Ecuador: Overview

RENTAL YIELDS

Yields are spectacular in Quito

Prices for 100-sq. m. apartments in Quito are around US$80,000. This size apartment could probably be rented for US$800 a month, giving the landlord a rental yield of 12%.

Houses in Quito are generally bigger, and often surrounded by gardens. They are priced around US$300 to US$480 per sq. m. Rental yields of houses can be high, at around 12% to 17%.

Apartments and houses in Guayaquil tend to yield between of 6% and 10%. Within the beach area near Guayaquil, rental yields are higher, at 7% to 16.5%.

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TAXES AND COSTS

Rental income tax is high in Ecuador

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	25%	25%	25%
Click here to see a worked example
Source: Disclaimer

Rental Income: Non-resident foreigners are subject to a flat tax rate of 25% on gross income generated from within the country. It is withheld by the recipient.

Capital Gains: Capital gains of individuals on the occasional sale of real property are exempt from income tax.

Inheritance: Inheritances and gifts are tax at progressive rates.

Residents: Residents are taxed on their worldwide income.

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BUYING GUIDE

Total transaction costs are moderate in Ecuador

The total roundtrip transactions costs, i.e., the cost of buying and selling a property, are at 10.25% - 14.25%. This includes the 4% to 6% agent's fee.

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LANDLORD AND TENANT

Rent control, automatic contract renewal in Ecuador

Ecuador's rental market is pro-tenant.

Rent Control: The Registry of Rents in each city sets the maximum chargeable annual rent at 10% of the property value. Rents can normally be adjusted only after two years.

Tenant Security: The minimum contract is two years, which is automatically renewed if notice has been given. Settlement of disputes through the courts can take anything between 6 months to one year and a half.

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ECONOMIC GROWTH

Small but turbulent Ecuador

It is no secret that Ecuador has been through several political troubles and crises. This perennial unrest pushes the economy through a roller coaster ride of booms and busts, as democratic regimes and dictatorships alternate.

Ecuador’s annual average GDP growth from 1996 to 2006 is 3.2%, falling only from 1998-1999 by 6.3%. Its biggest expansion was in 2004, registering an increase of 7.9% in its GDP. It registered a GDP growth rate of 4.4% from 2005-2006, with a GDP per capita of US$3,081 in 2006.

1999 was a bad year for Ecuador. It experienced a financial crisis, a banking sector collapse, and around 400% currency devaluation against the US dollar. Inflation jumped severely from 36.1% in 1998 to 96.1% in 2000. In an effort to salvage the situation, Ecuador adopted the US dollar in place of the Ecuador Sucre in 2000.

In 2006, political newcomer Rafael Correa won the elections, becoming the 8th president of Ecuador in 10 years. The leftist president is pushing for many radical political and economic reforms, like rewriting the constitution.

Earlier, Correa expressed the intention to default on the government’s payment of bonds due on February 15, and resolve into a 30-day grace period instead. This was despite the apparent ability of the government to pay its debt. Nevertheless, the government ordered to push through with the payment the day before the deadline.