Property pricing in Colombia. Is there any logic?

sloopskipper says on Feb 17, 2008, 15:41:

Is there a property tax exoneration issue? Although it is being phased out, the newest, and soon to be completed houses and apartments here in Panamá qualify for, up to, 20 years exoneration, while my 13 YO apartmment only has 7 years remaining.

Although I am sure there is normally a disparity between the new and 10-20YO structures, with extra features, better materials (like marble, quartz, and granite) higher ceilings, more glass, etc.

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fecherklyn says on Feb 17, 2008, 16:02:

Sloop,

Not sure about the property tax issue in Colombia, but I agree if exoneration exists it could be relevant to the discussion.

But I am not sure I agree with your comments on structural differences between new and old. My experience has been to the contrary with the older structures often being of a superior quality to the new. Our old apartment in the centre has marble and exotic wood parquet flooring and inter-apartment insulation which left us in total privacy. Our latest apartment benefits from tv/radio cost economies (we can listen to next door's) and listen to their bed creak as they get into it.

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sloopskipper says on Feb 17, 2008, 16:18:

JAJA, you can only hear when they GET INTO bed. You must have old neighbors.

But are you talking about new apartments compared to 12 years old, or much older? I don't think that is generally the case here, except for a 20-some YO structure near me that belonged to Noriega. It was sealed shortly after he left, and is gorgeous, with 300m+ apartments with almost total glass and a much better Pacific view than I have.

But appliances and fixtures are somewhat dated, although never used.

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tomtom33 says on Feb 17, 2008, 16:27:

Damned if I know. But I doubt if you'll see me buy anything new any time soon. So far I have purchased 2 apartments and one house in 5 years in Colombia. The newest has been maybe 20 years old.

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sloopskipper says on Feb 17, 2008, 16:36:

Tell me about it. I am facing a falling $, rising COP, an increased real estate prices there, and the stock market has turned against me.

But, for step one, I hope to find a small, rentable, beachfront apartment in Cartagena. Then I can spend more time there and see how agreeable life in Colombia would be for me.

I have somewhat reputable advice that my 146m apt has appreciated from $93K to, at least, 150 in 18 months. So, if and when, I should come out OK.

I doubt that I will seek anything new, especially when I hear what you say.

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fecherklyn says on Feb 17, 2008, 17:11:

Sloop,

Yeah, I don't suppose there is a valid general rule about the quality of old v/s new. I know my wife swears by "traditional" construction, whatever that is, as opposed to the "plywood" modern models (unless you pay a fortune).

It also depends on where we are talking about. Medellin (particularly Poblado), is supposedly undermined by subteranium rivers which scare the life out of me when I get neck-ache looking at 25th floor penthouses. How much truth there is in all this I don't know.

As to the rising COP, I think most of us "expatriates" have similar concerns. In this context, I take the view that as somebody who intends to stay here long term I reason I hedge my risks better by getting involved in the local economy. So far, it has been swings and roudabouts for me; unrealised capital gains on rapidly appreciating COP property investments versus a declining ability of my "offshore" incomes to pay for my local cost of living.

In the end I think you need to "want to stay in Colombia".

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wendell13 says on Feb 17, 2008, 19:42:

You are talking "paper profits".....you haven't gained anything until you sell it.
Try getting a home equity loan on your property and see what the bank says.

I have the same concerns as most other expatriates here.

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tomtom33 says on Feb 18, 2008, 03:18:

You really have to want to stay here. Some have just thrown up their hands and said, "Fuck it," on their way out.

The subterranean rivers seem to run beneath my apartment in Conquistadores as well. And then there are the fault lines. There is another problem in Medellín. The chlorine in the city water seems to eat the water pipes. There was no PVC 20 years ago.

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Ctg Bound says on Feb 18, 2008, 06:14:

fecherklyn, you don't really need to ask why new property is valued more than older ones of equal condition, just be aware of it.

