Real estate investment in Colombia for 2023 ¿who will benefit?

Over the last three years, humanity has faced unpredictable and improbable events that have let to economic crisis. Colombia, like all the global economies, have not being immune to its effects, in addition to a recent change of government, the impulse of the reformist legislative agenda, and upward dynamics of the dollar and inflation. But then, how does this situation affect the real estate market in Colombia?

To answer to this question, it is essential to analyze the accelerated and sustained increase in interest rates, which is an indispensable monetary policy measure to control inflation. This measure, although necessary, affects the possibility of acquiring real estate with financing and therefore reduces the demand for them, causing an excess in supply, which ends up impacting the price of real estate.

The Economist in its article entitled "A global house-price slump is coming" highlighted that in countries such as the United States, Canada, South Korea and the Nordic countries, the increase in interest rates has meant a decrease of up to 9% in the price of real estate in less than a year. Thus, creating an attractive scenario for investors that does not need to leverage their resources and who have a risk tolerant profile.

However, Colombian Central Bank analyzed the status of turnover and real estate market for 2022’s first semester and concluded that, despite the fact there are deaccelerations in supply and demand, prices have not yet been impacted.  It will be necessary to evaluate the result of the analysis of the second semester of 2022 to determine the projections for the year 2023.

It is true that opportunities come from the crisis and although this global situation has a direct impact on the real estate market, real estate is generally an asset that responds well to uncertain times. However, the outlook is favorable for a small group of people who have risk tolerance and do not need to resort to leverage; meanwhile, for the common people it is an unfavorable situation and reduces their ability to have their own home, generating a de-acceleration in the real estate and construction market. This being a very important engine of the national economy and one of the main generators of employment. For this reason, it is essential to know what the policy of the Central Bank and the national government will be to address this situation and boost this important bastion of the economy.