Chile's Residential Property Market Analysis 2025
Chile's housing market is weakening, amidst slowing demand.
Table of Contents
- Housing Market Snapshot
- Historic Perspective
- Demand Highlights
- Supply Highlights
- Rental Market
- Mortgage Market
- Socio-Economic Context
Housing Market Snapshot
The average price of residential properties rose by a modest 2.32% in Q3 2024 from a year earlier, following year-on-year increases of 3.48% in Q2 2024, 4.3% in Q1 2024, 5.32% in Q4 2023, and 2.76% in Q3 2024. However, when adjusted for inflation, prices actually fell by 1.71% during the year to Q3 2024, according to the Chilean Chamber of Construction (CChC).
Quarter-on-quarter, residential property prices were down by 0.42% (-1.44% inflation-adjusted) in Q3 2024.
Chile's house price annual change
By property type:
- The average price of new houses rose by 3.28% (but fell by 0.79% when adjusted for inflation) in Q3 2024 from a year earlier, a slowdown from y-o-y increases of 5% in the previous year and 18.1% two years ago. Quarter-on-quarter, house prices were up by 4.41% (3.33% inflation-adjusted) during the latest quarter.
- The average price of newly built apartments increased slightly by 1.66% (-2.34% inflation-adjusted) during the year to Q3 2024, a deceleration from y-o-y rises of 2.6% in Q3 2023 and 18.6% in Q3 2022. But quarterly, apartment prices were down by 1.89% (-2.9% inflation-adjusted).
The Northeast saw the highest price growth for new apartments, recording a y-o-y increase of 6.1% (1.9% inflation-adjusted) in Q3 2024, followed by Northwest and Central, with both regions registering price growth of 4.6% (0.5% inflation-adjusted). Only the South experienced a price fall of 3.9% (7.7% inflation-adjusted) y-o-y in Q3 2024.
The average price of apartments across Chile is around US$160,000 while detached houses are priced at about US$270,000.
After a short-lived recovery last year, demand seems to be slowing again this year. In the first three quarters of 2024, residential property sales in Chile fell by 15.2% to 29,858 units as compared to the same period last year, based on figures released by CChC. Over the same period, the number of apartments sold dropped 14.6% y-o-y to 25,318 units while home sales plummeted by 18.3% to 4,540 units.
In Greater Santiago, residential property sales also fell by 13.2% y-o-y to 17,595 units in Q1-Q3 2024, in stark contrast to the 33.3% increase in the same period last year. Apartment sales dropped by 13.8% y-o-y to 15,425 units while home sales declined by 8.6% to 2,170 units.
Residential construction activity continues to fall sharply. Nationwide, the total number of dwellings authorized plummeted by 31.8% y-o-y to 49,542 units in the first ten months of 2024, following annual declines of 23.2% in 2023 and 19.4% in 2022, according to data released by INE. Likewise, the total area of dwelling permits authorized in the country fell sharply by 26.8% y-o-y to 4.25 million square meters (sq. m) over the same period.
Similarly, the number of dwelling permits in Greater Santiago plunged by 42.2% y-o-y to 13,519 units in the first ten months of 2024 while the total area dropped 33.5% to 1.25 million sq. m.
Nicolás León, manager of Studies and Public Policies at the CChC, noted that "the real estate sector continues to struggle with restrictions on accessing mortgage financing, leading to lower sales and a significant disincentive to start new projects, which today also involve higher construction costs due to increases in the price of materials and permits, among other factors."
However, the overall economy is now showing some improvements. In Q3 2024, the country posted a GDP growth of 2.3% as compared to the previous year, following year-on-year expansions of 1.6% in Q2 and 2.5% in Q1, based on figures from the Banco Central de Chile. As such, the IMF expects Chile's economy to grow by 2.3% this year and by around 2% to 2.5% in 2025, an improvement from the previous year's minuscule growth of 0.2%. This is not far from the World Bank's projection of a 2.5% growth this year.
Chile is an upper-middle-income economy, with a total population of about 20 million people and a GDP per capita of more than US$16,815, according to figures released by the International Monetary Fund (IMF).
