Property Futures

Real Estate News, Reviews and Investment

Residential Property in Peru Seeing Remarkable Price Growth

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.

Woman on Uros island sitting in front of her home and working

Woman on Uros island, Peru, sitting in front of her home and working

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.

  • Society is divided with people from the coastal areas and people from the mountains identifying themselves separately.
  • It also has a high rate of migration to the cities and the coast.

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.

  • Of these, more than 20,000 units were reported as having been sold.
  • If this trend continues, we could see thousands of new units on the market during the year 2013.
  • This has raised obvious questions about the capacity of the market to absorb the new units even as prices are increasing.

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.

  • Over a period of one year, the average price for an apartment in the district of Barranco in Lima has risen from USD $1,456 a square meter to USD $1,997 – a  rise of 40%.
  • In San Borja and San Isidro, the rise has been 38% and 36% 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 unsatisfied demand is believed to be around 400,000 homes and quite a lot of this demand is in Lima and Callao.

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.

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One comment on “Residential Property in Peru Seeing Remarkable Price Growth

  1. Pingback: Beyond Brazil | Commercial Real Estate Finance

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