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Arequipa's property market shows strong growth potential with 20-30% price increases since 2020 and 9% annual growth in 2024-25. The market is driven by population growth, infrastructure investment, and limited housing supply creating sustained upward pressure on prices.
As of September 2025, Arequipa's residential property market demonstrates exceptional momentum with current average prices at S/3,480 per square meter and strong demographic fundamentals supporting continued growth. Major infrastructure projects worth $3.2 billion and a housing deficit of 55,000 units create favorable conditions for long-term price appreciation.
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Arequipa's house prices have surged 20-30% since 2020, with current growth at 9% annually, significantly outpacing inflation and Lima's market performance.
The market faces a critical housing shortage of 55,000 units with population growing at 1.25% annually, creating sustained upward pressure on property values through 2035.
| Market Factor | Current Status (2025) | Long-term Projection |
|---|---|---|
| Average Price per m² | S/3,480 (~$1,000) | 4-9% annual growth projected |
| Population Growth | 971,000 (1.25% annually) | 1.1 million by 2035 |
| Housing Deficit | 55,000 units shortage | Supply constraints continuing |
| Rental Yields | 5.99% average gross yield | Stable, outperforming Lima |
| Infrastructure Investment | $3.2 billion allocated | Light rail, port expansion boosting values |
| Mortgage Rates | 7.4-15% (average 7.4%) | Expected to remain elevated |
| Foreign Investment | Growing interest from expats | Continued influx expected |
What has been the historical trend of house prices in Arequipa over the last 10 to 20 years?
Arequipa's residential property market has experienced remarkable growth over the past two decades, with the most dramatic surge occurring since 2020.
Property prices in Arequipa have increased by 20-30% since 2020, with particularly strong performance in central districts like Cayma and Yanahuara. After a brief market slowdown during 2021-22, the market rebounded aggressively with annual growth rates reaching approximately 9% in 2024-25.
This 9% annual growth significantly outpaces Peru's national inflation rate and even exceeds Lima's property price growth of 3-7% during the same period. The price surge stems from severe supply constraints, ongoing urbanization, and robust economic expansion driven by mining and infrastructure development.
The concentration of new mid-to-high-end developments in central neighborhoods has created additional upward pressure on property values, establishing Arequipa as one of Peru's most dynamic real estate markets outside the capital.
As of September 2025, this growth trajectory continues with strong momentum, positioning Arequipa as an attractive alternative to Lima for both local and international property investors.
What is the current average price per square meter for houses in different neighborhoods of Arequipa?
As of September 2025, Arequipa's property market displays significant price variations across different neighborhoods, with central districts commanding premium valuations.
| Neighborhood/Area | Price per m² (Soles) | Price per m² (USD) |
|---|---|---|
| Citywide Average | S/3,480 | ~$1,000 |
| Cayma (High-end) | S/5,180 | ~$1,490 |
| Yanahuara (Premium) | S/3,750 | ~$1,079 |
| Central Districts | S/4,200-5,500 | $1,200-1,580 |
| Peripheral Areas | S/2,100-2,800 | $600-805 |
| New Development Areas | S/3,200-4,000 | $920-1,150 |
| Traditional Residential | S/2,500-3,200 | $720-920 |
Premium neighborhoods like Cayma and Yanahuara feature new apartments averaging S/451,000 for 87m² units, while houses in Yanahuara can reach S/232,000 for 215m² properties. The citywide median house price stands at approximately S/1,890,000 (around $500,000).
These prices represent approximately 33% lower costs compared to Lima, making Arequipa an increasingly attractive alternative for buyers and investors seeking value in Peru's property market.
How has the population of Arequipa been growing or declining, and how does that affect housing demand?
Arequipa demonstrates robust demographic growth that directly fuels sustained housing demand and price appreciation.
As of 2024, Arequipa's population reached 971,000 residents, with projections indicating growth to 983,000 by end-2025 and exceeding 1.1 million by 2035. The city maintains a healthy annual growth rate of approximately 1.25%, providing strong demographic fundamentals for the property market.