If you are planning on not selling I wouldn't buy new based on investment values (obviously you might really like the place, which then doesn't count), but if you are just going to live there a few years and then move on, buy new and sell it, you will make more than buying older properties and doing them up.

The latter is presuming there are no downturns in the property market.

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judgeschmails says on Feb 18, 2008, 08:36:

I bought my place in Poblado in December 2006. It is 20 years old. Me refurbished it and now it is unbeleivable. It costs us almost nothing to redo the apartment. I tend to agree with the people who say the old construction is of a very high quality. There is new stuff being built is impressive in many aspects, but with so much good construction still out there, I agree....no vale la pena.

I paid less the benchamrk at the time of negotiation in August of 2006 of one million per square meter . Is it true that now it is almost 2 million per square in Pobaldo???? Ahh, what do I care. I am not selling. And paper profits are meaningless as was already stated. But I do agree, why buy new when old is still well built, and if you want something new in the place such as floors or something like that, labor is still cheap.

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Mr. Hollywood says on Feb 18, 2008, 08:54:

I've always thought it said something about how Colombians perceive the life expectancy of property that it depreciates so quickly with age. Compare, for example, the giant premium people will pay in NYC for "prewar" buildings vs. the huge depreciation of even a 5 year old building in Bogota or Medellin. Maybe they know something we don't. Are all these condos going to be ready to tear down after 25 or 30 years? Does the upkeep skyrocket after 10 years?

I don't know. But that seems worth asking.

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LDW says on Feb 18, 2008, 09:01:

When we think about property in Colombia, or anywhere else outside our home country, a person's age should be a basic consideration as to whether one buys it or not. My Colombian wife and I are in our 60's (so I am guessing that we are older than most participants in this blog). So my thought process on this whole issue has evolved differently.

My wife has been in Canada for more than half her life. Our kids are to this country born, and feel no real solid ties to Colombia other than the occasional visit.

We plan to spend the winters in Armenia and Valle del Cauca. Should we buy? I think not. Consider the following:

(1) We are not going to live forever.
(2) We already know people who have built swanky retirement places in North America whose places are sitting empty because their elderly owners are either dead or in nursing homes.
(3) In many cases those swanky retirement places have little or no daily use from their kids because too often they are too far away to make regular use of them.

So I ask myself:

(1) Why the bloody hell should I buy anything outside my country?
(2) What will be the succession (inheritance) issues for our kids when we are gone?
(3) If they do inherit something from us that is located in Colombia, what use would it be to them? How secure would it be if they don't live there?

We will be spending winters in Armenia and Valle del Cauca starting in November 2009. We have relatives with large homes. We are just going to give them a few hundred bucks each month to stay there, and then come back to Canada each April. I will be playing my golf, eating my fresh pineapple, and enjoying life. We don't have to buy any property. We don't have to furnish anything we rent. We don't have to worry about it when we are gone.

We will just keep it simple.

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Frank Rizzo says on Feb 18, 2008, 09:05:

i dunno judge, the labor is cheap but the quality is very, very poor in most instances if you don't ride their back. If you're expecting high quality work without riding their back i'd say you won't get it. You get what you pay for, in my experience you have to ride them daily for quality. I'm a perfectionist on remodeling though...most people don't go through the pain I do for a perfect job.....and they'll live longer for it...jajajajajaaaa

Mr. Hollywood....the construction si basically the same, re-inforced concrete with wire tied rebar in concrete. Inner vertical columns in everything below 15 stories...with decreasing dimater as you rise......these are very stable....the taller buildings typically use tensioned cable construction where the cables and outer support I or H beams supporting the weight and the concrete floors and ceilings are there to support the weight of the furniture and people as well as keep the outer beams apart....(standard in the US too)...

I think the cost of the buildings goes down as the occupancy goes down... Additionally, the home owners are slow to approve increases in administration to keep up with raising costs of up-keep....therefore NEW buildings ...have newer owners that have admin. costs that are more in-line with the current up keep...as well as higher occupancy...and a new structure to start with... just my observation. i've got no proof that this is the case...

