Market in Depth

House price surge due to low supply

Lalaine C. Delmendo | March 02, 2022

Chile's house prices continue to rise, amidst limited supply. The average price of residential properties in Greater Santiago surged by 18.4% in Q3 2022 from a year earlier, following y-o-y increases of 18.7% in Q2 and 14.3% in Q1. When adjusted for inflation, prices rose by a more modest 4.1% during the year to Q3 2022, according to the Chilean Chamber of Construction (CChC).

Quarter-on-quarter, residential property prices increased 3.9% in Q3 2022 (0.4% inflation-adjusted).

By property type:
  • The average price of new houses rose by 18.2% (3.9% inflation-adjusted) in Q3 2022 from a year earlier and by 4.9% (1.4% inflation-adjusted) from the previous quarter.
  • The average price of newly built apartments increased 19% (4.7% inflation-adjusted) y-o-y in Q3 2022 and by 3.6% (0.1% inflation-adjusted) q-o-q.

Southern Santiago saw the highest price rises for new apartments, with 22% increase during the year to Q3 2022 (7.3% inflation-adjusted), followed by the Northwest with 19.5% price increase. The Northeast and Central Santiago saw price increases for new apartments of around 15.9% and 13.5%, respectively.

The average price of apartments across Chile is around US$155,000 while detached houses are priced at about US$260,000.

Actual sales in the capital are actually falling, amidst rising interest rates. But this might also be partly due to the limited supply in the market and as buyers seek places outside of urban areas due to surging house prices. The total number of residential properties sold in Greater Santiago plunged by 35.7% y-o-y to 15,215 units in the first three quarters of 2022, following a 30.9% surge during 2021, according to the CChC.

“I sell some of the most expensive houses in Chile, and it hasn't stopped,” said Folke Bergstrom of Sotheby's International Realty Chile. “The issue is that there's no more space to grow in small towns, and the number of houses for sale has not increased. The only way to get a piece of land is to convince an owner to sell.”

Chile house prices
The number and area of dwellings authorized fell by 34.8% and 32.6%, respectively, in the first three quarters of 2022 as compared to the same period last year, according to the Instituto Nacional de Estadisticas (INE).

Yet the wider economy is slowing. In Q3 2022, the economy grew by a meager 0.3% y-o-y, sharply down from an expansion of 5.6% in the previous quarter and the weakest growth since Q1 2021. As such, economic growth is projected to slow to 2.1% this year, amidst global economic slowdown and heighted inflation risks, according to the International Monetary Fund (IMF). This is a sharp deceleration from a strong economic growth of 11.7% during 2021.

Analysis of Chile Residential Property Market »

Rental Yields

Moderate rental yields in Santiago

It is obviously impossible to summarise the many different price-ranges and yields in Chile's capital, Santiago.  Our research covered the richer districts of Barrio Lastarria - a popular tourist hub and a historic district; Barrio Brasil - with its strong artistic and cultural scene and many universities; Bellavista, known as Santiago's bohemian quarter, with avant-garde galleries, bars and clubs, host to many of the city's intellectuals and artists; La Dehesa; El Golf; Las Condes, with its upscale population; La Reina, which consistently ranks in the top 5 districts for quality of life; Metro Alcantara; Metro Escuela Militar; Nunuoa; Providencia; and Vitacura. 

We found great variations but the overall results was pretty clear, that a square metre of residential property in such upscale districts tends to go for around $3,200 to $3,700 and to command a rental yield of around 4%.

Read Rental Yields »

Taxes and Costs

Chile's rental income tax is high

Rental Income: Nonresidents earning Chilean income are subject to AT, which is levied at 35% on gross income.

Rental incomeis subject to FCT at a flat rate of 27%. FCT and property taxes are credited against the taxpayer’s AT liability.

Leasing of real estate is subject to VAT at 19%.

Chile coastal real estate and propertiesCapital Gains: Gains are taxed at the standard FCT, like any other profit, if immovable property is sold within the first year after acquisition, or if an apartment is sold within the first four years.

