What type of property should you buy if you intend to be a long-term resident in Colombia, an apartment, or a house...old, or new?
During my first 9 years in Medellin, there was little to debate as my family and friends seemed unanimous in advising that an apartment in a secure, closed residence would best suit my security needs and I was relatively ignorant about the local property market. Then I started to wonder if a house, old or new, could not be an option? After all, houses can also be found in secure, closed residences!
My early background was Northern Europe and I have always retained fond memories of our gardens and the ease of “getting outside”, something I was beginning to miss after a latter lifetime of living in apartments. Not only was I getting a phobia with the habits of some our closer neighbours (shame on me for not appreciating their karaoke efforts at 3.am), but I was also questioning the ratio of risk between living in an apartment or a house. Of course, not every apartment neighbour was like my ex-Bedouin neighbour on the floor above, in what shall remain an unnamed Middle East country, who thought it perfectly normal to roast goats in an open barbeque in his lounge only feet above my head. In addition, surely there is less risk (fire, flooding, etc) with having one neighbour on either side of your house, than in having 20, or 30 apartments within arm’s length?
Accordingly, I looked for a house, found something I liked, and have been living in it happily these last 3 years. What I have not understood is “Why is there virtually no market in Medellin for houses (Casas)?” Equally important, “Why are used property prices so cheap in comparison with new properties?” “What is it that justifies such enormous price differentials?” The rest of this thread invites you to help me get answers to these questions.
I bought my current “used” house (1993 construction) in 2012 for almost the same price I sold my (2008 construction) apartment only a couple of hundred metres away. The big difference was thus not the locality, but the size and age of the two properties. My 4-year-old, 180-m2 apartment had permitted me to buy a 320-m2 house. I liked this “anomaly”, but I did not understand it then and I still do not understand it now. In fact, the price movements in the last 3 years have only tended to deepen the mystery. Does the fact my house is now “ancient” (22 years old) justify this enormous price differential? I decided to try to research if my own experience was representative of the general market. This was what I found.
To examine this statistically, I based my NEW property prices on data contained in the “Revista Propiedades” (Marzo 2015 edition), which is the most comprehensive listing of NEW property developments in Medellin .For OLD property prices, I used the “El Colombiana Clasificados 8.03.2015 edition. To simplify the data collection/analysis to something I could handle, I restricted the data input to that of one, specific sector of Medellin.....Poblado. Whilst Poblado is largely an estrato 6 district and has the highest property prices in Medellin, I did not think this would influence unduly the finding of my review, as what I particularly wanted to examine was the price differential between old, and new, properties. To the best of my knowledge, these price differentials do not vary much from one estrato, to another.
This is what I found:
- Currently there are 49 “proyectos” of NEW apartments in Poblado.
- The sales prices of NEW apartments range from COP 140M (30 m2) to COP 1,589M (292 m2)
- Prices per m2 for NEW apartments ranged from COP 3.2 M/m2 to COP 6.35M/m2.
- Average price for all 49 “proyectos” of NEW apartments = COP 4,652,066 per m2.
- Currently there are only 2 “proyectos” of NEW houses in Poblado.
- Average price for the 2 “proyectos” of NEW houses = COP 4,621,280 per m2.
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- Currently there are 135 “Used” apartments and 20 “Used” houses on sale in Poblado.
- The average asking price for “used” apartments = COP 2,938,441/m2.
- The average asking price for “used” houses = COP 2,984,023/m2.
Summary conclusions:
- Almost all activity is in the “apartment” sector. Virtually no NEW house/Casa development projects and very little “house sales” activity even though I still see substantial “used” housing around me. Apparently, house/casa owners tend to “stay put” and their houses appear on the market less frequently?
- Average pricing of new property is consistent at around COP 4.6M/m2 for both NEW houses, and NEW apartments. Three years ago when I sold my last apartment, the price was about COP 4.0M/m2, which suggest the NEW prices, have steadily increased.
- “Asking” prices for the sale of “Used” property is also consistent between Used houses and Used apartments, presently at around the COP 2.9M/m2.
Based on the above figures, it would appear my suspicions were confirmed, “Very significant price differentials separate new and old property in Medellin”:
- Price differential apartments = 58.3% (4,652,066/m2 v/s 2,938,441/m2)
- Price differential houses = 54.9% (4,621,280/m2 v/s 2,984,023/m2)
In fact, when I thought about it, it was probable the differentials were even larger in practice, as whilst the “New Proyecto” prices were firm, the “Old, sale Asking” prices were in all probability subject to fierce negotiations that reduced the final contract prices.
Therefore, I feel my questions are valid:
- Are Medellin’s price differentials normal (similar to those all over the world), or have they been warped in some manner?
- If they are abnormal, surely this is detrimental to the customary practice of homeowners constantly trying to upgrade over their lifetime. If purchasing a “New” property gradually becomes more and more difficult, surely this is bad?
Otherwise, I feel validated in my decision to buy a “used” house. “Yes”, I had to put some extra money into it to compensate for what I take to be the Colombian mentality of feeling preventive maintenance to be unnecessary. But now, I find I have a beautiful house, as good as new, for a fraction of the price of a comparable (if it is possible) new apartment., together with the advantages of freehold ownership of the land it stands on and less risk from inconsiderate apartment neighbours. Am I wrong? I seriously welcome other readers views.
Last moment: Just felt an earthquake (16h30, March 3rd 2015). My cup of coffee moved along the desk I am sitting at. Now I feel even better being in a house, rather than the 20th floor of a torre.
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