Historic Perspective:
The housing cycle
Residential property prices in Greater Santiago have risen by around 157% (66% inflation-adjusted) from 2004 to 2016. The global financial crisis of 2008 had barely impacted the housing market, registering a small decline of just 4.7% (-3.4% inflation-adjusted) from Q3 2008 to Q2 2010.
After the 2010 earthquake house prices bounced back, rising by 12.2% in 2011, followed by 7.5% growth in 2012, 10.6% in 2013, and 16.5% in 2014, with strong demand in the northwest and southern areas of Greater Santiago from the beginning of 2014, mainly in the apartment market. In 2015, house prices in Greater Santiago rose by 13.3%.
In January 2016, a VAT of 19% was imposed on property sales in Chile by "habitual sellers" such as real estate companies, or persons who sell their properties in less than a year. The VAT added around 4% to 11% to the price of new properties, making older homes more attractive.
This, as well as weak economic growth, led to a slight housing market downturn in 2016. Greater Santiago's house prices went down by 0.4% (-3% inflation-adjusted) y-o-y by the end of 2016. Nationwide home sales and housing starts plummeted in 2016 by around 35% and 31%, respectively.
However, the impact of the property sales tax quickly waned, with new residential property prices rising again by 10.7% in 2017 and by another 9.5% in 2018. In 2019, the housing market continued to expand, with prices increasing by 10.5%.
Chile saw another housing market downturn during the onset of the Covid-19 pandemic. During 2020, residential property sales plummeted by 28.2% y-o-y to 22,672 units. Construction activity was also adversely affected, with dwelling permits falling by 22.2% y-o-y to 123,779 units in 2020.
Chile's housing market started to bounce back in 2021, amidst the easing of pandemic-related restrictions. Residential property prices in Greater Santiago rose by 12% (4.5% inflation-adjusted) in 2021 from a year earlier, driven by a 31% surge in sales. Then during 2022, residential property prices surged further by 18.4% (5% inflation-adjusted).
In 2023, nationwide property prices continued to increase, albeit at a much slower pace, despite improved demand. Prices were up by a modest 5.32% (1.33% inflation-adjusted) last year.
Demand Highlights:
Nationwide property sales slowing again
Nationwide, the total number of residential properties sold rose by 10.3% to 44,929 units during 2023, following a y-o-y decline of 32% in 2022, based on figures released by CChC. Yet it remains the lowest sales recorded since 2010.
By property type:
- Apartments: The number of properties sold in the country rose by 15.3% y-o-y to 37,848 units in 2023, in contrast to an annual contraction of 29.2% in the prior year.
- Houses: Sales volume nationwide fell by 10.2% y-o-y to 7,081 units last year, following a huge decline of 41.5% in 2022.
After a short-lived recovery last year, demand seems to be slowing again this year. In the first three quarters of 2024, residential property sales in Chile fell by 15.2% to 29,858 units as compared to the same period last year. Over the same period, the number of apartments sold dropped 14.6% y-o-y to 25,318 units while home sales plummeted by 18.3% to 4,540 units.
Greater Santiago follows the national trend
Property demand in Greater Santiago follows the national trend. During 2023, the number of residential properties sold in Greater Santiago rose by 23.7% to 26,042 units, partly offsetting the huge decline of 29.1% registered in 2022.
By property type:
- Apartments: Sales volume soared by 29.3% y-o-y to 22,916 units in 2023, in sharp contrast to a huge decline of 22.7% in 2022.
- Houses: Sales dropped by 6.1% y-o-y to 3,126 units last year, following a massive decline of 50.6% in the prior year.
However, in the first three quarters of 2024, residential property sales fell again by 13.2% y-o-y to 17,595 units, in stark contrast to the 33.3% increase in the same period last year, according to CChC figures. Over the same period, apartment sales dropped by 13.8% y-o-y to 15,425 units while home sales declined by 8.6% to 2,170 units.
In Q3 2024, the total number of months to sell the available stock in Greater Santiago was 30.8, slightly lower than the 31.5 months recorded in the previous quarter but far longer than the 26.5 months in the same period last year. This follows the national trend, which showed that the average months-to-sell available properties nationwide reached 30.1 in Q3 2024, slightly down from 29 months in the prior quarter but far lower than the 25 months registered in the previous year.