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LDW says on Feb 18, 2008, 09:11:

Frank:

Good point. I am not even a builder and I can spot that shoddy workmanship in many places in Colombia, which further reinforces my thought process given above.

BTW...many Colombians I know in Canada who are our age think the same way about this issue as I do.

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miamimike says on Feb 18, 2008, 10:24:

LDW-You make a Valid Point about Renting versus Buying! A Lot Cheaper in the Long Run!

My Avatar-- Sarah Palin Says " "You know the difference between a pit bull and a hockey mom?? Lipstick!" Now on a Short Verbal Tether by the Honorable John McCain

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LDW says on Feb 18, 2008, 10:46:

miamimike:

I think my point still stands even if a person is wealthy enough to own property in both places. We all get older, and we all die. Perhaps, being in my 60's, I am more conscious of this than many of the younger participants in this blog.

Our kids grow up. Where are they going to be and what will they be doing with their lives? If our kids stay in Canada (as ours almost certainly will) and we buy property and die in Colombia, what then?

This is what I wrote to azunoman in another thread:

When your kids are grown, your wife will probably want to be wherever they are. Colombian mothers are like that. If your grown kids move back to the US, your wife will most likely want to follow them. Having grown kids in Canada is the reason my wife will not move to Colombia full time, and is a central reason why my thought process has evolved to what I have described above in this thread.

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Frank Rizzo says on Feb 18, 2008, 10:59:

That's a personal issue LDW..... I don't like living in another persons house....so renting does not work for me....to each his own....that's for sure..

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LDW says on Feb 18, 2008, 11:08:

Well Frank:

I expect to be on the golf course in Armenia most of the time. Furthermore, in my wife's extended family in Valle del Cauca ( small town there), members of her gigantic extended family are all the time wandering in and out of each others' homes as if they own them. Thirdly, the house we will be at in Armenia is huge and belongs to my wife's widowed cousin, who except for her grandson, is all alone anyway. What we will be paying her will probably amount to paying for the wages of her 2 maids. And most importantly, we will be there for less than half the year. Having grown kids in Canada, my wife is not prepared to spend any more time than that in Colombia in any case.

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Frank Rizzo says on Feb 18, 2008, 11:12:

I completely understand that...and in those circumstances...i'd probably do the exact same thing..... it's family.....sounds like a good plan LDW !!!

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miamimike says on Feb 18, 2008, 11:13:

Frank-in Colombia, for Americans, I think in many cases it pays to rent. Not to forget security, if you want to move every year or so uptown, west of town wherever, you just pack up and leave when your time is up. No mess, no fuss. No as far as staying in someone's house WITHOUT a Private entrance/Exit, I could not tolerate this either, if that's what you mean. I stayed 2 weeks with a Bogota Family and as nice as they were, they drove me crazy, hovering over me 24/7, watching my every move and mouthfull when I ate. I know they meant well, but its overboard for me so give me a private apartment. Each to his own but owning has its own set of hassles also,,,,

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LDW says on Feb 18, 2008, 11:16:

Frank:

Just a footnote to what I last wrote:

If we bought a house in my wife's small town in Valle del Cauca, there would be several other downsides for me:

(1) The weather there is too hot. Armenia is better.
(2) We will actually have less privacy because my wife's huge extended family is all there. They will move right in, especially when we are gone.
(3) Her town is too bloody far away from a golf course.

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miamimike says on Feb 18, 2008, 11:21:

Rubito--new construction is NOT always cheaper in all cases ; when you get to remodeling older homes in many of our larger cities, by the time you get done with rewiring, re-plumbing, repoving old Radiator heat Runs ect it can be much more costly. Not to mention, if you have any OLD asbestos or leaded Paint to remove and discard, Old Home remodeling may end up costing a lot more. Then if you get into Historic Neighborhoods where you have those Protective Covenants(restore to original), they can drain your wallet in a New York Minute,,,

My Avatar-- Sarah Palin Says " "You know the difference between a pit bull and a hockey mom?? Lipstick!" Now on a Short Verbal Tether by the Honorable John McCain

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Frank Rizzo says on Feb 18, 2008, 11:25:

Enjoy your golf LDW.....sounds like you've got a good plan....Like Art said..i'm a workaholic and no se when/if i can ever retire....jajajaa

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aztec says on Feb 18, 2008, 11:33:

LDW, Close but you are not the oldest.

