Peru Real Estate Markets Are Strictly Long-term Investments

Peru is market-oriented developing economy, considered as a potential emerging market due to its stable political and economic conditions

. The World Bank had classified Peru as Upper Middle Income Economy. Hence, the Peru real estate listings are bound to develop in the coming decade, offering ample opportunities to international real estate investors for reasonable returns on their real estate investments in Peru.

In spite of the housing market collapse in the United States, many South American countries had been witnessing steady growth in their real estate markets since 2005 and Peru real estate listings are no exception. This automatically leads to a minor dilemma. The Peru real estate for sale and Peru rentals had tripled since 2006. Is it worthwhile to buy or rent anything at present? Would the prices appreciate further or could there be a crash in the near future? The Peru real estate prices in Lima, Cusco, Trujillo, Arequipa, and Chiclayo had become quite expensive. Hence, short-term profits are ruled out for international real estate investors when it comes to Peru property market.

The main advantages of Peru real estate market are the facility for foreigners to purchase properties without restrictions, the nominal closing costs, low property taxes in most provinces, high rental yields in short-term, easy acceptability of US dollars, and the low cost of living. The negative factors are the nearly 6-month periods for closing a property purchase, difficulty of evicting present tenants, poor roads and other infrastructure facilities, weak Peru real estate laws, and risk of squatters invading on large land parcels. Further, short-term purchase and sale is not for Peru real estate investment. If the investors sell the property within 3 years of purchase, the capital gains tax are quite hefty.

As such, international real estate investors, who had not invested in Peru real estate before 2008, should be prepared to take long-term investment outlooks, if they buy real estate in Peru at present. According to real estate experts, the Peru property prices are likely to decline in the next 3 to 5 years and then only regain momentum.

Hence, there is no point in purchasing Peru real estate listings, if the investors would not be able to wait for longer periods in excess of 7-8 years at the minimum. At the same time, due to the low cost of living in Peru, with average monthly income remaining around $200, very few Peru citizens would be able to invest in Peruvian properties in the near future. When their incomes rise after 5 to 7 years to higher levels, the Peru real estate market would witness a strong revival.

by: Taylor White

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