Foreign homebuying is still limited
Foreign homebuying in Chile remains limited. Unlike neighboring Argentina, where foreign investors have driven property sales in recent years, "Chile has never been a huge market for foreign buyers," said Matt Ridgway of Colchagua Valley-based realty firm Chile Investments.
Most foreign buyers in Santiago are from the United States or Europe, though interest from Chinese investors is growing. Lastarria and Bellas Artes, which are close to downtown and museums, and have a walkable 'European feel' are popular with foreign buyers, said Nathan Lustig of Andes Property. El Golf, a sophisticated, upper-scale neighborhood located in Las Condes, Santiago, tends to attract wealthy foreigners with its private golf club, luxury housing, five-star hotels, renowned restaurants, and fancy shopping destinations.
Any individual or corporate body can acquire and own real estate in Chile, whether or not they are residents, except near the country's boundaries. Chile has strong legal protection of property rights.
Properties for sale are typically quoted in Unidad de Fomento (UF), a currency tied to the Chilean peso (CLP) but regularly adjusted for inflation. The Central Bank of Chile posts the daily UF-to-CLP exchange rate on its website.
Supply Highlights:
Housing construction activity continues to fall sharply
The total number of dwellings authorized in Chile plummeted by 31.8% y-o-y to 49,542 units in the first ten months of 2024, following annual declines of 23.2% in 2023 and 19.4% in 2022, according to data released by INE. This is far below the 138,000 new dwelling units authorized annually from 2012 to 2022.
Likewise, the total area of dwelling permits authorized in the country fell sharply by 26.8% y-o-y to 4.25 million square meters (sq. m) over the same period, amidst gradually increasing costs of construction materials.
In Greater Santiago, the number of dwelling permits plunged by 42.2% y-o-y to 13,519 units in the first ten months of 2024 while the total area dropped 33.5% to 1.25 million sq. m.
In October 2024, the construction materials and inputs price index (IPMIC) rose by a meager 0.5% from a year earlier, in sharp contrast to annual declines of 7.8% in October 2023 and 31.6% in October 2022, according to CChC. Similarly, the cement price index increased by 2.2% y-o-y in October 2024, following price falls of 11.5% in the previous year and 12.9% two years ago.
The total stock of dwellings available for sale nationwide stood at 104,877 units in Q3 2024, down slightly by 1.5% from the same period last year. About 91.6% of which were apartments while the remaining 8.4% were houses.
Greater Santiago accounted for nearly two-thirds of the total available dwelling stock in the country.
Chile's successful housing program
Chile's housing shortage has been reduced by a very successful housing policy. The Ministry of Housing and Planning (Ministerio de Vivienda y Urbanismo or MINVU) was created in the 1970s and has dominated the housing sector since. It is the country's largest real estate firm and its second-largest mortgage bank.
The special law Decreto con Fuerza de Ley 2 (DFL-2) encouraged affordable housing of less than 140 square meters (sq. m). DFL-2 properties are exempt from income tax, and enjoy 50% off the Real Estate Tax for corresponding periods, according to land area. This applies regardless of the number of homes an individual may own.
However, on February 4, 2022, Chile enacted tax reform (Law No. 21.240) that reduces or eliminates certain tax exemptions to finance Law No. 21.419 (the new pension law). Beginning January 1, 2023, the said law will limit the tax benefits for DFL-2 housing to the first and second homes acquired by individuals, regardless of the acquisition date of the real property.
Rental Market:
Moderate rental yields, rising rents
Chile has a small but competitive rental market. Unsurprisingly, there are great variations in rental yields in Chile, particularly in its capital city, Santiago. But the overall results from a recent Global Property Guide research were pretty clear - the gross rental yields for apartments nationwide are moderately good at an average of 4.71% in Q3 2024, slightly lower than the 4.73% seen in Q4 2023 and 4.99% in Q2 2023.
By major areas:
- In Santiago, gross rental yields for apartments range from 4.1% to 5.7% in Q3 2024, with a city average of 4.75%.
