Colombia is one of the prime investment destinations in South America. Boasting a superb landscape and pristine beaches, it’s a top holiday destination that attracts travelers from all over the world. People come here to spend a relaxing week, but they also come here to stay for the entire summer or to find themselves a vacation home. At the same time, Colombia also has a booming economy that grew by 3.3% in 2019 and that has become an investor magnet. The fact that buying real estate here qualifies you for a residency visa helps too. According to Colombia’s central bank, the country’s economy will recover by 4.1% in 2021, and there are reasons to be optimistic. So, if you wanted to buy property in Colombia, now may be a good time to revise your plans and see if you can bring them to fruition. However, you still need to be careful. For all its opportunities, the Colombian real estate market has its particularities, and you should analyze several essential factors before making a move. Of course, this applies to any foreign real estate market. Just because something drives profit in the US or is a major trend here, that doesn’t mean it looks the same overseas. Or, the other way around. Just because a real estate sector is losing ground here, that doesn’t mean it’s not picking off steam someplace else.
How negotiations and payments are carried out
To successfully purchase property in Colombia, you either need to spend some time here to get used to the culture, or you need to work with a local lawyer who can help you navigate the market. That’s because, as someone from North America, many of their practices when buying real estate are polar opposites to what you’re used to. For example, real estate deals are done in cash. This is really common and, unlike in the US, where if you offer to pay in cash you expect a considerable discount, here you won’t get more than 8%. Negotiations are also different. They’re typically done between people, not between companies, which is why it’s essential to have some sort of network and establish relationships in advance. Colombians value personal relationships, which is sending someone on your behalf to discuss terms might not always yield the expected results. Typically, in Colombia, the seller is also the person who built and managed the building.
Another thing you should pay attention to especially when negotiating for real estate is that unlike in the US, where the seller of a property which has been on the market for several years will eventually drop the price considerably, in Colombia, sellers tend to hold on to the price they believe is right – even if that means waiting a few more years until someone makes them on offer. Also, arguments such as “I’ll have to change the tiles and the sink so you should lower the price” don’t really work.
What real estate sectors are thriving in Colombia?
If residential real estate is an easier sector to navigate, it’s commercial real estate where the biggest differences are. Take casino properties, for example. This sector is thriving in Colombia, and it attracts many investors. In fact, Colombia stands out as one of the gambling hotspots in South America. If, in the United States, land-based casinos are starting to lose ground, Colombia is barely just entering into a new era after the eGaming Act of 2016.
The widespread popularity of tragamonedas and other casino games, combined with the friendly regulatory environment, has encouraged casino developments, and the sector is ripe for investment. If you can find a casino property near a hotel, restaurant, or residential complex, that’s even better because these properties have been proven to drive a higher ROI.
The fact that many Colombians enjoy playing ruleta is not a secret, but, in addition to local casino fans, the properties might also attract tourists. To make sure your investment pays off, the best course of action would be to focus on the cities that have reported the highest growth in the past few years, namely Bogotá, Medellín, and Barranquilla. These cities also have the highest standard of living.
In general, the Colombian commercial real estate market is on the path to recovery after the past eighteen months. After a period of vacancies, office spaces are once again looking for tenants. In the past year, several major companies have come to Colombia, including Amazon Web Services, and they will attract more businesses. These businesses will need office spaces because remote work is not very widespread. Also, a need for dedicated data spaces has also been observed. Other real estate sectors worth mentioning include industrial spaces. In Colombia, industries such as textiles, commodities, and manufacturing are on an ascending path, and they employ nearly one-quarter of the workforce. However, you should keep in mind that industrial real estate has its own set of requirements, and you’ll need to do extensive research for it. As for retail, its status is dramatically different compared to the one in North America. If many stores here are struggling to stay open because many consumers now prefer shopping online, in Colombia, the retail sector continues to be on the rise because shoppers prefer having closer interactions with the merchandise they buy. Thus, you’ll find that there’s even an oversaturation for commercial retail spaces for fashion, electronics, and personal care items.
If you want to invest in residential real estate, you should know that there is increasing demand for small houses – from 11% in 2010 to 19% in 2014. That’s mostly because of the shift in lifestyle habits. More and more young adults choose to leave their parents’ house early and move out to bigger cities.