The international business community rejoiced at Sunday’s news that business-friendly, right-wing Ivan Duque and his influential ticket companion, Marta Lucia Ramirez, won, with almost 55% of the vote, the Presidency and Vice-Presidency of Colombia against leftist candidate Gustavo Petro. The U.S.-educated President-elect, who completed Masters at American University and Georgetown, is presumed to welcome foreign investment in key sectors. Duque represents stability and is likely to continue the historically cooperative relationship with its number 1 trading partner, the U.S. But what does this mean for the country’s real estate market, both for citizens and international investors?
Economic Stability Equals Investor Confidence
First and foremost, let’s consider the overall effect of economic stability. We have seen a perceived safe haven is perhaps the most important factor for international investors when eyeing a property investment abroad. The prospect of economic growth is also a huge factor that potential homeowners will consider before committing to a purchase.
The good news in this regard is that Duque plans to largely continue with Colombia’s liberal macroeconomic direction, which has yielded a steady yearly GDP growth of around 2% over the past few years.
According to economist and political scientist Francisco Martinez, “investors should view Duque’s election with tranquility. It’s a sign that Colombia will carry on with the same economic model that has favored international investment and open markets.”
Biding refreshing news in a region where many important markets are eyeing and adopting protectionism, like Mexico and the U.S. respectively, “Colombia will continue to participate in a globalized economy and continue policies that advance in this regard,” according to Martinez.
Individuals may disagree on whether or not this is the best approach. However, observers can at least agree that it represents a continuation. This is the type of predictability that boosts confidence in real estate markets.
New Reforms Could Boost the Real Estate Market
Moreover, during his campaign, Duque promised to prioritize tax reductions for companies and people alike. While the details of this reform remain vague, generally tax cuts, at least in the short term, lead to an uptick in economic activity.
According to Martinez, the reference tax reform “would give incentives to small, medium and large businesses to expand and stay and continue to promote their investment in the country”. The same may very well bode for individual national and international real estate investors. This will be a huge item to watch closely in the coming months.
Additionally, Mr. Duque’s focus on quickly finishing ongoing mega-infrastructure projects, such as the Bogota metro and the US$18 billion 4G national highway network, could present a mayor boon for surrounding real estate markets.
Potential High-Yield Opportunities
Perhaps the most exciting prospect for real estate investors could be openings for potentially high-yield investments in previously untapped areas.
Mr. Duque has emphasized the importance of maintaining the peace agreement negotiated under current President Juan Manuel Santos’ administration. While he will likely introduce changes to its implementation in the areas of former guerilla political participation and judicial treatment, he has not wavered in his commitment to build and rebuild infrastructure in isolated and remote areas that were hard-hit by the 50-year conflict.
This commitment is not only significant to the much-needed social development agenda of Colombia. Hand-in-hand with this development is the continued growth of Colombia’s tourism sector.
As Martinez stated, “tourism is becoming the second driver of economic growth in Colombia. [The country] has experienced, from 2017-2018, an increase of 155% in [number of] visitors. We are at 6.5 million tourists a year. The overwhelming potential of the ‘forgotten’ Colombia is going to be picking up in terms of priorities for the government. It’s going to be huge.”
Already, prices for historic homes in Cartagena’s Old City are among the most expensive in the country. They range from 1 to 10 million US dollars. Additionally, they held down their prices even during the global economic downturn of 2008-2009. These are typically owned by foreigners who use them as vacation homes or transform the historic mansions into luxury hotels.
This speaks to the potential of the many underrated tourist destinations in Colombia, which had been made virtually inaccessible due to the half-century conflict, lack of infrastructure, and the international perception that Colombia was not a safe destination for leisurely travel.
InternationalRealEstate.News will feature some of these locations in upcoming City Spotlights.
The new Duque administration will officially take the reins on August 7th. While there is still much polarization in the country, it is likely that Mr. Duque will have the necessary political capital to move on his top priorities. Luckily for real estate investors, many of those priorities directly affect the market in a positive way.