP in annual rental income, the rental yield would be 6%.
According to Numbeo, rental properties in Colombia offer gross rental yields ranging from 3.3% and 6.0%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Colombia.
It means that your income potential is relatively moderate.
Everything you need to know is included in our Colombia Property Pack
In Colombia, inflation will intensify
Positive
Simply put, inflation is the general increase in the cost of living.
It's when your usual cup of Juan Valdez coffee costs 4,500 Colombian pesos instead of 4,000 Colombian pesos a couple of years ago.
If you're considering investing in a property, high inflation can bring you several advantages:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the 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.
As per the IMF's forecasts, over the next 5 years, Colombia will have an inflation rate of 20.0%, which gives us an average yearly increase of 4.0%.
This data means that Colombia 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 Colombia then?
Time to conclude !
2024 presents a promising opportunity for property investment in Colombia, given a range of positive signals that underscore its potential. The projected substantial development in the country creates a favorable backdrop for real estate investment, with growth prospects indicating potential appreciation in property values over time.
The uninterrupted increase in house prices in Colombia further bolsters the argument for property acquisition. This consistent upward trend suggests a resilient market, offering potential investors the prospect of sustained value growth and long-term returns.
Colombia's growing population, combined with improving economic conditions, adds to the appeal of property investment. The increasing affluence of the population contributes to expanding housing demand, potentially leading to higher property values over time.
Despite some negative signals, such as a lack of confidence among Colombian business owners, the overall context remains positive. Colombia's relative stability, alongside moderate inflation and average rental yields, offers a balanced investment environment where potential risks are mitigated by the country's favorable growth trajectory and improving population wealth.
We wish this article has been of help!. If you need to know more, you can check our our pack of documents related to the real estate market in Colombia.
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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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