Authored by the expert who managed and guided the team behind the Peru Property Pack
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Are you considering investing in Peru’s real estate market? What are the legal steps, tax implications, and cultural differences you need to understand before taking the plunge? What challenges do foreign investors typically face, and how can you overcome them?
These are the questions we hear most often from foreign investors because we’re actively connected to this market. We’ve spent time working with local agents, developers, and investors, so we know what works—and what doesn’t. That’s why we’ve written this article: to provide a clear guide that answers the questions we get asked daily.
Our goal is to help you, as a foreigner, to navigate the property buying process with confidence. If you think there’s something we missed or want more details, let us know (please do!). Your input helps us refine and improve our advice for everyone.
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1) Foreigners can own property in Peru, but avoid buying land within 50 kilometers of borders due to restrictions
In Peru, foreigners can own property, but there are some restrictions to keep in mind.
According to the Peruvian Constitution, foreigners enjoy the same property rights as locals. However, there's a catch when it comes to buying land near the borders. Specifically, foreigners are prohibited from owning land within 50 kilometers of the borders due to national security concerns.
This rule is laid out in Article 71, which is all about protecting the country's interests. The government emphasizes this in various publications, making it clear that national security and public needs are top priorities.
Despite these border restrictions, many foreigners have successfully invested in Peruvian real estate. Reports and testimonials from real estate agents show that foreign ownership is still very much possible, and the market remains attractive.
Foreign investors often find opportunities in urban areas and popular tourist destinations, where the restrictions don't apply. This means that cities like Lima and Cusco are hotspots for foreign buyers, offering a range of properties from modern apartments to charming colonial homes.
Sources: Aparthotel, Baker McKenzie, Expat Focus
2) Conduct thorough due diligence in Peru’s largely unregulated real estate market to avoid scams
The Peruvian real estate market is a bit like the Wild West, largely unregulated and full of risks.
One of the biggest headaches is the lack of a centralized property registry, which can lead to title disputes. Without a unified system, verifying who actually owns a property becomes a guessing game, making it easier for fraudsters to pull off scams.
In 2022, there was a noticeable uptick in shady dealings, with sellers misrepresenting property information rising by 22.6% in the second quarter compared to the previous year. This spike in property fraud is a direct result of the market's lax regulations.
Foreign investors often find themselves caught in these scams, partly because the enforcement process is a tangled mess. The lack of accountability among judges and court officials doesn't help either, making it tough to resolve disputes.
Third-party objections are another hurdle, frequently used to delay or block legitimate transactions. This tactic is a favorite among those looking to exploit the system's weaknesses.
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.
3) Look into low-income housing projects in Peru for tax incentives offered by the government
The Peruvian government is making it easier for investors to dive into real estate by offering tax incentives for low-income housing projects.
These incentives are a smart move, encouraging investments that benefit society by making affordable housing more attractive. For those looking to invest, the government has extended tax breaks for Real Estate Investment Funds and REITs until 2026, which means you can enjoy perks like deferred taxes and reduced withholding taxes.
Backing these efforts, the Inter-American Development Bank (IDB) is stepping in with financial support. They've approved a $300 million loan to boost social housing, aiming to help over 17,000 households. This isn't just about building homes; it's about creating energy-efficient, green homes that improve living conditions.
These initiatives show a strong commitment to enhancing the quality of life for low-income families. The focus on green homes is particularly noteworthy, as it aligns with global trends towards sustainability and energy efficiency. This approach not only benefits the environment but also reduces utility costs for residents, making it a win-win situation.
Investors looking to make a positive impact while enjoying financial benefits should consider these opportunities. The combination of government incentives and international support makes Peru an attractive destination for real estate investments, especially in projects that aim to improve social welfare.
Sources: EY Tax News, Inter-American Development Bank
4) Consider properties with co-working spaces or high-speed internet to attract digital nomads and remote workers
The rise of digital nomads is reshaping the real estate market, with over 40 million expected worldwide by 2024.
Peru is jumping on this trend by offering a digital nomad visa, aiming to boost its economy through tourism and services. This makes it a hot spot for international professionals looking for new places to work and live.
In Lima, the capital, there's a noticeable boom in coworking spaces, which reflects the growing demand for remote work-friendly environments. This is a key factor for digital nomads when picking a location.
Investing in properties with coworking spaces or high-speed internet is a smart move. As Peru upgrades its internet infrastructure, it becomes even more appealing to remote workers who need reliable connectivity.