This population expansion is driven by internal migration from rural areas and the attraction of young families and professionals to Arequipa's growing economy, particularly in the mining sector which expanded 116% in 2024. The influx of workers in mining, infrastructure, and education sectors creates immediate housing demand across all price segments.
The combination of urbanization trends and migration from rural Peru intensifies demand specifically for affordable family housing and mid-range properties, while the growing professional class supports demand for higher-end residential options in central districts.
It's something we develop in our Peru property pack.
What are the current mortgage interest rates in Peru, and how are they expected to move over the next decade?
Peru's mortgage market in 2025 reflects elevated borrowing costs that are expected to remain high throughout the next decade.
Current mortgage interest rates for properties in Arequipa range from 7.4% to 15% depending on the borrower profile and loan product, with the average rate for local buyers around 7.4% for 20-year fixed-rate mortgages denominated in Soles. Foreign buyers may access slightly lower rates on dollar-denominated loans but typically face requirements for larger down payments.
The Central Bank of Peru maintains its policy rate at 4.5%, providing some support to the market, but mortgage spreads remain elevated due to banking sector risk assessments and global economic uncertainties. This creates a gap between policy rates and actual borrowing costs for consumers.
Over the next decade, mortgage rates are not expected to decrease significantly from current levels. Global economic uncertainties, inflation management priorities, and Peru's position in international markets suggest that borrowing costs will likely remain elevated compared to historical averages.
This rate environment favors cash buyers and investors with significant capital, while potentially constraining access for first-time buyers dependent on financing, though strong rental yields in Arequipa help offset higher borrowing costs for investment properties.
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How is inflation in Peru projected to evolve, and what does that mean for real estate values in Arequipa?
Peru's inflation outlook remains remarkably stable compared to regional peers, creating favorable conditions for real estate value preservation and growth in Arequipa.
Annual inflation in Peru for 2025 stands at 1.65%, well within the central bank's target range and significantly lower than most Latin American countries. Long-term consensus forecasts project inflation between 2.7-3% through 2027 and beyond, reflecting effective central bank management and stable economic policies.
This low inflation environment means that Arequipa's current property price growth of 9% annually represents substantial real (inflation-adjusted) appreciation. With property prices growing at 6-7 percentage points above inflation, buyers and investors benefit from genuine wealth accumulation rather than merely keeping pace with general price increases.
The stable inflation outlook supports the sustainability of Arequipa's property market growth, as moderate price increases don't erode purchasing power or create affordability crises that could destabilize demand. This environment particularly benefits long-term property investors seeking wealth preservation and growth.
For property buyers, the low inflation environment means mortgage payments retain their real value over time while property values continue appreciating above general price levels, creating favorable leverage conditions for financed purchases.
What large infrastructure or development projects are planned in Arequipa that could influence property values?
Arequipa benefits from substantial infrastructure investment that will significantly enhance property values across the metropolitan area over the next decade.
The Peruvian government has allocated $3.2 billion specifically for infrastructure development in Arequipa, including a new light rail system (SUMP), major road improvements, hospital construction, and the continued development of the Majes Siguas II irrigation project. These projects represent one of the largest infrastructure investment packages for any Peruvian city outside Lima.
The Matarani Port expansion, with a $600 million investment, will boost commerce and logistics capabilities, creating additional employment opportunities and attracting businesses to the region. This port development particularly benefits properties in industrial and commercial zones while supporting overall economic growth.
The new light rail system will dramatically improve connectivity between neighborhoods, making previously peripheral areas more accessible and valuable. Properties near planned transit stations are expected to experience premium appreciation as the system becomes operational.
Road infrastructure improvements and the new hospital construction enhance livability and attract residents to specific districts, while the irrigation project supports agricultural sector growth that feeds into Arequipa's broader economy. These combined infrastructure investments create multiple drivers for sustained property value appreciation throughout the metropolitan area.
How much new housing supply is expected to be built in Arequipa in the next 5 to 10 years?