Inheritance: Inheritance, gifts and donations tax rates vary according to the degree of relationship and the value of the inheritance, from 1% to 35%.

Residents: Residents are taxed on their worldwide income.

Read Taxes and Costs »

Buying Guide

Total transaction costsare low in Chile

Chile apartments and condominiumsThe total roundtrip transaction cost, i.e., the cost of buying and selling the property, is around 5.30% to 5.40% of the property value. This includes the estate agent's fee of 4%, which is split evenly between buyer and seller.

If the property is newly built by a developer, the transaction cost will be higher, due to the 19% VAT imposed on such properties.

Read Buying Guide »

Landlord and Tenant

Chile's law neutral between landlord and tenant

Chilean law is neutral between landlord and tenant, following fairly recent changes in the law.

Rents: The rent can be freely agreed upon. There is no legal maximum for deposits.

Tenant Eviction: Eviction of tenants may be difficult or easy depending upon the nature of the agreement. Monthly tenancies can be terminated by giving two months' (notarized) notice of eviction.

However tenants in fixed term contracts and in contracts exceeding one year can only be evicted through long judicial proceedings.

Read Landlord and Tenant »


Economic growth slowing again

The economy expanded by a huge 11.7% during 2021, in sharp contrast to the 6.1% contraction in 2020 and far higher than the annual average growth rate of just 2.9% in 2009-19.

“Fueled by a strong fiscal response, Chile’s GDP grew at 11.7 percent in 2021, one of the fastest recoveries worldwide,” said the World Bank. “Growth was driven by consumption, amid pension fund withdrawals and direct fiscal support of 9 percent of GDP. One of the fastest vaccination rates globally also contributed to the fast normalization of economic activity.”

Chile GDP growth
However, economic growth is projected to slow sharply this year to 2.1%, and contract in 2023 by 1.3%, amidst reversal of policy stimulus, coupled with global economic slowdown and heighted inflation risks, according to the International Monetary Fund (IMF). The World Bank is even more pessimistic, expecting a meager growth this year of 1.9%.

Chile is an upper-middle income economy with a track record of sustained growth, its GDP having grown at an annual average of 5.6% from 1990 to 2007, among the highest growth rates in the world. Strong growth continued from 2008 to 2012, with an economic contraction of only 1.1% in 2009, amidst the global financial crisis. Chile then rebounded with 5.8% growth in 2010, despite the earthquake. From 2011 to 2013 there was an average growth of 5.2%.

However, since then the economy has been hit by the decline in global demand for mining products. From 2014 to 2019, the average real GDP growth was below 2% annually.

Fiscal discipline is one of the pillars of Chile’s solid international image. From 2000 to 2012, Chile recorded an average budget surplus of 1.7%, reaching a record high of 8.8% of GDP in 2007. The budget surplus not only transformed Chile from a debtor to a creditor country, but also placed the country in solid position to weather global economic volatility. In May 2010, Chile became OECD’s first Southern American member, highlighting reduction of poverty from 45% in the late 1980s to around 14% in 2009. There were other advances, such as strengthening of state institutions and fighting corruption.

Chile unemployment rate
Fiscal deficit had been manageable since, ranging from just 0.6% to 2.8% of GDP in 2013-19, driven by a growth in receipts, coupled with a reduction in public spending, according to the Ministry of Finance. However, the introduction of fiscal stimulus packages to mitigate the adverse impact of the Covid-19 pandemic pushed the deficit to as high as 7.1% of GDP in 2020 and to 7.5% of GDP in 2021.

Chile’s government debt stood at about 36.2% of GDP last year, up from 32.5% in 2020, 28.3% in 2019, and 25.6% in 2018. In fact, it was the highest debt level recorded since 1991.

Chile’s unemployment rate stood at 8% in Q3 2022, up from 7.8% in the previous quarter but down from 8.4% a year earlier, according to INE. The jobless rate averaged 6.8% in 2011-19 before increasing to 10.8% in 2020 due to the pandemic. It fell to 8.9% in 2021, as economic activity gradually improved.