Where will the next fortunes be made on Latin American real estate?

If you’ve considered investing in property in Latin America, you probably know that some countries in the region have drawn much more attention from foreign investors than others.

Costa Rica and Mexico

Buying property in Costa Rica and Mexico, for example, has been popular among Americans and Europeans for decades. Lots of people who bought in the up-and-coming areas 20 years ago have been able to sell their properties for 5, 10, even 20 times what they paid for them. Each country has plenty of beautiful regions. After so many years of popularity, however, lots of spots have been built up to the point of being gaudy, and the potential for return on investment has diminished. On top of this, corruption and security problems have always plagued these countries.

Panama

Panama really came on the scene in the last five years, with Panama City attracting lots of capital into its banking industry and property market. Areas like the Azuero peninsula and the Bocas del Toro archipelago have intriguing property frontiers, and infrastructure throughout the country is improving. Opportunities still exist but, with the run-up in prices, buying now should be done with caution.

Ecuador, Uruguay and Nicaragua

For years now, Ecuador, Uruguay, and Nicaragua have been advertised as great places to retire. It’s true, the cost of living is low and real estate is cheap. Some lots on the coast of Rocha in Uruguay are definitely tempting investments, as is a beautiful mountain home in Ecuador. Prices are bound to rise over time but probably won’t be going off the chart any time soon. Neither of these countries are on their way to becoming major world players, and demand for real estate from the local population isn’t exactly overwhelming.

Argentina

Argentina‘s property markets haven’t been wildly popular among foreigners recently, although Buenos Aires and the areas around Bariloche have definitely attracted some attention. Those who bought during the country’s economic crisis in 2001 made out very well, but the country’s protectionist policies and insane political leadership have always been drawbacks.

Brazil

Brazil’s huge economy has drawn lots of investment dollars over the last ten years. Local incomes have increased dramatically, and this has pushed up prices quite a bit already. Property investments in the country would probably be a lot more popular among the international community if it wasn’t for the confusing regulations and restrictions that exist for foreign buyers.

Colombia

People who know Latin America probably recognize Colombia as an emerging market with lots of opportunity. Prices are still reasonable in most areas, the economy is growing, and local demand is the main driver in the housing market. The level of cultural and technological sophistication in certain parts of the country can be much higher than you might expect. From the Caribbean beaches around Cartagena and Santa Marta to the cosmopolitan cities of Bogota and Medellin, there is definitely money to be made off property in the country. Colombia has a lot going for it, but the country does have a couple issues.

1. Stigma: Most of the world still thinks of Colombia as one of the most dangerous places on the planet. This isn’t accurate anymore, though security can still be an issue in rural areas. There is also substantial evidence that the country’s military has engaged in serious human rights abuses against its own citizens within the last five or six years.
2. Corruption: Colombia, along with most Latin American nations, definitely suffers from problems caused by corruption. It’s possible this corruption wouldn’t affect your property investment much, but there have been accusations of notaries (which is where all property transactions are inscribed) being involved in some very worrisome activities. These include accepting bribes to delete or illegally change individual property records when a large company was looking to acquire property in the area for new projects.

These kinds of problems will probably keep Colombia from ever becoming the #1 property investment destination in Latin America.

Chile

Over the last few years, Chile has started to become much more popular with the international investment community. There are pockets of Santiago and areas in southern Chile where foreigners have already driven up property prices significantly. These areas are attractive, but much better property values exist where the number of foreign property owners is still very small, in the central regions outside of Santiago.

Central Chile, from the fifth region down to the eighth, consists of a fertile central valley tucked in between the Andes and the coastal mountains. It’s the location of Chile’s prime wine growing areas, South America’s best ski areas, and the world’s largest copper mine. It’s where infrastructure projects get approved the quickest, where the most funds are available for new businesses, and where industries are expanding the fastest.

The small cities in the central regions become more developed every year and are starting to be increasingly comfortable places to live. You can find many lists of businesses that are setting up franchises here in order to meet the local population’s growing demand for goods and services.

One of the most exciting things for the Chilean economy right now is mining: the country’s silver production will be doubling in the next three years, and the country’s gold production is expected to triple by 2020. The number of high-paying mining and engineering jobs that will be added to the economy will have favorable effects on property prices throughout the country, and with the central regions being the most accessible, there could be a serious revaluation on the horizon.

Chile is the only country in all of Latin America where property investments offer very low risk and huge upside potential at the same time. Chile will be benefiting from both domestic growth and increasing foreign investment for many years, because of:

1. the country’s clear rule of law
2. solid property rights
3. low national debt
4. enormous copper, gold, and silver deposits
5. expanding technology sector
6. growing middle class
7. friendly business climate
8. vast water and agricultural resources

When you look at all of these factors together, it’s hard to deny that, of all the different types of investments available in the world, property in central Chile is one of the most compelling.

 

Written by Darren Kaiser

Where will the next fortunes be made on Latin American real estate?