Medellin real estate prices peaking? Risky time to buy?

Man Tequila says on Aug 17, 2008, 14:55:

Be suspicious of anyone who cliams real estate will never fall. It's been said before.

Aunque no me creas/ si me lo propongo/ lograre olvidarte/ porque a fin de cuentas/ no soy tan cobarde./ Y termino todo una de estas tardes/ no sera dificil buscar algún sitio donde refugiarme/ donde nunca mas vuelvas a encontrarme. (Polo Montañez)

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Ctg Bound says on Aug 17, 2008, 15:02:

joelg,

Some area are over valued in Medellin others not, I wouldn't invest in certain areas.

As to real estate nevering falling in value, how many times have we heard that one.

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Gringo Spy says on Aug 17, 2008, 15:40:

I bought last year and have invested in Medellin again this year and I would keep buying if the right opportunity presented itself.

Not sure where CB gets his/her information as to specific areas "over valued in Medellin others not". I'd be very curious to know his/her source or basis of this information.

Think supply and demand and of course location, location, location. You also need to access your goals as well. Are you in it for a long term hold or short term? Is it a residence or rental or both?

My personal approach to purchasing real estate anywhere in the world is, if it doesn't create income, don't buy it. Although you may want to modify this approach if it's your one and only permanent residence.

It's always risky buying real estate. Sometimes the risk are greater than others but if you don't take the risk you will never realize the reward. Your job is to minimize the risk and maximize the reward. If this was easy everyone here on PBH would be gazillionaires. Simply do your due diligence and don't be afraid to take some risk and then pull the trigger. Don't sit back and wait and wait or you will end up like one the other members here on PBH who after a year still hasn't pulled the trigger because he's waiting for the stars to align just perfect. In the mean time he has lost money by not buying when he should have a year ago.

Don't hold your breath waiting for the COP to weaken against the USD to 2100 or above, it's not going to happen anytime soon.

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joelg says on Aug 17, 2008, 15:52:

hey gringo spy, i think your reply was right on. i want it as a residence, maybe rent one room out, and it has a separate section where i could have my chiropractic office or rent it out to a small business. i am a general contractor, so the remodeling part doesn't concern me. i just think they are asking too much. house has been on the market since january. you available to email/talk on the phone?

do what you like, take risks, build something

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Ctg Bound says on Aug 17, 2008, 16:01:

Gringo Spy,

My sources are my eyes and ears and who has been buying real estate in Medellin since 2003.

Doesn't mean I am correct though, just my view.

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joelg says on Aug 17, 2008, 16:04:

Ctg bound, so which areas do you think are overvalued, where you wouldn't buy?

do what you like, take risks, build something

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Gringo Spy says on Aug 17, 2008, 16:05:

Thanks CB. I'm always curious to know where people get their information, who knows it just might be helpful for me someday. I understand about the "eyes and ears" as I too use them frequently.

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joelg says on Aug 17, 2008, 16:15:

ctg bound, gringo spy:

so everybody and their mother wants to be my comisionista. do i need one? i don't think so. i know i need a lawyer because i will use the investment to get my investor's visa. any comments about that?

do what you like, take risks, build something

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Gringo Spy says on Aug 17, 2008, 16:15:

joelg: One thing that I have found when purchasing real estate outside of the United States is many times people put asking prices that make no sense. They will ask a certain price not based upon comparables but based upon some other criteria. For example; I wanted to purchase this little house in Mexico for one of my employees to live and the guy selling it was asking X price for it. I asked him why he was asking X when everything in the area was substantially less. His reply was that he wanted to purchase a truck (tractor trailer rig) and that's what he needed to buy the truck. So be forewarned the asking price is not always based upon the value on the property being sold it often times is based upon the property the seller wants to buy. Do your due diligence.

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joelg says on Aug 17, 2008, 16:22:

gringo spy: been doing due diligence. a house i'm looking at has an avaluo of 275, they were asking 260, willing to go down to 255. a colombian friend raised in the same neighborhood and civil engineer/general contractor who went to the house with me says it's worth 230. it's worth 255 to me, just don't like overpaying. is the avaluo of value here? or are they inflated?

do what you like, take risks, build something

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Ctg Bound says on Aug 17, 2008, 16:26:

joelg,

I can't claim knowledge of the whole of Medellin, only areas I have looked at over the years and still look at, I am more interested in looking at areas that I think are undervalued, so if I see heavy apprecation in an area I generally mark it down unless I think there is going to be high future apprecation for some reason/s.

