New homes, new cars, new televisions and refrigerators. Rising incomes and renewed optimism. Those are the trappings of a growing middle-class. It happened in the U.S. in the 1950′s. It happened in Brazil over the past decade (particularly in the Northeast since 2007.) And it’s happening somewhere else in Latin America right now. That’s a big deal if you’re looking for a real estate market at the start of an uptrend.
First, a brief history lesson.
Brazil’s best beaches are in the Northeast and that’s where the new middle class from the populous south come to vacation or retire. Cities like Fortaleza are fast emerging as global trade and manufacturing hubs.
Those of us who have bought condos here have seen values rise year after year. For example, the type of condo I recommended to members of Real Estate Trend Alert would have cost $85,000 three-and-a-half years ago. Six months ago this condo could have sold for $176,500.
Move jobs in Brazil and you can expect up to a 50% pay rise. Quality condos in good locations are snapped up by young professionals. Investors buy to offer rentals to the newly economically and socially mobile. Retirees and families want a condo at the beach.
Foreign buyers and sellers are few and far between. That gives us a distinct advantage. This market has been, and continues to be, driven by the rise of Brazil’s middle class.
That why, when you follow the new middle class, and buy quality real estate in areas where supply can’t sprawl…you’ll do well.
On Wall Street they call Colombia “the next Brazil”. Demographics (with a young population) are in its favor. They have gold, oil and hydroelectric power. They grow coffee and forests as well as anywhere. Debt levels are low. After two decades of liberalizations their government is one of the most forward and outward looking in the region.
The income of the average Colombian has doubled in less than a decade. Roads are tightly packed with cars, many new. Colombians who worked abroad are returning with money and skills. Expat hang-outs are packed with Canadian and European resource contractors.
Over the next decade, $100 billion is slated for a badly needed infrastructure plan. Roads, airports…and even an $8 billion Chinese-funded railway that will compete with the Panama canal.
Colombia’s middle class is on the up. The rich are getting even richer.
I’ve seen it all before, of course, in Brazil. That’s how I can recognize the profit opportunity in Colombia.
The best opportunity is in Medellin, especially in two upper middle class neighborhoods.
Internationally, parts of Colombia still suffer a serious case of “old news” when it comes to stories about the cartels. This reputation couldn’t be further from what I found in the Il Poblado and Golden Mile areas.
There’s a real cafe culture here. Like you’ll find in a leafy European city. But you get to sip your coffee or dine outside year-round. Scorching summer heat or cool winters won’t cramp your style, since the perfect weather (Medellin sits at 5,000 feet) only varies by one degree all year.
You’ll find great restaurants, trendy bars and fancy boutiques. Minutes away from Il Pobaldo the Golden Mile (as it is known) of banks, offices, boutiques and outdoor eateries is buzzing and humming with traffic and commerce.
This area of Medellin is the place to be…and, to invest.
You can feel and see a growing, confident city. Multinationals like Hewlett-Packard are making Medellin their home. Domestic Medellin-based multinationals are strong in cement, financial services and food products.
Real estate prices are among the lowest of any place on my beat, let alone leafy upper middle-class neighborhoods in a city with so much activity and potential.
With prices as low as $100,000 for a 1,000-square-foot condo, the price reflects Medellin’s past. (Real estate here sells in Colombian pesos. So, you are also getting diversification from your dollar.) Not her present or future potential. You can net 8% from a rental here. And you are buying so cheap that as the middle class grows, values will likely increase.
Buy a condo here. Roll your rent into an interest-earning local bank account. Come back in five years. I expect you will be happy with what you find.
*About the author: Ronan McMahon is a director of Pathfinder, IL’s preferred real estate advertiser.
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