- In Conception, apartments offer rental returns of between 5.03% and 5.74%, with a city average of 5.47%.
- In Viña Del Mar, apartment rental yields range from 3.59% to 4.37%, with a city average of 3.92%.
- In Concon, gross rental yields range from 3.51% to 4.39%, with a city average of 3.91%.
- In Temuco, apartments offer gross rental yields of around 4.69% to 5.34%, with a city average of 4.94%.
- In Valparaiso, rental yields range from 3.26% to 4.7%, with a city average of 3.87%.
- In La Serena, rental yields range from 4.27% to 5.56%, with a city average of 4.7%.
- In Antofagasta, rental yields range from 6.13% to 6.19%, with a city average of 6.16%.
In Greater Santiago, a two-bedroom apartment, as a rough average, rents for about US$380 to US$500 per month.
Based on OECD's Rent Price Index, rents in Chile rose by 7.81% y-o-y in 2023, following annual growth of 5.86% in 2022, and 2.15% in 2021.
Mortgage Market:
Mortgage market continues to expand
Chile's mortgage market is one of the most developed in Latin America, having grown steadily from 11.2% of GDP in 2000 to about 28% of GDP this year.
Chile's mortgage loan interest rates:
In November 2024, the total value of outstanding mortgage loans in the country increased by 6.4% y-o-y to CLP 84.75 trillion (US$85.39 billion), following annual growth of 7.3% in 2023, 14.3% in 2022, 13.5% in 2021, 8.1% in 2020, 11.2% in 2019, and 9.4% in 2018, according to figures released by the Central Bank of Chile.
The mortgage market is expected to continue growing in the coming months, albeit at a much slower pace, amidst weakening property demand.
Most mortgages are fixed rates with maximum LTV ratios of around 75% to 80%, which helps contain the banking system's credit risk.
Chile's banks do not usually lend to foreigners, even to those with a resident's permit. Banks have strict lending criteria which are almost impossible for foreigners to satisfy. These tight controls on mortgage lending may have reduced the country's exposure to external shocks and global crises.
Housing interest rates declining, amidst successive key rate cuts to rein in inflation
In its December 2024 meeting, the Central Bank of Chile lowered its benchmark interest rate by 25 basis points to 5.0%, its eleventh consecutive rate cut since June 2023 when it was at its 15-year high of 11.25%, in an effort to buoy economic activity.
In line with this, housing loan interest rates are now noticeably falling, with the average rate declining to 4.42% in November 2024, down from 5.18% in November 2023 and 4.64% in November 2022.
Nationwide inflation eased to 4.2% in November 2024, from 4.7% in the previous month and 4.8% in the same period last year. However, it remains above the central bank's target level of 3%.
From an annual average of 2.9% in 2009 to 2021, inflation surged to 11.6% in 2022. Nationwide inflation remained high at 7.6% last year.
"Recent inflationary dynamics have been influenced by the combined increase of several cost factors, among which the depreciation of the peso, higher labor costs and increases in electricity rates stand out," said the central bank in its November 2024 Monetary Policy Report.
"In the central scenario, annual inflation will rise in the coming months, fluctuating around 5% during the first half of 2025. It will then begin to decline, ending the year at 3.6% and converging to the 3% target in the early months of 2026," added the central bank report.
Socio-Economic Context:
Economy growing modestly, but fiscal position weakening
The Chilean economy is growing modestly. In Q3 2024, the country posted a GDP growth of 2.3% as compared to the previous year, following year-on-year expansions of 1.6% in Q2 and 2.5% in Q1, based on figures from the Banco Central de Chile.
By sector:
- The mining sector expanded by 5.1% y-o-y in Q3 2024, led by increase in copper revenues
- The non-mining sector grew by 2% y-o-y in Q3 2024, buoyed by increases in personal services activities (7.1%), transportation (6.7%), manufacturing (3.2%), and commerce (3.2%). In contrast, activity in agriculture and forestry declined by 8.5% over the same period.
As such, the IMF expects Chile's economy to grow by 2.3% this year and by around 2% to 2.5% in 2025, an improvement from the previous year's miniscule growth of 0.2%. This is not far from the World Bank's projection of a 2.5% growth this year.