El Poblado & Sabaneta are two over valued areas in my view.

It doesn't mean you can't find good deals in each area.

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Gringo Spy says on Aug 17, 2008, 16:30:

I would not take one persons opinion for gospel although I would certainly value his/her opinion especially if they are knowledgeable in that area. I have no first hand knowledge of appraisals in Medello as far as if they are inflated or not. If it's worth 255 to you... buy it!

For what it's worth all of my investments have been made in El Poblado.

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fecherklyn says on Aug 17, 2008, 16:30:

Joelg,

I feel Gringo Spy's comments are very valid. Hope the following few comments may be of use ae well.

I have been living in Medellin for a little over 5 years and have bought and sold a handful of properties. More to the point I presently have a very nice apartment on sale which is "sticking"....and not because it is overpriced.

The real estate agents I am dealing with are agreeing the market is becoming/has become "becalmed". There are plenty of properties on sale and very few prospective buyers around.

It is worth knowing as well that the local markets are surprisingly small/illiquid. I saw some statistics recently (but forget where) that the total number of sales/purchases in ANTIOQUIA in 2007 was very small (to my mind; only a couple of thousands). Most of this activity has been in NEW CONSTRUCTIONS which have driven the price levels to what may now constitute a "resistance" level.

Activity in old/used properties has suffered in comparison to the new developments over the last few years but this may be about to change as the disproportion between the price levels attracts buyers back to the old.

Finally, except for the very rich, few buyers have had the luxury of buying properties before realising the sales proceeds from their original property. This has always created a situation in Medellin (if not throughout Colombia) of property transactions being of excruciatingly long duration (because long chains of property transactions get held up by a solitary unrealised sale). To avoid this difficulty the market increasingly resorts to alternative mechanisms involving deferred payments, or swops involving everything from other properties, cars...to washing machines and household goods.

I am experiencing these factors now. I have received numerous expressions of interest, several formalised offers..all of which were dependent upon them realising a sale themselves. We are still waiting.

Not the best time to buy in my opinion UNLESS it makes financial sense to you on a personal residence basis.

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joelg says on Aug 17, 2008, 16:41:

to fecherklyn:
thanks for confirming some hunches i've had (hunches cuz i can't find hard data). the illiquidity cuts both ways though, so it should give me leverage as a cash-in-hand buyer. my instincts tell me wait...see where the dollar goes and give sellers time to realize the medellin market is cooling. i plan to pull the trigger by early feb.

do what you like, take risks, build something

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Gringo Spy says on Aug 17, 2008, 16:45:

I should qualify my comments above. I purchased one apto. for a residence/rental but my other investments are commercial real estate, development to be exact. Sometime next year I plan to buy a finca. Not sure where just yet, still doing my homework but it will be a working ranch for sure.

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fecherklyn says on Aug 17, 2008, 16:49:

Joelg,

You are right...the situation is to your advantage if you are a buyer...it is presently a buyers's market. But your question was is Medellin currently a good investment. I personally feel the best moment for foreigners to invest in Colombian property (except exceptional opportunities) has past for a while.

Of course, if we knew where the US$/COP rate was heading the answers would be a lot simpler.

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panthdave says on Aug 17, 2008, 17:00:

I agree....well..take that back there are areas that are reasonable to me still..I am not an investor when I buy I am going to live in that house unless I have a life changing situation...so not looking to make an extra buck but don't want to overpay either and be upside down on my loan like many are now here in the States well in S.Florida..

panthdave Miami

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gringoloid says on Aug 17, 2008, 17:16:

ain't that right fech...........man if i knew the exchange rate for 1 year from today.........that would make all the difference.

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LPwill says on Aug 17, 2008, 17:28:

fecherklyn says on Aug 17 (today): flag

"Most of this activity has been in NEW CONSTRUCTIONS which have driven the price levels to what may now constitute a "resistance" level."
.........................

And now many are sucking canal water.

Wait a bit, prices will fall as many will choke on the inflated prices they are asking.

Just as an example, San Fernando Plaza had very little for sale or for rentals 6 months ago. Now they are coming on the market everyday. At inflated prices, no less.

Hunker down in the grass, watching your prey, continually inching forward and pick your number at which you attack.

Sounds like you are emotionally attached to this property. If its only an investment, go to rehab and lose your emotional attachment. However, you are going to live, work, rent, etc, etc..........so make your offer now as its not only about numbers to you. You have a "happiness" factor to think of with larger plans for the space other than as only an investment. Nothing wrong with making an offer. All they can do is say no. Then let them sit and come back in 4 months. I bet they say yes, after the US elections and Obama gives new hope to a depressed country.