Arequipa faces a critical housing shortage that will persist over the next decade, creating sustained upward pressure on property prices.
As of September 2025, Arequipa experiences a housing deficit of approximately 55,000 units, with new construction primarily focused on multifamily and condominium developments due to severe land constraints within the metropolitan area. This shortage represents one of the most significant supply-demand imbalances in Peru's major cities.
New housing construction is not expected to keep pace with demand over the next 5-10 years, as annual growth in housing stock falls well below projected population increases of 1.25% annually. Development is constrained by limited available land, zoning restrictions, and the concentration of new projects in already-developed central areas.
The majority of new supply consists of mid-to-high-end apartments and condominiums rather than single-family homes, reflecting land scarcity and developer preferences for higher-density projects. This supply composition particularly benefits existing single-family homeowners while creating opportunities in the apartment rental market.
The persistent supply shortage means property owners benefit from a seller's market environment, while buyers face limited inventory and continued price appreciation pressure. This dynamic strongly favors early entry into Arequipa's property market before supply constraints intensify further.
What are the rental yields in Arequipa, and how are they trending compared to property values?
Arequipa offers attractive rental yields that outperform many regional markets while maintaining stability despite rising property values.
The average gross rental yield in Arequipa stands at 5.99% as of September 2025, with two-bedroom units generating 5.66% yields and three-bedroom units producing 5.31% returns. These yields compare favorably to Lima's average of 5.49% and remain stable despite ongoing property price appreciation.
Net rental yields, after accounting for taxes, maintenance, and management costs, typically range from 4.0-4.5%, which still provides attractive returns for property investors. The yield spread between gross and net returns is approximately 1.5-2%, reflecting moderate operating costs in Arequipa's rental market.
Rising rental demand stems from multiple sources: local families seeking housing, young professionals attracted to Arequipa's growing economy, and increasing tourism supporting short-term rental opportunities. This diverse demand base provides stability and growth potential for rental income.
The relationship between yields and property values remains favorable because rental growth keeps pace with property price appreciation, preventing yield compression that affects many appreciating markets. This balance makes Arequipa particularly attractive for investors seeking both capital appreciation and income generation.
It's something we develop in our Peru property pack.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Peru versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
How do property taxes and government housing policies in Peru affect long-term house prices in Arequipa?
Peru's favorable tax environment and supportive housing policies create positive conditions for long-term property value growth in Arequipa.
Property taxes in Arequipa remain relatively low compared to other Latin American countries, reducing the ongoing cost of property ownership and enhancing net returns for investors. This tax advantage makes Arequipa properties more attractive compared to higher-tax jurisdictions and supports sustained demand from both local and international buyers.
The Peruvian government provides specific incentives for first-home buyers, including favorable financing terms and reduced transaction costs, which expands the buyer pool and supports market liquidity. These policies particularly benefit the mid-range housing market where many first-time buyers participate.
Infrastructure investment policies, including the $3.2 billion allocation for Arequipa projects, demonstrate government commitment to supporting the city's growth and development. This investment directly enhances property values while improving quality of life for residents.
However, the lack of a comprehensive formal development and zoning plan constrains new supply, inadvertently supporting price appreciation by limiting competition from new construction. While this benefits existing property owners, it contributes to the housing shortage affecting affordability.
Government policies generally favor property ownership and investment, with stable regulations that provide predictability for long-term property investors and support sustained market growth.
How does foreign investment, including interest from expats, impact demand for housing in Arequipa?
Foreign investment and expat interest significantly contribute to Arequipa's property market growth, adding depth and diversity to local demand.
Growing interest from foreign investors focuses on both stable rental returns and tourism-driven short-term rental opportunities, as Arequipa's 5.99% rental yields and growing tourism sector attract international capital. Foreign buyers particularly target properties in central districts and areas with tourism potential.
The influx of expats and international professionals tied to mining, infrastructure, education, and business sectors creates sustained demand for quality housing, particularly in neighborhoods like Cayma and Yanahuara. These professionals often seek long-term rentals or property purchases, providing stability to the market.
