Colombia: Overview

RENTAL YIELDS

Last Updated: Oct 01, 2009

Property investment in Bogota?

Property investors awake! Even though house and apartment prices have continued to rise in Colombia, we find that rents have risen even more. The result is that property investment yields are highly attractive.

Yields on apartments in Santa Barbara, Bogota, are now between 8.9% and 11.4%, which should be very interesting for property investors. Per square metre prices vary enormously from around US$1,000 to near US$3,000. Houses cost more and yield slightly less.

Yields in other areas of Bogota are similarly generous, with yields ranging from 7% to 11%.

Of course, Bogota, has certain disadvantages, and the foreign focus in Columbia is on property investment in Cartagena.

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TAXES AND COSTS

Last Updated: Feb 18, 2009

Taxes are generally high at 33%

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	27.7%	27.7%	27.7%
Click here to see a worked example
Source:			Disclaimer

Rental Income: Rental income earned by non-residents is taxed at a flat rate of 33% for 2008. Income-generating expenses are deductible when computing taxable income.

Capital Gains: The capital gains tax for non-residents is at a flat rate of 33%.

Inheritance: Inheritance is taxed at 33% for non-residents.

Residents: Residents are taxed on their worldwide income at progressive rates, from 19% to 33%.

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BUYING GUIDE

Last Updated: Jun 27, 2007

Total transaction costs are low in Colombia

Total roundtrip costs are relatively low at around 8.08% to 9.24% of the property’s value, inclusive of the 3% to 4% estate agents’ fee (subject to 16% VAT), which is paid for by the seller. The total cost of registering the property is around 4.45% of the property value. The registration process involves seven procedures, which can be completed in about 23 days.

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LANDLORD AND TENANT

Last Updated: May 31, 2006

Rental system is neutral to pro-landlord

Colombia’s rental market legislation is neutral between landlord and tenant. Some aspects are pro-landlord, while others are pro-tenant.

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.

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ECONOMIC GROWTH

Last Updated: May 30, 2008

Political conflicts and a beautiful country

Colombia’s population of 46 million makes it Latin America’s second most populous country after Brazil. It is a spectacular country with significant natural resources including a mix of sea, having both Atlantic and Pacific coastlines; the Andes mountains and some of the most dramatic rainforests.

The country has a turbulent history, and was ravaged in the 1990s by a decades-long violent conflict, involving guerrilla insurgencies, drug cartels, and gross violations of human rights.

However a hard-line right-leaning politician, president Alvaro Uribe, took power in 2002 has and a tough line against left-wing guerrillas and right-wing paramilitaries.

He has been resoundingly successful. The years 2007 and 2006 both saw 6.8% economic growth. Over the past 5 years, the average GDP growth rate has been 5%. These growth rates have not been seen in Colombia since the end of the 1970s.

The fiscal deficit has been brought down from 3.5% of GDP in 2002, to 0.7% of GDP in 2007, reflecting a 3.3% primary surplus. Net public debt has fallen from 47.9% of GDP in 2002, to 28.1% of GDP in 2007. Now that at last sensible policies are in place, Colombia looks set – astonishingly – to a very bright future.