Since 2010 the housing market in Peru has made a strong comeback, and it is now considered to be ‘hot!’ Not surprisingly, as there was 8.8% GDP growth in 2010, followed by 6.9% economic growth in 2011 (figures from Central Reserve Bank of Peru (BCRP)).
The average price of homes sold in Lima Metropolitan Area rose 19.9% in 2011, to 262,043 Soles (US$ 99,449), according to Peru Tinsa, though this may partly reflect a change in the composition of home sales, there is no house price index in Peru. In 2011, residential sales were up by 52.2% on the previous year to 6,000 million Soles, according to Tinsa, with a 31.57% increase in area sold.
In 2012, the housing market is likely to continue strong, with the help of lower mortgage rates, improved public investment and Peru’s economic strength.
In January 2012, GDP was up 5.38% from the same period last year, Peru’s 29th consecutive month of economic expansion, according to the Central Reserve Bank of Peru (BCRP), and GDP is projected to expand by 5.7% in 2012.
At the heart of this was China’s booming demand for raw materials, like copper and other metals. Peru’s exports have also been protected from too much currency appreciation, due to frequent intervention by the BCRP.
Gross rental yields on prime residential property in central Lima are high, but have been falling over the last few years. The fall seems to reflect lower rentals, rather than increase in prices of residential property, no doubt reflecting the large amounts of new properties released into the market.
The continued appreciation of Peruvian Nuevo Sol (PEN) should have pushed rents up, as high-end rental prices are typically set in US dollars, but this seems not to have happened.
Only Chile is now considered a more hospitable environment for investment in the region than Peru. Even during the global crisis of 2009, Peru managed GDP growth of 0.9%. Exports have been helped by high international prices for Peru’s commodities, and lower exporting costs, averaging US$ 590 per container.
Peru continues to attract inward investment, given its low costs and economic dynamism. The absolute poverty rate has shrunk over the past 10 years from 53% to 31%, a considerable achievement.
Peru, while it might not be ready for prime time yet, could be a place to expand into in the future.