Several factors make Arequipa attractive to foreign investors: low property taxes compared to their home countries, Peru's currency stability, high rental yields relative to developed markets, and relatively affordable property prices compared to international standards. These advantages continue attracting foreign capital to the market.
Foreign investment adds purchasing power to the market, often involving cash transactions that can drive prices higher, particularly in premium segments. This international demand provides a buffer against local economic fluctuations while expanding the overall buyer pool.
The combination of permanent expat residents and investment-focused foreign buyers creates a sustainable source of demand that complements local market fundamentals and supports long-term price appreciation.
What do major real estate agencies and analysts forecast for Arequipa housing prices over the next 10 to 20 years?
Real estate professionals and market analysts project continued strong performance for Arequipa's property market with sustained growth across multiple time horizons.
Short-term forecasts for 2025-2026 anticipate continued 9% nominal annual price growth, supported by persistent supply constraints and robust demand fundamentals. This growth rate significantly exceeds inflation and reflects the market's current momentum and underlying supply-demand imbalance.
Mid-term projections for 2027-2030 suggest more moderate but still positive growth of 4-5% annually as new infrastructure projects come online and begin addressing some supply constraints. Properties in well-connected areas near new transit and infrastructure are expected to outperform this average.
Long-term forecasts spanning 10-20 years anticipate continued upward trends assuming macroeconomic and political stability. Key drivers include sustained demographic growth, ongoing urbanization, continued strength in the mining sector, and the multiplier effects of major infrastructure investments currently underway.
Analysts highlight that Arequipa's fundamentals - population growth, economic diversification, infrastructure investment, and supply constraints - create conditions for sustained price appreciation that could outpace both inflation and broader Peruvian real estate markets.
Market professionals emphasize that Arequipa's position as Peru's second city, combined with its economic growth and infrastructure development, supports optimistic long-term projections for property values across all segments of the market.
What are the main risks that could cause house prices in Arequipa to stagnate or decline long term?
Several key risks could potentially disrupt Arequipa's positive property market trajectory and cause price stagnation or decline over the long term.
Political uncertainty represents the most significant near-term risk, particularly with national elections scheduled for 2026. Political instability could undermine investor confidence, especially among foreign buyers and in luxury market segments, potentially reducing demand and slowing price growth.
Overbuilding in luxury and expat-targeted segments poses a medium-term risk, as excessive supply in high-end properties could reduce price growth and create inventory imbalances. This risk is particularly relevant given the concentration of new development in premium neighborhoods.
Economic risks include potential increases in borrowing costs beyond current elevated levels, which could significantly reduce buyer affordability and demand. Additionally, global economic downturns that disrupt Peru's mining-driven economy could weaken local purchasing power and property demand.
Regulatory and policy shocks, such as significant changes in property taxation, foreign investment restrictions, or zoning regulations, could alter market dynamics and investor sentiment. While currently stable, policy changes remain a potential long-term risk factor.
Infrastructure project delays or cancellations could reduce the growth drivers currently supporting property values, while natural disasters or climate-related events could impact both property values and insurance costs in affected areas.
It's something we develop in our Peru property pack.
Conclusion
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.
Arequipa's residential property market demonstrates exceptional strength with 20-30% price growth since 2020 and robust fundamentals supporting continued appreciation.
The combination of population growth, infrastructure investment, supply constraints, and favorable yields creates compelling conditions for both investors and residents considering property ownership in Peru's dynamic second city.
Sources
- The LatinVestor - Arequipa Price Forecasts
- The LatinVestor - Arequipa Real Estate Trends
- World Population Review - Arequipa Population
- MacroTrends - Arequipa Population Growth
- The LatinVestor - Arequipa Real Estate Forecasts
- Numbeo - Property Investment in Arequipa
- The Global Economy - Peru Mortgage Interest Rates
- Trading Economics - Peru Inflation CPI
- Focus Economics - Peru Inflation Forecast
- Global Property Guide - Peru Rental Yields