During the year to end-Q2 2013, the house price index for the three major Colombian cities soared by 11.77% (9.51% inflation-adjusted), according to the Banco de la Republica Colombia. In Q2 2013, house prices rose by 2.68% (1.85% inflation-adjusted) from the previous quarter.
Colombia’s property market has seen spectacular house price rises in the past seven years, despite the global financial and economic meltdown.
During the second quarter of 2013, the economy grew by 4.2% from the same period last year, up from the growth rate of 2.8% last quarter, according to DANE. Colombia’s economy is expected to grow by 3.7% in 2013, after registering real GDP growth rates of 4% in 2012, 6.6% in 2011, and 4% in 2010, according to the International Monetary Fund (IMF).
"It is very good news, because this translates into more employment, into more funds for social investment, into more development ... So I´m celebrating that the economy has begun to recover after the drop in the first quarter," said President Juan Manuel Santos.
The country’s central bank had kept the benchmark rate at 3.25% in August 2013, after 200 basis points were shaved of the key rate since July last year, in a bid to boost the economy further.
Three cities showed particularly strong annual house price increases in 2010 – Bucaramanga, where new houses were up 15.2% from a year earlier (according to Banrep); Bogota (up 10.5%); and Barranquilla (up 8.6%).
Medellin (up 5.8%), Pereira (5.8%) and Cali (4.5%), showed appreciable annual price rises, but lower than their growth y-o-y to Q3 2010.
Colombia’s ‘housing deficit’ amounts to 2.4 million houses, or about 26% of the housing stock, according to a 2005 survey. 185,000 houses are needed annually, yet only 104,208 housing units were approved in 2005, and 122,590 in 2006. Owner-occupation has declined over the long term - from 67.4% in 1988, to 63% in 2005. Similarly, the number of renters has increased from 24% to 30.6%.
Probably all these trends go back to Colombia’s last great housing crisis which occurred in 1995, and was triggered by high interest rates.
However, the gap is now closing. Housing approvals reached 153,903 in 2010, partly due to declining construction costs, which is helpful to developers. Though new housing construction still hasn’t surpassed its 1994 peak, things are heading in the right direction.
The value of credits for house purchases rose 32.5% in 2010, with the total number of houses financed by mortgages up 22.6%, and used house mortgages up 29.3%, while new houses financed by mortgages increased 17.5%
Colombia’s central bank, the Banco de la Republica Colombia, raised its key rate by 25 basis points to 3.5% inMarch this year, to keep up with inflation. The first increase was in February, when the rate rose to 3.25%, from the 3% which had prevailed since April 2010.
Colombia’s prime lending rate also rose in February to 10.26%, up from the previous month’s 10.02%.
Both increases were responses to rising Inflation, which rose to 3.17% y-o-y in February 2011, still within the central bank’s 2% to 4% inflation target.
Rental yields in Colombia are moderate to good, ranging from 6.5% to 9.6% according to the Global Property Guide research of October 29, 2010.Typical apartment costs:
Juan Manuel Santos became president in August 2010 after winning two electoral rounds. He was a key ally of his predecessor Alvaro Uribe. As defense minister, Santos was instrumental in weakening the Revolutionary Armed Forces of Colombia (FARC), Colombia’s biggest left-wing rebel group. Although he is a scion of a well-known political dynasty, he has shown some willingness to act as a “traitor to his class.” With graduate degrees in economics and journalism from the London School of Economics and Harvard, his win was welcomed by investors and businesspeople.
In March 2011, Colombia’s credit rating was upped to investment grade by Standard and Poor’s (S&P), a vote of confidence in Santos’ reform agenda, which includes changing the management of oil and mining royalties, and a health care overhaul. Colombia has shown resilience during the global crisis, as a result of sound fiscal management and careful use of oil revenues.
The country has a turbulent history. It was ravaged in the 1990s by a decades-long conflict involving guerrilla insurgencies, drug cartels, and gross violations of human rights. In 2002 a hard-line right-leaning president, Alvaro Uribe, took power and implemented a tough line against left-wing guerrillas and right-wing paramilitaries.
In 2006, Uribe sought a constitutional revision to allow reelection for a second 4-year term. This was approved by Congress, and Uribe was reelected with a 64% of the votes, more than enough, given the 50%+1 requirement to avoid a run-off.
Uribe has been resoundingly successful. Though within Colombia Uribe polarized opinion, few would dispute the economic achievements. From 2003 to 2007, the economy expanded by an average of 5.5% annually. Such growth rates have not been seen in Colombia since the end of the 1970s. Hit by the global economic meltdown and by the credit crunch, GDP growth slowed to 2.7% in 2008 and 1.5% in 2009.
Despite the economic slowdown Uribe remained highly popular. He sought another constitutional revision to allow a third term but this was shot down by the Constitutional Court. Uribe’s defense minister and long-time ally, Juan Manuel Santos, ran as his successor. Santos won 46.7% of votes leading to a run-off, which he won with 69% of votes.
Though Uribe’s military focus was on combating leftist militias, he also challenged the paramilitary Autodefensas Unidas de Colombia (AUC), responsible for many recent kidnappings and murders.
Uribe’s heir Santos is slowly distancing himself from his predecessor, while promising to continue Uribe’s successful policies and programs
The new government will try particularly to stimulate growth in the tourism sector. Santos plans to spend about 120 billion pesos (approximately $67 million) to develop infrastructure - theme parks, docks, piers and convention centres, and create 250,000 new jobs in the construction sector.
“We intend to build 300 kilometers of highways each year, and ensure that tourist facilities are properly marked,” said President Santos. The government will also develop and modernize air terminals and tourist infrastructure, implementing an open skies policy, to improve prices and customer service for tourists.
President Uribe’s own tourism drive introduced incentives such as exemption from income tax for new hotels guilt between 2003 and 2018, and a 20-year income tax exemption in Ecotourism.
From 2003 to 2008, the country managed to register robust economic growth of an average of 5.2% per year. The economy slowed sharply in 2009, with a real GDP growth rate of 1.7% before returning to healthy growth of 4% in 2010 and 6.6% in 2011. In 2012, real GDP growth stood at 4%.
During the second quarter of 2013, the economy grew by 4.2% from the same period last year, up from the growth rate of 2.8% last quarter, fuelled by expansions in agriculture, mining and construction, according to DANE. Colombia’s economy is expected to grow by 3.7% in 2013 and 4.2% in 2014, according to the International Monetary Fund (IMF).
In September 2013, the national jobless rate fell to 9%, down from 9.9% in the same period last year. Likewise, the country’s urban jobless rate also dropped to 9.9% in September 2013 from 10.7% in the previous year.
In November 2013, the country’s nationwide inflation rate dropped to 1.76%, the lowest level in six decades, thanks to falling food and housing costs. This is below the central bank’s target range of 2% to 4%.
The country’s central bank, Banco de la Republica Colombia, had kept the benchmark rate at 3.25% in August 2013, after 200 basis points were shaved of the key rate since July last year, in a bid to boost the economy further.
In August 2010 Juan Manuel Santos succeeded former President Álvaro Uribe. Santos, previously minister of defense, defeated his close competitor Antanas Mockus, after a second electoral round in June 2010. High unemployment and mending Colombia’s relations with Venezuela and Ecuador are main concerns for Santos’ government.
#1 RICHARD CAVITT | December 19, 2013
Real estate prices are in resurgence everywhere. It will grow double every year. It is the best investment. Price history also revealing that the prices of achat immobilier are growing very rapidly.
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