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LPwill says on Aug 17, 2008, 17:30:

G-Loid if Obama gets in, you will see the dollar overtake the Euro by about .15 cents in the next 15 months.

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RobertInMedellin says on Aug 17, 2008, 17:31:

I've looked at a good number of rental properties over the last few months and I was told a couple of times that the only reason the owner had decided to put a property up for sale was because he wasn't able to sell it. The market in Medellin reminds me a lot of Miami 1.5 years ago: The locals are still enthusiastic, there is construction everywhere (a red flag!), but sales are already slowing. In my opinion with declining demand and increasing supply it's just a question of time until prices will start dropping. Real Estate is cyclical (so much about "prices can only go up"...), and I believe we're at the end of the expansion in Medellin. One difference between Miami and here is that there is less speculative buying here. People actually have to come up with REAL money to buy property. The other big unknown is drug money. Real Estate seems to be a common way of money laundry. I'm holding off for now. It might be a buyers market, just as California was already a buyers market one year ago, but prices have not come down yet. I'm looking forward to buy in ~2 years. Just my 5 cents worth.

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gringoloid says on Aug 17, 2008, 17:41:

LPwill............euro doesn't matter to me anymore, i don't own a single one,.....sold out about 3 weeks ago and then shorted it. It's the dollar/peso exchange i'm wondering about.

LP, you must not know me.........i don't believe obama has anything to do with it.........it s the Federal Reserve and the European Central Bank that run the respective economies.

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joelg says on Aug 17, 2008, 17:50:

LPwill: i agree with you. i'm planning to offer 20% below asking and then sit tight until next year. at which point for me personally it will make more sense to buy than rent.

do what you like, take risks, build something

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jonny305 says on Aug 17, 2008, 17:57:

buy now if you can prices still going up in colombia but still cheaper than buying in europe

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fecherklyn says on Aug 17, 2008, 18:04:

Jonny,

Of course prices are still cheaper in Colombia than Europe (or the USA). What would you expect when there is still such an enormous differential between income levels and construction costs?

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LPwill says on Aug 17, 2008, 18:11:

You won't have to wait that long. If they don't take it now, they will in not too long.

G-Loid, I am of the mind that everything effects the other and after the election and Obama is in, the "perception" that prosperous times are not too far in front of America, that the dollar will rebound drastically against all currencies in the world.

As soon as the new gardener takes over, there will be a plentiful Spring with new growth.

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pedro says on Aug 17, 2008, 18:18:

I did buy something in Medellin very recently.

A couple of times, I saw attractive properties selling within one to two weeks of being advertised.

The difference between my situation and yours -- I was converting from Euros. I was happy to lock in the current rate.

If you are converting dollars, that's a whole different story. I get the feeling most of the reluctance is not to do with Medellin prices, but the USD/COP exchange rate.

que nota!

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fecherklyn says on Aug 17, 2008, 18:32:

Pedro,

"I get the feeling most of the reluctance is not to do with Medellin prices, but the USD/COP exchange rate".

I'm definately not an expert but I am not convinced with your above logic. Some property purchasers in Medellin may be interested in X.rates but most are local players.

What I feel is more relevant is how much "depth" the market has. Is there a middle class who own property? Are there many 1st time buyers? What are the ratios of disposable income to property prices? Etc. Unfortunately if my understanding of the above features is correct...then there is little "depth" to the market and spread of prices is dishearteningly wide (one can buy a NEW apartment from around 40 million COP whereas the prices for prime property (new) goes up to 4 million COP/m2...and more. These price ranges are, to my mind, unhealthy and an efficient market economy will only really exist when there are more players.

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pedro says on Aug 17, 2008, 18:45:

Fech, allow me to try and phrase that a bit better.

I get the feeling most of the reluctance *among PBHers to buy right now* is not to do with Medellin prices, but the USD/COP exchange rate.

I only base that on my conversations with various PBHers who are waiting it out right now. If I had dollars to invest in only one Medellin property that represented a large chunk of my life savings, I'd probably do the same.

que nota!

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gringoloid says on Aug 17, 2008, 18:59:

are you taking into account the ratcheting down of the colombian economy and the effect that this will have on liquidity? ctg bound and I had a good discussion about this here:

http://poorbuthappy.com/colombia/post/colombias-july-crude-oil-output-...

