Colombia’s property market has seen spectacular house price rises over the past nine years:
+ 14.32% (9.64% inflation-adjusted) in 2006
+ 17.08% (10.95% inflation-adjusted) in 2007
+ 18.33% (10.57% inflation-adjusted) in 2008
+ 10.55% (6.10% inflation-adjusted) in 2009
+ 6.91% (4.49% inflation-adjusted) in 2010
+ 8.13% (4.55% inflation-adjusted) in 2011
+ 11.78% (8.35% inflation-adjusted) in 2012
+ 10.09% (7.83% inflation-adjusted) in 2013
+ 8.80% (5.68% inflation-adjusted) in 2014
Colombia's house price index includes nine cities (the three major cities: Bogotá (the capital, with a population of 7.96 million), Medellin (pop: 3.5 million), and Cali (pop: 2.3 million), plus Barranquilla, Bucaramanga, Cucuta, Manizales, Neiva and Villavicencio).
The price of new houses rose 9.47% (5.73% in real terms) during 2014, with a 1.88% price-rise during the latest quarter (1.37% in real terms), according to the Departamento Administrativo Nacional de Estadística (DANE).
There were strong house price increases in most metropolitan areas, led by Barranquilla where house prices rose 15.25% in 2014 (DANE), followed by the three major cities: Cali (11.10%), Bogotá (9.45%), and Medellin (7.91%).
However Banco Bilbao Vizcaya Argentaria (BBVA) Research noted that new housing prices in urban areas decelerated in 2014. According to BBVA, the moderation might be due to the ending of subsidies to the middle class.
From 2006 to 2008, house prices in the three major cities rose strongly. Cali rose by 42.95%, followed by Bogota (37.95%), and Medellin (24.85%).
In 2009, house price growth in Bogota sharply slowed to 5.13% y-o-y, after 16.48% y-o-y growth in 2008, reflecting the same trend as the national prices. Cali’s housing market was severely affected by the economic slowdown, with prices plunging by 5.76%, after a 15.09% growth in 2008. In contrast, house prices in Medellin rose by 9.11% in 2009, even stronger than the 7.97% y-o-y growth in 2008.
In 2010, house prices in both Bogota (10.51%) and Cali (4.54%) started recovering, while prices in Medellin slowed (5.83%).
Since then, house prices in these three major cities have remained buoyant. From 2011 to 2014, house prices in Bogota rose by 37.04%, followed by Cali (29.15%), and Medellin (26.94%).
Analysis of Colombia Residential Property Market »
Capital Gains: The capital gains tax is levied at a flat rate of 10%.
Inheritance: Inheritance is taxed at 33% for non-residents.
Residents: Residents are taxed on their worldwide income at progressive rates, from 19% to 33%.
Rent Control: The most pro-tenant aspect of the law is that monthly rents cannot exceed 1% of the property value, giving the landlord a 12% maximum yield. But in reality, if the tenant does not complain, the landlord can get more.
Tenant Security: The rules for renewal and termination tend to favor landlords. If the tenant owes rent, the landlord can seize his properties. And even if eviction proceedings are long, the tenant is required to pay the rent for the duration of the proceeding.
“These results confirm our position as the fastest growing economy among the six largest in Latin America, and as the seventh in the world among all countries," said Finance Minister Mauricio Cardenas. "This growth is noteworthy, since it is expected that growth in Latin America, according to the IMF, is 1.2% for 2014."
The construction sector, with 9.9% growth, has been an “important engine for economic activity”, stressed Cardenas. Other high-performing sectors included social services, trade, and financial services.
In Q1 2015, Colombia’s GDP rose by 2.8% y-o-y, the lowest growth since Q3 2012, due to the declining price of oil, which accounts for more than half of the country’s exports. In 2015, Colombia’s economy is expected to grow by 3.4%.
From 2003 to 2008, the country had robust economic growth averaging 5.2% per year. The economy slowed sharply in 2009 (1.7% growth), but growth returned to 4% in 2010, and 6.6% in 2011.
Unemployment, after reaching a historical low of 8.9% in March, rose again to 9.5% in April 2015.
In May 2015, inflation moderated to 4.4%.
In the presidential election of May 2014 incumbent Juan Manuel Santos retained his position, gaining 50.95% of the votes in the second round, against Óscar Iván Zuluaga of the Democratic Center (Centro Democrático). Santos ran for the Social Party of National Unity, commonly referred to as "Party of the U".
After being elected, Santos pledged to continue his efforts to "defend the life and the liberty" of Colombians. The re-elected president’s campaign focused on the peace negotiations with the FARC guerrilla group, currently being held in Cuba, that he launched in November 2012.