In response to your comments about buying in Colombia we went through some of the same thought processes. Even contracted to purchase a house from Pedro Gomez. Couldn't deliver in time frame so contract was canceled.

Since that time we have determined, for a number of reasons, in our case it is much wiser to rent. After a year or two you will have a much better idea of what is best for your situation.

Your concern about inheritances raised complicated questions but not insoluble ones. Children and property in Colombia will not be handled in the some way as you might experience in Canada. A good Colombian lawyer is necessary.

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Frank Rizzo says on Feb 18, 2008, 11:56:

Aztec's right LDW....the laws are different...

i'm no lawyer..though, have some good ones.... only relating what we did here.....again i'm no lawyer.....please get your own and just ask him about this.......you can form an associdad and separate out shares and signers... as well as the poder general....if your kids don't fight...it's somewhat easy to have a perpetual plan that exits you on your death and allows them just to continue the corp. and elect a new president with minutes. You place it that while you are living you control 51% of voting and separate out the other 49% to your children....then upon your death you allow a "minority" meeting to be held in your absence with a valid death cert. and the children's shares (the 49%) is divided up proportionally...so that their % are maintained in voting...The only purpose of the meeting is to elect new pres (the majority shareholder of the 49%) and to continue...they would have already been on bank accounts and the homes are in the name of the company...thus perpetual..

It's how we are doing it... there is no paperwork even on your death or will...since the associdad actually owns the property...the living shareholders just continue operating the business (and thus the property, cars, permits, etc)... in an everyday fashion....

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LDW says on Feb 18, 2008, 14:41:

Well aztec:

I said I reckoned that I am older than MOST in here (which seems to be true), but I was not so bold as to suggest that I am the OLDEST!! I still walk around the golf course (6 handicap), though I do look forward to going back to the tradition of using a caddy, which would be both available and affordable in Armenia.

Aztec and Frank, you are both right. One would be wise to hire a good lawyer, on the presupposition that one would consider property acquisition a good idea to begin with. It is that initial question that our age and our Canadian resident children answer with a clear "NO".

I am aware that a society or corporation can be formed. That is a method that even many local service clubs use here (like Rotary) to provide legal protection and continuity. But I would not want to get into any quagmire that may involve taxation in a foreign country, and even if our kids were members or shareholders of such an entity, there would still be the question of what practical use such a foreign property would be to them. More than likely, some member of my wife's extended family would squat there and have free accomodation.

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aztec says on Feb 18, 2008, 16:12:

Frank Rizzo, why didn't you carry the incorporation one step further and incorporate in Panama? US citizens still need to report the corp when doing their taxes.

LDW anyone with a six handicap is way too good for me regardless of age. As a relatively new comer to the Game I struggle.

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Frank Rizzo says on Feb 18, 2008, 17:12:

ahhh...never thought of it Aztec...thanks for the info...does that help me??? Thanks..

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Buongone says on Feb 18, 2008, 23:52:

LDW, what's the Golf Course like in Armenia?

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LDW says on Feb 19, 2008, 08:39:

Buongone:

Actually, I haven't played it yet. I have seen it, but I haven't played it. It looks to be a nice one. I have also seen (but not played) the Club Campestre in Cali. That is really a swanky place, but I prefer the weather in Armenia.

I haven't even taken my clubs to Colombia yet on any trip that I have taken there.

My day is coming.

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aztec says on Feb 19, 2008, 10:25:

Spent a week at Club Campestre in Cali. Brother in law put us up in one of the club hotel rooms. You will have to see the course early in the morning! Weather is perfect and view marvelous.

http://www.campestrecali.com/

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