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bufalo says on Aug 17, 2008, 20:00:

Here's an idea. Offer your 20% less of asking price. Then have several groups of people you know stop by and offer 30% less of asking price. The'll think their property is worth a lot less, then take you up on your offer.

Makes sense?

"If you don't like it - lump it, take it down the road and dump it." - Archie Bunker played by Carroll O'Connor

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joelg says on Aug 17, 2008, 20:46:

Makes sense, have thought about it. it's an old trick. a little underhanded and a bit transparent and can't quite get myself to engage in such behavior. the owners seem to be decent people (although they continue to exaggerate the square footage even after their error was pointed out to them) and i'd rather let market forces convince them rather than use blatant manipulation. also, if they found out what i had done they would probably raise the price or sell to anyone but me (have learned this by pulling stupid stunts in the past). karma usually rules

do what you like, take risks, build something

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Lipper says on Aug 17, 2008, 20:53:

as someone said above..........you are too emotional........too much communications..........they know they have a pigeon on the hook.....pay the price. You are like a Gringo looking for Colombiana trim.

I say, keep your money safe, you are not in a state of mind to make rational decisions.

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tejasmarcos says on Aug 18, 2008, 07:26:

market forces do not work here folks. this is the bizarro world. i have found it is rare for a seller to accept less than 10% of the asking price on a normal property that needs no refurbishing.

- if a property is slow to sell here in medellin, they raise the price...

trying to walk a straight line on sour mash and cheap wine...

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morphus says on Aug 18, 2008, 08:11:

"I don't want to buy at the top of the market and then lose a bundle if I want to sell in a few years"

It does'nt matter what the peso and dollar are doing. Real Estate in Colombia loses value as it gets old anyway. Even if the place does'nt collapse in a few years, nobody will want to buy it. New buildings go up every day in Medellin. People would rather buy a new apartment for the same price.

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joelg says on Aug 18, 2008, 09:41:

are there PBHers with experience in fixer uppers? i am looking for a fixer-upper because i can do the work myself, something maybe 20-30 years old. it seems fixer-uppers in the 200-400 million price range are not selling. i am not looking to flip the place, plan to live there.

do what you like, take risks, build something

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nbenjamin says on Aug 18, 2008, 10:29:

Property prices in Medellin are bizarre. I have been looking at property there tentatively. I am looking at a Finca in Rio or an apartment in a nicer neighborhood like Laureles or Poblado.

The pricing is all over the place. You can see fairly comparable condos for sale in Poblado and find that the prices from one to the next can almost double even though the apartments are bother 4 and 4. It makes no sense. Another thing you will notice is people cannot come up with cash so they often throw in barter material such as cars and washing machines all kinds of stuff to purchase a house. One thing is for sure, Colombia is twice or three times the price of Ecuador, Peru or Panama. And the question is why? Is the economy that much better. The price of property almost doubles in Colombia.

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morphus says on Aug 18, 2008, 10:37:

In Lima, Peru you can buy a brand new 2 bedroom apartment for under 20K in the best part of town. Why pay all this money to live in Medellin? Lima is much more gringo friendly, has better food, great weather and beaches close by.

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viajero123 (☼Travelguide writer) says on Aug 18, 2008, 10:43:

nbenjamin says on Aug 18, 2008, 11:05:

Lima is not that cheap. A friend of mine just bought a 2 and 1 for about 70 grand.

But lima? - man I am not a big fan of peru, especially lima. Weather night life is not that great. And lets face it, you cant beat colombia for the people.

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billyb says on Aug 18, 2008, 11:09:

20K sounds awful cheap, even for Lima. Can you post a link to those apts, Morph?

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morphus says on Aug 18, 2008, 11:13:

"Lima is not that cheap. A friend of mine just bought a 2 and 1 for about 70 grand"

He got ass raped without the lube...LOL

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morphus says on Aug 18, 2008, 11:17:

"20K sounds awful cheap, even for Lima. Can you post a link to those apts, Morph?"

Check out mundoanuncio.com

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nbenjamin says on Aug 18, 2008, 11:20:

"he got ass raped without the lube...LOL"

That comment was unnecessary. Actually, he is peruvian, and knows what he is doing as half his family lives there and another half lives here in Los Angeles. I am sure he did not.

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morphus says on Aug 18, 2008, 11:25:

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morphus says on Aug 18, 2008, 11:26:

Hey, you're calling them all unattractive...is that any worse?

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nine inch nails says on Aug 20, 2008, 11:42:

Look real nice to me. Are they in a decent area?

I love that sweet pretty house music, house music....

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