The Banrep 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).
Colombia’s property market has seen spectacular house price rises over the past ten years:
+ 14.31% (9.64% inflation-adjusted) in 200
+ 16.72% (10.60% inflation-adjusted) in 2007
+ 18.01% (10.28% inflation-adjusted) in 2008
+ 10.56% (6.09% inflation-adjusted) in 2009
+ 6.91% (4.50% inflation-adjusted) in 2010
+ 8.29% (4.70% inflation-adjusted) in 2011
+ 11.48% (8.06% inflation-adjusted) in 2012
+ 9.91% (7.66% inflation-adjusted) in 2013
+ 8.25% (5.15% inflation-adjusted) in 2014
+ 10.33% (5.11% inflation-adjusted) in 2015
The new house price index compiled by the Departamento Administrativo Nacional de Estadística (DANE) tells a slightly different story. The price index of new houses was up by 6.83% during the year to Q1 2016. But when adjusted for inflation, prices were actually down by 0.79%. New apartment prices also rose by 6.89%, but were down by 0.73% in real terms.
And from the perspective of the foreign investor, things look very different indeed. Over the past two years the Colombian peso has nearly halved in value against the US$. Any dollar-based buyer is likely to have lost a lot of money.
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.
The export decline also caused the Colombian peso's devaluation. In February 2016, the currency reached a historic low of around COP 3,400 per USD, having lost about 28% of its value over the past 12 months.
Scotiabank predicts that the COP will stay within the 3,000 to 3,300 range, but will depend on external factors such as USA's monetary policy normalization, China's financial woes, and the instability of oil prices.
Colombia's GDP rose by 2.5% during the year to Q1 2016, its lowest growth rate since the global financial crisis of 2009.
According to the IMF, the Latin American region "will grow slowly for an extended period of time".
"The region continues to be particularly vulnerable for a stronger slowdown as the one foreseen for China — one of the most important trade partners in the region — and the new drops in commodity prices," based on the regional forecast of IMF’s Latin America chief Alejandro Werner.
From 2003 to 2008, the country had robust economic growth averaging 5.2% per year, but growth slowed sharply in 2009 to 1.7%, before returning to 4% in 2010, and 6.6% in 2011.
In June 2016, annual inflation rose to 8.6%, more than double than the central bank's +/- 1 percentage point around the 3% target.
Unemployment in Colombia fell to 8.8% in May 2016, slightly down from 8.9% in May 2015.
After his re-election in 2014, President Juan Manuel Santos focused on the peace negotiations which had been held in Cuba since November 2012. In April 2015, the president began to lose patience and called for a deadline. "We must put deadlines on this process and if (the FARC) want peace they must demonstrate with deeds and not with words," said Santos.
Happily in June 2016, the Colombian government and FARC finally announced that they had agreed a ceasefire deal, ending a conflict that had lasted half a century. The agreement includes the disarmament of an estimated 7,000 FARC rebels.