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Real Estate Articles in Chile, South America
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If there is a real estate bubble in southern Chile, it is around Pucon and Lake Villarrica.
This is our 2006 list of the top five
locations for buying land or real estate in Southern Chile and Patagonia for
investment purposes. We will approach this from a relatively short
term five to ten year horizon of increasing land values. We believe
that beyond a ten year period Patagonia and Southern Chile land
values will increase overall dramatically. Of course, if you are
buying property to enjoy nature and could care less about the real
estate value then your returns are already locked in. For the rest of
the people looking for a return on their investment in southern
Chile, please read on.
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1. Futaleufu Patagonia Chile Real Estate
Market
The small town of Futaleufu in the the
Pelena region of Patagonia Southern Chile has gotten the greatest
attention for international investment in recent years. The beauty
of Futaleufu's unspoiled and remote natural wonders are its prime
appeal. It has earned a reputation as a World class white water
rafting and fly fishing location. The domestic Chilean real estate
market has yet to take a serious look at this area, but they are
starting to take it seriously. International investors have bought
large tracks of land. Much of the land bought in this area is marked
for nature conservation and should not go back on the market. There
is also some land speculation going on with regards to a proposed
dam. Speculators are buying up land in the zone that would be flooded
in hopes that the Endesa power company will be forced to buy their
land at market value if they go ahead someday with the dam project on
the Futaleufu river.
The locals land owners are paying
attention, and are starting to raise the prices they are asking for
their family land holdings. Land is also starting to be sold in
smaller lots of one to ten hectare parcels, rather than in parcels of
hundreds of hectares. There are still many large tracks of land
available in the area, but they are starting to disappear fast.
Prices currently start at around $2,000 US a hectare; but, we are
starting to encounter prices in the $14,000 dollar per hectare for
some parcels. We believe the $14,000 a hectare is completely
unrealistic in the current market, but is an idea of where things are
going in the area.
We would expect that is possible that
some parcels of land in the area could double in price almost every
year for the next five years. Overall, we could see prices topping
$20,000-30,000 per hectare in five to ten years for the Futaleufu
area. For long term investment of over 10 years, look to the areas
further away from Futaleufu center towards Chaiten and more south in
the Patagonia of Chile to get real deals.
2. Puerto Varas Chile Real Estate Market
This was at one time a bedroom
community to the large southern Chilean city of Puerto Montt. Puerto
Varas to Puerto Montt is about 30 minutes by car. This town has
turned in to a major tourist destination in the last few years with a
Casino and several 5 star hotels planned. The proximity to Puerto
Montt and its booming economy makes this attractive to both
foreigners and Chileans. Many Chileans from Santiago have summer
homes on the lake.
Property prices are still relatively
reasonable. a 5,000 meter or about a half a hectare lot goes for
around $10,000 to 20,000 US. Homes in the area sell for around
$100,000 US currently. The growing tourism industry and development
in the area will insure that property prices will easily increase
over the next five to ten years. We would say an easy 30% increase
in real estate values would reasonable to expect in the Puerto Varas
area.
3. Chiloe Real Estate Market
The magical Island of Chiloe reminds us
of Ireland with rainbows and ancient myths everywhere you turn. The
fishing industry has been bringing a lot of money to the island, and
this has started to increase the real estate values across the
island. In areas around the more populated cities half hectare lots
are going for around $10,000 - $20,000 US.
As the economy picks up,
we would expect parcels such as those to at least double in value
over the next five to ten years. There are much better deals on more
remote land in the area, and much depends on what you are looking for
in property. There is also a large push to buy land for nature
conservation on the island. Following the pattern of other areas in
Chile, this tends to drive up real estate values as large tracks of
land are removed from the market forever and locals try to cash in on
the big purchases by environmental groups.
4. The Seven Lakes District Real Estate
Market
Located just south of Villarrica
volcano this area has already been bought out be big land speculators
years ago. However, what few properties are available in the area
insure that prices will go up directly as these land speculators
eventually start development. The prices in this area are directly
effected by the real estate bubble in the Pucon / Villarrica area
just north. This area has always been a favorite for the Chilean
summer vacationer and many big resort projects are well underway.
There is also a lot of Mapuche Indian land in this area that can not
be bought by Chilean law. This also puts a crimp on the supply of
land in the area. Expect a modest 30% to 50% increase in property
values for most properties in the area over ten years.
5. Pucon and Villarrica Real Estate Market
If there is a real estate bubble in
southern Chile, it is around Pucon and lake Villarrica. Pucon has
almost a mythical status among the Santiago's new rich as 'the place
to vacation'. Subsequently, the development to meet the demand and
the prices that go with it have also grown to mythical levels and out
of all proportion to the rest of southern Chile. It is one of the
only areas we know of in southern Chile where the real estate market
is so competitive that real estate agents poach each others
properties. There is a lot of turnover in real estate as people from
Santiago buy property or vacation homes for a summer, can not afford
keep them up in the down season, then place them back on the market
at a much higher price than they payed. This property is often sold
directly in the national paper to others from the Santiago region, at
Santiago Los Condes real estate prices.
This cultural fascination with Pucon
should keep the property prices in a relatively stable climb for a
few more years. Our concern here is that the big real estate
investors have already moved on to greener pastures in Southern
Chile. Very few foreigners are attracted to the area as they were say
ten years ago, and even domestic demand has wained as new areas are
developed for Chileans to vacation. That topped with the problem of
Pucon being an active volcanic red zone that has been destroyed in
the past, literally makes this one of the hottest real estate market
in Chile . The old rich in Chile tend to set the investment and
vacationing trends for the new rich to follow. We would expect this
bubble to burst in grand style within five to ten years, but there is
still some returns on an investment for a few more years to come.
The Chile Real Estate Market Overall
We will continue to add to and revise
this list as the market changes in Southern Chile. One thing to
consider is the exchange rate for foreigners wanting to invest.
Consider that with the boom in Chilean copper prices and other
expansions in the economy, Chile's peso has gained about 25% on the
U.S. dollar in the last five years. These are gains that are expected
to stay with the Chilean peso going forward. Also remember, that in
any hot real estate market there are a million other variables to
consider before buying. Do your homework on each and every property.
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