Real estate listings are now highlighting remote work amenities, showing a clear shift in market demand. This trend indicates that properties with these features are attracting more interest from digital nomads.
By catering to digital nomads, property investors can tap into the economic benefits of this growing community. As more digital nomads flock to Peru, the demand for suitable accommodations is set to rise, offering a promising investment opportunity.
Sources: Pumble, Localyze, Euronews
5) Explore alternative financing options in Peru, as obtaining a mortgage can be complex for foreigners
Getting a mortgage in Peru can be tricky for foreigners.
In recent years, especially around 2023 and 2024, the Peruvian mortgage market has been a bit of a maze for non-residents. Most mortgage products are tailored for locals, leaving foreigners with limited options. This focus on local residents means that if you're not from Peru, finding a suitable mortgage can be quite the challenge.
Interest rates are another hurdle. Foreigners often face higher rates than locals, making loans more expensive. For instance, back in October 2018, the lending rate for foreign currency mortgages was noticeably steeper compared to what locals paid. This difference in rates can add up, making borrowing a costly affair for non-residents.
Then there's the paperwork. Foreigners need to jump through more hoops, providing extensive documentation like visas or authorizations. This process can be both time-consuming and complex, adding another layer of difficulty to securing a mortgage.
Another issue is the lack of a credit history in Peru. Without a local credit record, getting mortgage approval becomes even tougher for foreigners. This absence of credit history can be a significant barrier, as lenders often rely on it to assess risk.
Sources: CEIC Data, Expat Focus, Aparthotel
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6) Consider vacation rentals in Cusco or Arequipa for high returns, as these tourist hotspots have a steady influx of visitors
Thinking about buying a vacation rental in Peru? Cusco and Arequipa are hot spots for tourists, making them prime locations for investment.
In 2024, Peru's tourism industry bounced back strong with over 2.1 million international tourists visiting between January and August. This surge in visitors means there's a big demand for places to stay, which is great news if you're considering investing in rental properties.
Cusco alone attracted nearly one million visitors in 2023, making it a major player in Peru's economy. High tourist numbers often lead to high occupancy rates for vacation rentals, ensuring a steady income stream for property owners.
The rental market in Peru is promising, with gross rental yields ranging from 3.2% to 5.9%. This suggests a healthy market that can offer consistent returns. Plus, the tourism sector is expected to keep growing, with more tourists predicted to visit through 2028.
Investing in vacation rentals in these popular tourist destinations can yield high returns due to the steady influx of tourists. Tourism is a key driver of economic growth in these areas, making them attractive for investors.
With the right property, you could tap into this thriving market and enjoy the benefits of a bustling tourist scene. Peru's tourism boom is a golden opportunity for savvy investors looking to capitalize on the demand for vacation rentals.
Sources: International Arrivals in Peru Surge 39.2% in Early 2024, Peru Tourism Report, Ministers Safeguard Tourism Sector's Role as Driver of Economic Growth
7) Consider properties convertible to multi-family units, as urban areas have high rental housing demand
Investing in properties that can be easily converted into multi-family units is a smart move, especially in urban areas where rental housing demand is high.
In cities like Lima and Arequipa, rental yields have been quite attractive, with neighborhoods such as Surquillo and Barranco offering even higher returns. This means property owners can earn a good income from renting out these units. Urban renewal projects are booming, particularly in Lima, which has further increased the demand for housing.
Converting existing properties into multi-family units is a profitable venture, especially with the steady growth of the urban population in Peru. More people are moving to cities in search of better opportunities and living conditions, driving up the demand for rental housing. The Peruvian government is also promoting urban development through various policies.
Infrastructure projects like the new mega Port of Chancay are expected to boost economic growth and, consequently, the demand for housing. The real estate market is shifting towards rental properties, indicating a strong market for multi-family units. This trend is supported by government initiatives aimed at enhancing urban living.
For those looking to invest, focusing on properties that can be easily converted into multi-family units could be a lucrative opportunity. The demand for rental housing is not just a trend but a growing necessity in urban areas. With the right investment, you can maximize your profit in this thriving market.
Sources: Global Property Guide, CEIC Data, Global Finance Magazine, Schneider Downs
8) Negotiate property prices in Peru, as sellers usually list higher expecting to bargain
Property prices in Peru are often negotiable, especially in recent years.
In Peru, it's common for sellers to list properties at higher prices because they expect buyers to haggle. Real estate agents frequently encourage this practice, as it's a well-known strategy in the market. This approach is backed by insights from the National Association of Realtors, which notes that many parts of real estate deals, including price, are open to negotiation.
