Chile getting hotter
It takes only one look at a map to be intrigued by Chile - it is the longest and probably one of the skinniest countries in the world and to say that it is geographically diverse is an understatement...
Tourists can enjoy a multitude of activities ranging from
climbing active volcanoes and hiking in the world's driest desert to rowing
through icy fjords in the vicinity of Antarctica.
Opportunities to bike, surf, ski, hike, and swim abound. From Santiago to Easter
Island, Chile's
geographical, historical and cultural landscape fascinates visitors of all
stripes.
The country's real estate market has shown stable growth over the last ten
years but Chile
isn't for property flippers. A rate of eight to 10 per cent annual growth
means only those who are in it for the long haul are interested and that is
just fine by locals.
Chile
has well established private property laws. "Legal institutions in Chile are strong and the laws are very
clear," said Victor Fuenzalida Dublé, Director of Fuenzalida Propiedades,
a real estate company in Santiago.
Chile is
also one of Latin America's most developed
countries, boasting a good quality of life for its well educated
population.
About Chile
Chile is one of the most
stable and economically advanced countries in South
America. Prior to 1990, the country was ruled by General Augusto
Pinochet. The General came to power by overthrowing Salvador Allende's
democratically elected, socialist government in 1973. Chile has
recovered well from its recent history of living under a dictatorship. It
currently nurtures a thriving democracy and a successful free-market economic
model.
The country shares borders with Peru,
Bolivia and Argentina. The Pacific Ocean marks its western border bestowing it with
a 4000 mile long coastline. Beyond continental South
America, Chile
encompasses the Juan Fernández Islands,
the Salas y Gómez islands, the Desventuradas
Islands and Easter
Island. It also claims 480,000 square miles of land in Antarctica.
Chile's
long North-South shape has translated into climatic conditions that range from
a dry and desolate to alpine and snowy. The country measures 2,880 miles
north to south and 265 miles east to west, at the widest part of the
country. Traveling down Chile's
length means going from some of the hottest temperatures to the coldest in the
world.
The imposing Andes run along the western edge
of the country. Most of the mineral deposits, including copper, are found in
the North. A majority of Chileans live in the central parts where the
rich agricultural resources are located. The South is littered with
volcanoes, lakes, and virgin forests. The Coast at the lowest tip of the
country is very close to Antarctica and is
dotted with magnificently pristine fjords, Canals, islands, and
peninsulas.
Santiago, the capital, is located near the
center of the country and is home to a little over a third of Chile's 15.1
million citizens. Santiago
has enjoyed consistent economic growth for the last couple of decades.
This has turned it into one of the most modern South American cities.
Rumor has it that visitors to Santiago
can treat themselves to skiing and surfing on the same day. The city is
close enough to both the Pacific Ocean and the Andes
to make such antics possible.
Chile
is the world's number one producer of copper. The country also exports timber,
a variety of fruits, seafood, and wine. Since the 1990's, Chile's GDP has
averaged eight per cent growth per year, according to the 2009 Index of
Economic Freedom published by the Heritage Foundation and the Wall Street
Journal.
The Index also ranks Chile
as the 11th freest economy in the world. Some of the many investment positive
aspects of the country include: a fairly transparent financial system and strong
private property protection.
Chile's
economy has been growing at a stable rate and is expected to continue on the
same trajectory in the long term. In addition to a free trade agreement with
the U.S., Chile is part
of the Asia-Pacific Economic Cooperation forum. It is also negotiating
agreements with other potential trade partners.
Chile
has a good business climate under which foreign and domestic investments are
treated the same. It doesn't have too many controls on capital transfer
and transactions. The country also boasts a well run financial and
regulatory systems.
Banks are reliable and citizens and non-citizens alike can open foreign exchange accounts. Contracts are well respected and the judicial system is largely fair. Unlike many countries in the region, and indeed in the world, Chile doesn't suffer from much corruption.
In fact, out of 179 countries, the country ranked 23rd in
the 2008 Transparency International Corruption Perceptions Index, coming in
just four places after the U.S. "Chile is a country of very low
corruption," said Dublé.
The Chilean real estate market
Chile
was hit particularly hard by the global economic crisis that resulted in
falling commodity prices. In January and February, the country registered a £1.6
billion year-over-year trade surplus decline, according to Latin American
Quarterly, a report prepared by the research department of Prudential Real
Estate Investors. While the country's economy may not contract in 2009, growth
is likely to be on the low side.
The property market in Chile
has grown consistently over the last decade, according to allchile.net, a website run by
Spencer Global International Consulting. However, these are turbulent times for
property markets around the world. Just as most everywhere else, the
market in Chile
reflects current global economic realities.
Office vacancy rates, while still low in Santiago, are creeping up, according to Latin American Quarterly. The retail sector is soft, with sales down by three per cent when compared to the same time, a year ago. As for the residential sector, buyers are weary of taking out mortgages during a time of economic uncertainty. Investors are cautious and are choosing to hold on to their cash. As a result, transaction activity is down. "Our sales have been down by a third since October 2008," said Dublé.
Most investors acquire property in the capital, according to Dublé. "A
large number of investors buy in Santiago
because the city has shown to have the biggest returns in relation to initial
investments," he said. Vacation spots such as Viña del Mar are popular but "don't have
the best returns."
As far as property types, small, one or two bedroom apartments bring the
highest returns, according to Fuenzalida Propiedades. The value of these
properties grow at an approximate annual rate of eight per cent while the value
of larger places grows by a slightly lower rate of around five per cent.
Buying real estate in Chile
Foreigners have the same rights as Chileans when it comes to real estate
transactions, according to allchile.net.
International buyers can purchase property anywhere in the country outside of
areas considered important for national security.
There are no residency or citizenship requirements. For its part,
owning property in Chile
will do nothing to guarantee residency status. Foreigners are required to
obtain for an RUT or a Chilean tax id number before legally acquiring property.
Property agents charge 1.5 to three per cent of the sale price which is
generally shared between the buyer and the seller.
Just as anywhere else, it is important for buyers to conduct thorough research
of the desired property. A title search is need to determine if it has
issues regarding building permits, taxes, inheritance claims, and others
problems that can stand in the way of a proper and legal transaction.
Purchasing through a reputable real estate agency should save buyers from
getting in trouble, according to Fuenzalida Propiedades.
Looking ahead
In March, Moody's Investors Service raised Chile's foreign debt rating citing
strong fiscal savings that will see the country though the global recession,
according to Bloomberg. Mauro Leos, an Analyst at Moody's, confirmed that the
country has "solid institutional and policy frameworks" in place. This
sends a positive message to investors about Chile. The country is expected to
weather the global economic slowdown better than its peers.
Real estate agents in the country also feel optimistic about the future.
"Once the international economic crisis passes, the real estate market
will return to growing at a pace of six to 10 per cent a year," said
Dublé.
Written by Yemi Kifle for www.nuwireinvestor.com