When you get to know about the prospects that exist in Chile real estate markets, you would be surprised that investments in Chile are better than in several other markets. The real estate environment in developed countries offers little scope for appreciation shortly. On the other hand, the Chile market is on a growth path and you can reap maximum benefits by investing in Chile real estate.
The Republic of Chile is a narrow, long coastal area between the Andes Mountains and the Pacific Ocean. Before you think of making any real estate investment in Chile, you would do well to know the basic features of the country and people, so that you could make informed decisions on your investment in Chile. Once you understand Chile better, the problem of how to reap maximum benefits from your investment in Chile becomes much easier.
Geography of Chile
The climate in Chile varies from the temperate rainy climate in the southern region to the Mediterranean climate in the central region and the driest desert of the world in the northern region of Atacama. The central area is the most prominent in population terms and the agrarian economy, being the political and cultural center of the nation. The southern region is full of green forests, a string of volcanoes, lakes, and grazing lands. The coastal region in southern Chile contains several islands, fjords, canals, inlets, and twisting peninsulas.
Economy of Chile
You might be surprised to know that Chile is the leader of the Latin American countries in terms of quality of life, competitiveness, economic freedom, political stability, low level of corruption, globalization, and lower poverty rates. After the introduction of economic reforms in the 1990s, the country had been witnessing annual growth above 4%. In the past decade, the growth rate had been between 5% and 7%. In 2006, Chile had the highest nominal per capita GDP among the Latin American countries. In the same year, the government had a fiscal surplus of $11.3 billion, about 8% of its GDP. Chile is one of the very few countries in the world to maintain a fiscal surplus for the last several years. It is also the economy with the fastest growth in the last 6 years in the entire Western Hemisphere.
Culture and Tourism
The official language is Spanish but the spoken accent is very different from other South American countries. English had been mandatory and most schools teach the language. Tourism is a growing industry in Chile. Estimates by the National Service of Tourism reveal that about 2 million people visit Chile every year. The ski resorts in the central Andes region, such as Valle Nevado and Portillo have an international reputation. Laguna San Rafael National Park and its many glaciers in Patagonia in southern Chile is a major tourist attraction, along with Torres del Paine National Park, the Chiloe Archipelago, and Easter Island situated in the Pacific Ocean are the other famous travel destinations in southern Chile. The Valparaiso coast near Santiago with its numerous beach resorts and Vina del Mar with its casino, beaches, and annual song festival attracts a large number of visitors.
Real Estate Investment in Chile
Despite the above features of the strong economy and large tourist attractions, the potential of Chile had not been fully realized by many overseas real estate investors. If you discuss foreign real estate investments, people usually mention Brazil or Argentina in South America as good places. Further, you are advised not to think about investing in Venezuela and Columbia, due to their bad reputation from drug cartels, dictatorship political decisions, and fierce internal fighting. Chile is not even mentioned as an investment destination since very few know about the opportunities that exist in Chile for profitable real estate deals.
Business Culture of Chile
Chile is a country with large families even now. The business could be developed mostly through the word-of-mouth approach since very few consulting firms exist in many places. However, the people of Chile are cordial and quite helpful, when they believe that you are sincere and honest. Once you are trusted by the locals, you would be amazed to find the response and offers you receive for investing your money wisely in Chile. The private property laws in the country are also well established. The legal institutions of the country are quite strong and the laws are very clear. Contracts are strictly honored. Banks are highly reliable and opening of foreign exchange accounts is simple. Corruption is also quite low.
Impact of Global Slowdown on Chile Real Estate Market
The global downturn in economic growth and real estate prices had reflected in the Chilean market also. Office vacancy rates are lower in Santiago, the capital of Chile and other major cities, compared to the rates that existed before 2008. In the home market segment also, people hesitate to obtain home mortgage loans due to uncertainty about the impact of the world economy affecting growth in Chile. However, the lower prices offer a golden opportunity to purchase property in these cities and other places in this country. According to the real estate dealers in Santiago, the city had provided the highest returns on initial investments, while the returns on tourist centers like Vina del Mar had not been that much better, comparatively. Still, any property investment in Chile would give higher returns in the long-term, due to the anticipated growth during this decade.
Investing in Real Estate in Chile
In Santiago, small apartments with 1-2 bedrooms increase in value by about 8% annually, while value growth of larger properties is around 5% at present. When it comes to buying properties in Chile, there is no discrimination between locals and foreigners. International real estate investors are allowed to purchase property in all parts of the country, except in areas considered vital for national security. The country laws do not impose citizenship or residency requirements for property purchases. However, foreign buyers should obtain a Chilean income tax identity proof or RUT before the legal acquisition of properties in Chile.
If you choose to buy a property through a local real estate agent in Chile, the sales commission payable varies between 1.5% and 3%, which is normally shared by the seller and the buyer equally. This procedure would avoid undesirable problems in issues such as building permits, inheritance claims, tax matters, etc. while giving you detailed research data on the property and its present, as well as future value. Hence, buying through a local real estate agent is certainly advisable and any investment in Chile would maximize your chances of getting better returns on the investment.