Locals drive the middle and lower end of the Peruvian market as political upheaval curbs the country’s high-end market opportunities.
Luxury Market in Peru “Frozen” by Political Riskiness
Last year’s election of Pedro Castillo as Peru’s president more than chilled the country’s housing market. Ivan Zalaquett, a partner at Keller Williams Peru in Lima, calls Lima’s luxury market “frozen” because “…clients with money think it’s too risky to invest here…” due to a Marxist-Leninist leaning president who has already sworn in his third cabinet officers within a six-month period of time.
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The result of Peru’s “political riskiness?” Luxury prices have dropped approximately -20% since last year, according to Nella Pinto, head of Peru Sotheby’s International Realty in Lima. Pinto said, “Unlike other countries, it’s been a buyer’s market.”
Despite current political wariness, Pinto commented that Peru’s mining and commodities economy “…has remained strong and… prices will only go up.”
Lima’s upscale neighborhoods such as San Isidro, San Borja, Surco, Barranco and Miraflores are generating prices that range from $3,000 to $6,000/square meter. In La Molina, an affluent district of Lima that features mountains and large rock formations, prices average $1,500/square meter.
In less affluent sectors such as Jesus Maria, San Miguel, Lince, Magdalena del Mar, Pueblo Libre and Surquillo, demand is called “perennial” due to ongoing persistent local demand and prices averaging about $1,871/square meter or $175/square foot, an increase of +7% y/y.
Keller Williams’ Zalaquett said the “sweet spot” for Lima’s apartments outside the wealthiest neighborhoods ranges from $80,000 to $150,000.
According to a report from the real estate association AESI, the average prices across metro Lima were estimated to have increased +14.7% y/y. The Central Reserve Bank of Peru estimated that prices are projected to increase +6% by the end of 2022.
Who Are the Buyers?
Middle-income Peruvians are driving Lima’s housing market. Jose Luis Alzamore, CEO of TALE Immobiliaria, a property developer in Lima, said, “People continue to get mortgages to buy their first home, or to move somewhere better than where they are. Politics may worry them a bit, but they have more confidence than wealthy buyers.”
Most foreign buyers, primary retirees from North America, Spain and Britain, look to coastal communities outside of central Lima due to lower prices and better weather. Expatriate Peruvians, many of whom have found that inflated property prices abroad have negated good investment returns, have come home. Peru’s ex-pats are currently the primary drivers of the country’s high-end market.
Notaries oversee property transactions by doing basic due diligence on the property, creating deeds, ensuring against money laundering and making sure proper taxes are paid when the transaction closes.
Non-Peruvians are unable to own land within about 30 miles of the country’s borders. Foreign buyers must open an account at a Peruvian bank in order to execute a property transaction. Mortgages are relatively to obtain but many foreign buyers choose to pay cash.
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Thanks to The New York Times.