Mauricio Jaimes

ARE REAL ESTATE PRICES IN COLOMBIA OVERVALUED?

Mauricio Jaimes — Thu, 24 Sep 2009 16:52:00 GMT

****Article original posted in spanish in October/2008

It seems somewhat repetitive, but it’s inevitable that we continue to discuss this issue. Journalists in Colombia criticize themselves because the only subject they write about in their columns is President Uribe. Likewise, as entrepreneurs, the most talked about subject is the current financial crisis. The typical question posted on any forum is: To what affect will the global crisis have on the Colombian economy? Some say that there will be no affect; others say there will be a small amount of affect and so on. I believe that it definitely does have an affect, for the simple reason that Globalization arrived some time ago and for better or worse our country is riding that wave. The measure of damages, according to each sector, will depend on the way you look at it. As for the real estate sector the question is: How will all this global Pandemonium affect the Colombian real estate market?

A way to analyze this is by looking at whether the prices of our properties are high compared with those from other parts of the world.

Coldwell Banker has published the 2008 HPCI report (Home Price Comparison Index) which compares the value of real estate prices in the U.S. to other markets in the world. Unlike other housing reports, this study “provides an apples-to-apple comparison of similar 2,200 square foot (about 200 sq meter), four-bedroom, two-and-a-half bath homes in 315 markets across the United States, in addition to Puerto Rico, Canada and a sampling of countries/territories outside of North America where Coldwell Banker has a presence.”1

Taking the average home price in some US and international cities and assuming an average exchange rate of COP $ 2.000 per US dollar in comparison with our Colombian market the following points were noted:

Colombia remains among the top countries in the world with the most affordable homes. In Bogota the average price is $1,785,000/m2. In 2007 it held the top spot as the country with the least expensive real estate in the world. This year it came in fifth place passed by Quito, Ecuador - the most affordable of 2008 – along with San Jose, Costa Rica; Hanoi, Vietnam; and Panama City.

In the United States the most expensive real estate per square meter is in La Jolla, along the Californian coast, at $17,870.000/m2, which is nearly double the worth per square meter of a commercial shop in the most expensive mall in Bogota.

In comparison, the most affordable real estate in the US is in Sioux City Iowa at $1,335.000/m2 equal to the average price of a middle class home in a city such as Pereira or Ibague in Colombia.

According to the Coldwell study, the most expensive place in the world is Dubai - $ 24 million pesos per square meter! – No comments needed.

Despite the increase in value of properties in Cartagena in the last few years (with an annual average above 20%), at $2,650.000/m2, it is still far below other Caribbean destinations like Aruba at $3,340.000 and Nassau in the Bahamas at $ 5'070.000, but higher than direct competitors like San Jose, Costa Rica at $1,420.000 and Panama City at $1,580.000/m2. This is an important point to keep in mind if the government wants to compete with these destinations and encourage foreign investment through the “Second housing” law.

With respect to other developing countries where the real estate market has been booming in recent years such as: Romania, Hungary and Turkey, Bogota and other cities are about half the price of these countries becoming a very attractive market for foreign investors.

An interesting comparison:

Barack Obama lives in Chicago where the average price is $8,630.000/m2, while John McCain lives in Phoenix with an average price of $ 2,880.000/m2. It's like comparing Obama living in an exclusive Penthouse in Cartagena and McCain in an apartment at the Chico in Bogota.

It is easy to deduce that real estate prices in Colombia are low, not only globally but in all of Latin America. And they have remained that way despite the current financial crisis. Similarly, the decrease in the dynamics of the local market have been driven more by domestic factors than by external economic factors such as the current ones. There is easy access to mortgage credit and builders are more cautious when initiating new projects. Also, the market has entered a period of adjustment that has helped to scare off any speculative behavior.

One final thought:
My grandfather used to say, “The land does not decompose". Nor is it toxic, using the same term the bankers on Wall Street called the papers that ended up worth less than a goose egg. And while there continues to be a crisis in the world's stock markets, real estate in Colombia will remain a safe asset which will not decompose despite bad times.

1 See the complete Coldwell Banker Report at: http://hpci.coldwellbanker.com/hpci_press.aspx

2 Story For Sale in Bello Horizonte

Mauricio Jaimes — Tue, 22 Sep 2009 06:00:00 GMT

• 230 sq. m., 3 bath, 4 bdrm 2 story - $480,000,000 - Excellent price

Bello Horizonte , Bolivar - Beautiful villa on the outskirts of Santa Marta, with a spectacular view of the sea of Bello Horizonte beach.
The property was named "Mar de Plata" (Silver sea) by its owner, because of the color reflected by the sea as seen from the house.
The house consists of:
- Large living room
- Terrace
- Dining room
- Modern Kitchen
- 3 bathrooms, with the possibility of other one.
- Laundry Area .
- Library,
- Second floor has a balcony with terrace
- House for guard keeper with kitchen.
- BBQ area with dishwasher.
- Swimming pool for adults and children.

Property information

Colonial For Sale in Parque Tayrona

Mauricio Jaimes — Tue, 22 Sep 2009 06:00:00 GMT

At footsteps of Parque Tayrona

• 20,000 sq. m., 3 bath, 4 bdrm colonial - $600,000,000

Parque Tayrona , Santa Marta - Property of 20 hectares near Santa Marta in Colombia, at a footstep of Parque Tayrona on the Caribbean Coast. The property has 2 villas. One completely transformed of 150 m2 with 4 rooms, a big open space, a kitchen and 3 bath rooms.

The other one of 144 m2 is brand new with 3 rooms, living room, american kitchen and 2 bath rooms. Both are furnished with high quality material from Europe, sofas, beds, tables, chairs, cabinets, dishes, plates, etc, office-desk, TV, home-cinema, internet connection, wash machine, dryer, micro-wave, 2 fridges, 1 freezer, etc. We installed electric plugs for both 110 and 220 voltage. We also have a generator. The water is connected to our own river.

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Apartment For Sale in Cabecera

Mauricio Jaimes — Thu, 17 Sep 2009 06:00:00 GMT

Espectacular vista

• 138 sq. m., 3 bath, 3 bdrm apartment - $290,000,000

Cabecera, Bucaramanga - Amplio apartamento con espectacular vista a la ciudad bonita. Amplia area social, alcoba del servicio, ubicada en la mejor zona de Bucaramanga en la sobre la Carrera 39.
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Great apartment with spectacular view to the pretty ciy. wide areas, large masterbedroom, located in one of the best areas of Bucaramanga in Cabecera.

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2 Story For Sale in Cartagena De Indias

Mauricio Jaimes — Tue, 08 Sep 2009 06:00:00 GMT

ecological project

• 115 sq. m., 2 bath, 3 bdrm 2 story - $172,500 USD - The best price/sq mt

Cartagena De Indias, Bolivar - Houses in individual lots
Optional pool with jacuzzi
Entry to the project with speed reducer on the main highway.
From entrance to the Club House 1000 MT. Approx.
The main way of the community is 17 MT wide , 4 water fountains, cycle path, green footpath.
The cycle path and footpath go across the property for recreation and sport.
24 hours Security.
Transportation available to Cartagena city and to the airport.
Project management for rental houses.
For more information visit http://www.buycolombiarealty.com/kalasalada.html

Property information