When looking at property sales in Peru, you'll find that the final sale prices are usually lower than the initial listings. For instance, a property might be listed at 850,000 soles but could sell for between 875,500 and 909,500 soles after some back-and-forth, showing a potential 3-7% price drop.
Buyers in Peru often share stories of successfully negotiating prices, which supports the idea that starting with a higher listing price is a common tactic to leave room for bargaining. This strategy is widely recognized and used by both buyers and sellers.
Understanding this dynamic can give you an edge in the Peruvian real estate market. Knowing that negotiation is expected can help you feel more confident when making an offer. It's not just about the price; other terms of the sale can also be discussed.
So, if you're considering buying property in Peru, remember that negotiation is part of the game. This insider knowledge can be a valuable tool in your property search.
Sources: Statista, Real Estate News, Molly Buttleman Blog
We have made this infographic to give you a quick and clear snapshot of the property market in Peru. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
9) Consider cash transactions in Peru, as they are preferred and can lead to better deals
In Peru, cash is king when it comes to real estate deals.
Many Peruvians prefer cash transactions, especially in real estate, because foreigners often struggle with the local banking system. High interest rates and the challenge of building strong banking relationships make cash a more attractive option. This preference was particularly evident in 2023 and 2024, when most property deals were done in cash.
If you're buying property in Peru, being a cash buyer can give you an edge. Sellers often favor cash offers and might even accept a price slightly below the asking price if you can pay upfront. This means you could snag a better deal compared to using a mortgage, which involves more steps and potential delays.
Expatriates and investors frequently share stories of negotiating better deals through cash payments. Sellers are generally more open to lower offers from cash buyers, making it a smart move if you can swing it. This cultural preference for cash is deeply rooted in Peruvian financial practices, especially in real estate.
Cash transactions are not only cheaper but also faster, reducing the risk of complications. With fewer steps involved, you can close deals more quickly, which is a big plus in a competitive market. This speed and simplicity make cash an attractive option for both buyers and sellers.
Understanding this cash preference can be a game-changer if you're looking to invest in Peruvian property. It’s a unique aspect of the market that savvy buyers can use to their advantage, potentially saving money and time.
Sources: Escape Artist
10) Build local connections in Peru, as real estate deals often rely on word-of-mouth and personal networks
In Peru, real estate deals often happen through word-of-mouth and personal networks.
Locals have a knack for finding properties by tapping into their personal connections. About 20% of new properties sold each year are bought at fairs, where personal ties and word-of-mouth play a big role. These fairs are not just about buying; they’re social events where families can explore different options and negotiate prices, often with the help of someone they know.
Real estate agents like Rafael Fernández Crossety from RE/MAX Excellence emphasize that local connections are key to navigating the market. He points out that these fairs are popular because they offer a chance to compare properties and conditions in a friendly, informal setting. It’s not just about the properties; it’s about who you know and how you connect with them.
For expatriates, having local contacts can make all the difference. Many successful property buyers in Peru have leaned on friends or colleagues who know the market well. These connections can help you find the right property and guide you through the buying process, which can be quite different from what you might be used to.
Community events and gatherings are also a big part of the real estate scene in Peru. They provide a relaxed environment where potential buyers and sellers can meet, chat, and explore opportunities. These social settings often lead to property deals, as people feel more comfortable discussing their needs and preferences.
Building local connections isn’t just helpful; it’s almost essential if you want to find the best real estate deals in Peru. Locals often rely on word-of-mouth and personal networks, so getting to know people and attending local events can give you a significant advantage.
Sources: HalloCasa Blog
11) Consider eco-friendly and sustainable housing in urban areas, as they are increasingly popular with younger buyers
Eco-friendly and sustainable housing is gaining popularity, especially among younger urban buyers.
In places like Peru, this trend is really taking off. The KfW Development Bank is building 5,000 energy-efficient homes in Lima, featuring LED lighting and solar panels. These homes not only cut down on energy use but also help save money, making them a hit with budget-conscious, eco-aware young buyers.
Globally, people are more interested in sustainability. A survey found that 78% of consumers care about environmental sustainability. Millennials, in particular, are leading the charge, with 75% factoring sustainability into their buying decisions. This shift is pushing the demand for homes that match their eco-friendly values.
In Peru, the focus on energy-efficient homes is part of a broader movement. These homes are designed to be both environmentally friendly and cost-effective, appealing to a generation that values both. The use of green certifications is becoming more common, as buyers look for proof of sustainability.