"Real GDP is expected to expand by 2.3 percent in 2024, driven by the strong mining and service exports, and 2-2.5 percent in 2025, related to an expected recovery in domestic demand," said the IMF.
"The external environment is more unstable and uncertain. The commodity price volatility linked to the economic outlook of Chile's main trading partners and the pace of the global green transition is a key external risk. Moreover, the uncertainty surrounding monetary and fiscal policies in advanced economies could lead to tight financial conditions for longer periods of time and financial volatility. On the domestic front, concerns about crime, migration, and inequality persist; and political polarization is hindering reform progress," added the IMF.
After growing by an annual average of 2.9% in 2009-19, the Chilean economy recorded a contraction of 6.1% in 2020 due to the COVID-19 pandemic. The economy grew strongly by 11.3% in 2021 but slowed sharply again in the following year, recording only a modest growth of 2.1%.
Chile is an upper-middle-income economy with a track record of sustained growth, its GDP has 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 a solid position to weather global economic volatility. In May 2010, Chile became OECD's first Southern American member, highlighting the reduction of poverty from 45% in the late 1980s to around 14% in 2009. There were other advances, such as the strengthening of state institutions and fighting corruption.
Fiscal deficit has 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 budget balance quickly returned to a surplus equivalent to about 1.1% of GDP in 2022.
However, the central government's fiscal position weakened significantly last year, registering a budget deficit of about 2.5% of GDP, amidst slowing fiscal revenues due to lower copper prices and rising fiscal expenses due to higher pension benefits, salaries, and capital expenditure. Fitch Ratings expects the country's fiscal deficit to increase further to around 2.9% of GDP this year.
Chile's government debt increased to 39.4% of GDP last year, up from 37.8% of GDP in 2022, 36.4% in 2021, 32.4% in 2020, 28.3% in 2019, and 25.8% in 2018. It was the highest debt level recorded in recent history. The debt level is projected to increase further to about 41.3% of GDP by end-2024.
Chile's unemployment rate fell to 8.6% in the three months to October 2024, slightly down from 8.7% in the previous month and 8.9% in the same period last year, according to INE. The jobless rate averaged 6.8% in 2011-19 before increasing to 10.8% in 2020. It fell to 8.9% in 2021 and further to 7.9% in 2022, as pandemic-related restrictions were removed. However, the jobless rate increased again to 8.7% last year, amidst struggling economy.
Sources:
- Economic indicators of the construction sector (Chilean Chamber of Construction): https://www.constructionbriefing.com/
- Building permits (National Statistics Institute): https://www.ine.gob.cl/
- Building permits increased by 2.1% in 2023 (National Statistics Institute): https://www.ine.gob.cl/
- Monetary Policy Report December 2024 (Banco Central de Chile): https://www.bcentral.cl/
- Money and Banking (Banco Central de Chile): https://si3.bcentral.cl/
- Interest Rates (Banco Central de Chile): https://si3.bcentral.cl/
- Chile Inflation Rate (Trading Economics): https://tradingeconomics.com/.
- House Hunting in Chile: A Sinuous Oceanfront Wonder for $2 Million (The New York Times): https://www.nytimes.com/
- Gross rental yields in Chile: Santiago and 7 other cities (Global Property Guide): https://www.globalpropertyguide.com/
- Chile Rent Price Index / Quarterly (2015=100) (Global Property Guide): https://www.globalpropertyguide.com/
- Chile enacts tax reform to fund pension reform (Ernst & Young): https://globaltaxnews.ey.com/
- Chile (International Monetary Fund): https://www.imf.org/
- Chile: Staff Concluding Statement of the 2024 Article IV Mission (International Monetary Fund): https://www.imf.org/.
- Chile GDP Annual Growth Rate (Trading Economics): https://tradingeconomics.com/.
- Chile Overview (World Bank Group): https://www.worldbank.org/
- Chile Faces Challenges Meeting Fiscal Deficit Targets as Revenues Underperform (Fitch Ratings): https://www.fitchratings.com/