Real Estate News, Reviews and Investment
Article: The growth in residential property prices in Peru is unsustainable in some locations.
Over the last few years, it is clear that the economy of Peru is doing well and the growth for 2013 is 6.2% and increasing to 6.3% in 2014. Inflation has often been a problem but has recently fell from 2.9% to 2.5% with a year-end target of 2%. This growth is one of the strongest in Latin America and should support the local property markets.
The mining boom is having its impact on real estate in certain areas of Peru and this is being exacerbated by the present rate of inflation.
It would be interesting to see what happens to the country over the next few years – but social integration is an issue with some people.
Residential real estate in Peru
Though 2011 was a high point for the market, the residential real estate sector in 2012 has smashed a 17-year record. 21,990 units were sold in this year compared to 21,441 in 2011 and 14,516 units in 2010.
A much larger number of units could soon be on the market because more than 48,300 units were registered as being under construction during 2012.
Between 2009 and 2012, prices of apartments in the Los Olivos district in Lima grew by almost 100% from USD $441 to USD $877 per square meter. In Lince and La Molina, the growth was 96% and 94% respectively.
Many people believe that although the price rise in certain locations are abnormal and unsustainable, there is considerable potential for growth as a whole, particularly in housing for the middle and lower-middle class.
The bottom line
Though residential demand is strong, a significant part of this is lower-middle class and highly susceptible to the performance of the economy.
The country is committed to providing credit to support the market but there could be a substantial shrinkage in demand in the event of an economic downturn. This would certainly be the case in Lima where land shortages are already pushing up housing prices.