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Last Updated: May 09, 2012




Peru’s housing market has fared well for the past two years after Peru underwent a meagre economic growth during the global meltdown in 2009.  The country’s economy made a strong comeback in 2010 with an 8.8% growth and with 6.9% in 2011, according to the Central Reserve Bank of Peru (BCRP).

In the fourth quarter of 2011, the average price of homes sold in Lima Metropolitan Area was up by 19.9% from the previous year, to PEN 262,043 (US$ 99,449), according to the consultancy Peru Tinsa.

Large demand has driven house sales up by around 27.1% to 6,990 units sold during the year to Q4 2011. Lima homebuyers are now focused on units whose value ranges from PEN 100,000 (US$ 37,736) to PEN 200,000 (US$ 75,471).

In 2010, Lima Metropolitan Area and Callao had recovered with a 12.8% home sales growth after its 2009 slump, according to the Banco Bilbao Vizcaya Argentaria (BBVA) Research. The recovery was brought by rapid economic growth, attractive financing conditions, higher consumer confidence and increased jobs.

Lima offers a wide variety of homes ranging from US$ 15,000 to US$ 2.8 million, according to the Peruvian Chamber of Construction (Capeco). The most expensive one is a 700 sq. m. apartment found in San Isidro that costs around US$ 3 million, while the cheapest costs US$ 15,429, a 45 sq. m. apartment in Carabayllo.

Capeco’s study showed that Lima’s best-selling homes are priced around $30,000 to $50,000. Districts with higher effective demand were found in San Juan de Lurigancho (10.83%) and Los Olivos (10.38%), districts that actually belong to low socioeconomic status.

Meanwhile, the districts where most projects are carried out were at Santiago de Surco – construction covers an area of 974,000 m2. It was folloed by Miraflores (681,000 m2) and San Isidro (540,000 m2).

Along with the expected moderate economic growth in 2012, the housing market is likely to surge as well. Housing sales is likely to fare better with the help of lower mortgage rates, improving public investment and Peru’s economic strength. Construction sector is also predicted to grow by 8% in 2012.

Analysis of Peru Residential Property Market »


RENTAL YIELDS
Last Updated: Sep 12, 2013



Property prices in Peru have been more or less stable over the past year, while the Sol has been rising . Smaller apartment sizes typically cost around US$1,000 per square metre. Larger apartments range from around US$1,300 to US$1,600 per square metre.

Rental yields in Lima are still good, with yields on smaller apartments of over 8.9%, and yields of 6.8% on very large apartments (250 square metres).

There was been a decline in yields since 2009, when stellar yields of 13% were possible on smaller properties. This yields decline is apparently due to a slight decline in rentals, as more property has come to market. Nevertheless yields are still good.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Jun 11, 2014



Rental Income: Rental income is taxed at flat rate of 30%, without any deductions.

Additionally, leasing real estate in Peru is subject to VAT at 18%. VAT is imposed when legal entities (individuals and corporations), resident or not, rent out Peruvian properties.

Capital Gains: Gains earned by nonresidents selling Peruvian property are taxed at a flat rate of 30%.

Inheritance: There are no inheritance or gift taxes in Peru.

Residents: Residents are taxed on their worldwide income at progressive rates, from 15% to 30%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Jun 12, 2014



Total round trip transaction costs, i.e. the total cost of buying and selling a property, are between 6.10% and 9.06%. The biggest cost is the estate agent’s fee, which is between 3% and 5%. Five procedures must be completed to register property, which can be accomplished in about 6 to 16 days.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jun 05, 2006



Rent: Although rents may be freely agreed by the landlord and the tenant, strong security of tenure is given to the tenant.

Tenant Eviction: Legal proceedings to evict the tenant can be burdensome and highly time-consuming (even tedious).

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: May 09, 2012


Moderate economic growth in 2012

In January 2012, GDP was up 5.38% from the same period last year, Peru’s 29th consecutive month of economic expansion, according to the Central Reserve Bank of Peru (BCRP). Growth was fuelled by a strong rebound in public investment which had a 30% increase at the local and regional levels during the past three months, according to Finance Minister Luis Miguel Castilla.

Financial services had the largest contribution to GDP over the said period with a 9.6% growth. It was followed by hotels and restaurants sector by 9.2% and transport and communications by 8.8%.

Exports were up by 34.7% to around US$ 3.99 billion, during the year to January 2012. It was despite having a stronger PEN over the previous months. The PEN was traded around 2.66 against the US$ last April, with PEN gaining 5.7% over the past year. 

This trend has been on since 2011 due to China’s demand for raw materials (i.e. copper and other metals), combined with tight supply, benefiting Peru with high export prices. Aside from large demand, Peru’s exports are also less vulnerable to exchange rate volatility due to BCRP’s frequent intervention in the spot market.

The Peruvian economy is projected to expand by 5.7% in 2012, according to the central bank. In 2011 the economy had a strong growth by 6.9%, reflecting increased activity in non primary sectors such as commerce and services.

During the year to March 2012, CPI reached a 4.23% hike, largely due to supply shocks. Inflation is expected to be down at 2.8% in 2012, which is within the BCRP’s 1% to 3% target rate. Despite the higher-than-target inflation rate, BCRP will still be taking a neutral stance in its monetary policy by maintaining its benchmark interest rate at 4.25%.








  • High yields in Lima
  • Low transaction costs
  • High rental income tax
  • Pro-tenant rental market
  • Volatile political situation
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $1,810 For a 120 sq. m. property, usually an apartment.
Rental Yield: 6.54% For a 120 sq. m. property, usually an apartment.
Rent/month: $1,183 For a 120 sq. m. property.
Income Tax: 30.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 7.58% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 30.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

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