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Peru is fast becoming one of the best options for international investment, both for internal and global situations. Diversity and vastness are its main features, besides its really low prices, compared to the global market.
When comparing a property in Europe, with another one with exactly the same features in Latin America, we can talk about prices differences that range from four, six, or even ten times cheaper. For example, a two bedrooms apartment in London costs about US$600,000, while a similar one in Lima or Cusco, costs approximately US$90,000.
In the long term, terrorism and environmental issues are just some of the reasons to see the whole of Latin America as one of the most safe and sustainable resources in the world.
The Prices for Property in Peru
Property prices in developed countries can’t grow forever. They are more likely to stabilise, if not, to drop after the well known “real estate bubble” bursts.
On the other hand, in Latin America property prices have just started to react to the increase of demand. Despite circumstantial economic ups and downs, price tendencies are definitively on the raise.
Profits for Peru Properties
The average rental yield for a property in Peru is about 10% to 12% a year, over the value of the property, for permanent rentals. For holiday rentals, it may vary, depending on the area the property is located and the demand it faces in a particular period of time. It is commonly higher, but seasonal variations it make it harder to estimate average profits.
In case you need more information or have doubts on any of these issues, the specialised staff in January First Real Estate will be glad to answer all your questions, click here.
Buying Real Estate in Peru
Housing market is rising
Residential prices have been rising more slowly in Peru in the past six years, following a substantial recovery during the 1990s.
Foreigners can freely buy properties in Peru. Real estate investments do not need prior approval from the governments except for properties near the borders. Foreigners, however, tend not to be attracted to buy in Peru.
Rise and fall
Property prices rose substantially in the mid and late 1990s, following the decisive elimination of the hyperinflation that had raged in the early 1990s. Peru’s economy was seen to be on the road to recovery. The early years of President Alberto Fujimori (1990-2000) saw victories over the Shining Path guerrillas, a successful austerity programme, and a new Constitution.
But the resignation of Fujimori amidst scandals and the unpopularity of his successor Alejandro Toledo (2001-2006) saw a return of political instability, slowing property price rises.
The principal cause of recent continuing demand growth has been better access to mortgage finance, combined with stronger economic growth. Peru experienced 6.7% GDP growth in 2005 and 5% GDP growth is expected in 2006.
Interest rates have fallen dramatically, partly due to government-financed housing loan programs such as Mivivienda, which has allowing much wider access to home mortgages. The new government has promised to maintain these programmes. Inflation has been tightly controlled since 2000, at under 3%.
However, the election of President Alan Garcia in 2006 was a bad omen, given that his previous presidential term (1985-1990) ended with runaway inflation at 7,481%.
Boom in Lima
Lima (pop. 8.2 million) continues to see much construction of new apartment buildings in residential areas.
There is the traditional elite Miraflores area, which has high priced apartments with magnificent sea views. For the most exclusive buyers there is the San Isidro district. There is also Barranco in the Los Malecones area.
Further from the centre, the Surco area has a large number of good-quality apartment blocks, and is well-administered so that values tend to be well-maintained. Within Surco, agreeable areas are Las Casuarinas, Chacarilla del Estanque, San Jorge, Santa Teresa and parts of Valle Hermoso. For detached housing Surco is also interesting, as is San Borja.
Housing deficit
Peru has a serious housing deficit, to the tune of 1.2 million housing units. To address the deficit, 300,000 new units need to be built and about 900,000 must be repaired annually. Rising poverty and inequality is the most significant cause of the housing deficit.
Official figures suggest that 51.3% of the population is poor, with 19.2% living in ‘extreme poverty’. Incomes per person are still below their 1973 level. About 82% of the population of Lima, Peru’s capital and largest city, lives in slums.
Owner-occupancy for urban areas in Peru is at 73.9% in 2004, up from 71.3% in 1998. Rented housing comprises about 9% of all urban houses in 2004, 1.7% is company provided, while 15.1% is housed by other institutions.
Alarmingly 4.8% of households got their houses by invasion or squatting, and less than 1% by acquiring their houses through loans. Home ownership is higher in rural areas, at 87%.
Mivivienda
To revive the housing sector the government has launched several housing projects such as Micasa (My home), Mivivienda (My House) Housing Program, and the Techo Propio Housing Program. Micasa provides loans for the renovation of specific segments of the house such as converting wooden walls to brick, replacing zinc roofs or adding additional rooms, one at a time.
The programme complements the gradual, progressive way poor people build their houses. The Techo Propio programme provides loans to the poorest socio-economic brackets (D and E) while the Mivivienda focuses more on middle and upper class levels (A, B and C).
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