As more people prioritize sustainability, the housing market is adapting. Builders are incorporating eco-friendly features to meet the demand. This shift is not just a trend but a response to a growing awareness of environmental issues and the need for sustainable living solutions.
For those considering buying property, understanding this trend can be beneficial. It’s not just about being eco-friendly; it’s also about making a smart investment in a home that aligns with modern values and future needs.
Sources: KfW Development Bank, The Madrona Group, BNamericas
Don't buy the wrong property, in the wrong area of Peru
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12) Hire a reputable Peruvian lawyer to verify property documents, as unclear titles are common
Buying property in Peru can be tricky due to complex land title issues.
In Peru, the process of getting a land title is notoriously complicated, often involving numerous steps and taking many years. This complexity can lead to overlaps and disputes, which are common issues in the country. Fraudulent property sales have been reported due to unclear titles, with some 80% of titled native communities not properly registered. This is often because of unresolved overlaps during the final stages of the title issuance process.
More than 600 communities have not even started the formalization process, and many registered ones need to redo parts of the process due to outdated methods used before geo-referenced maps were available. Legal battles over property ownership are frequent, with research indicating that a significant portion of the Peruvian Amazon overlaps with titled communities and reserves.
The Peruvian government has acknowledged these challenges, noting inefficiencies in the judicial system and a significant backlog of cases. Media coverage and expert opinions from real estate professionals further emphasize the importance of due diligence in property transactions. You may encounter properties with unclear titles, so hiring a reputable local lawyer to verify property documents is essential.
In recent years, particularly in 2023 and 2024, Peru has faced significant challenges with property titles, making it crucial to hire a reputable local lawyer for verification. The process of obtaining land titles in Peru is notoriously complex and lengthy, often involving at least 20 different steps and taking up to 20 years to complete.
Sources: Global Landscapes Forum, Rainforest Foundation
13) Consider properties with historical or unique architecture in Cusco, as they can attract premium buyers
In Cusco, properties with historical charm or unique architecture are hot commodities.
Why? Well, property values in Cusco's historical districts are climbing. This is largely because the city is a tourist magnet, and there's not much land left to develop. So, folks are ready to shell out more for a piece of this prime real estate.
Tourism is booming, especially around spots like Qorikancha, which means there's a big draw to Cusco's cultural heritage. This buzz translates into a higher demand for homes that echo the city's rich past and stunning architecture.
Homes with colonial or Inca designs are in high demand. Market analyses and real estate agents confirm these properties fetch top dollar. Buyers clearly have a soft spot for these unique architectural gems.
Restoration projects are also a big deal. When heritage properties get a facelift, their market value shoots up. Buyers are eager to invest in these beautifully restored pieces of history.
Plus, the government is sweetening the deal with incentives for preserving historical properties. Add in cultural events and festivals, and you've got a recipe for skyrocketing interest and prices in Cusco's historical real estate.
Sources: FazWaz, Voyagers Travel, World Heritage Site
14) Consider properties near planned infrastructure projects, like new metro lines in Lima, to boost property value over time
Buying property near planned infrastructure projects, like new metro lines in Lima, can significantly boost your property's value over time.
When new transport options are introduced, they often lead to better connectivity and accessibility, making these areas more appealing to both residents and investors. Take the Metropolitano bus rapid transit (BRT) system in Lima, for instance. Since its completion, it has transformed the city's transport network by reducing travel times and cutting down CO2 emissions, which likely increased property values in the areas it serves.
The Peruvian government is actively investing in infrastructure, with projects like the expansion of the Lima Metro on the horizon. These developments are expected to enhance transportation and improve the quality of life, making nearby areas more desirable. Real estate analysts are predicting that areas with planned metro expansions will see increased demand and higher property values as these projects come to fruition.
Living near a new metro line doesn't just mean a shorter commute; it can also mean a healthier lifestyle with reduced reliance on cars and less pollution. This is a big draw for potential buyers and renters who value sustainability and convenience. As these infrastructure projects progress, they often bring along other improvements, like new shops, restaurants, and parks, further boosting the area's appeal.
Investing in property in these areas can be a smart move, especially if you're looking for long-term gains. The ripple effect of improved infrastructure can lead to a vibrant community atmosphere, attracting more businesses and residents. This can create a cycle of growth and development, making your investment even more valuable over time.
Sources: GI Hub, Inclusive Infrastructure, GIA Finance
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility.