Investment in Venezuelan real estate market

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For a long time and with great interest I explored possibilities, compared information from different sources, searched for ways to figure out and shape conclusions about the Venezuelan real estate market.

After contacting dozens of real estate companies, both local and international, communicating with independent real estate consultants possessing a wide network of contacts, analysis of forums, blogs in Russian, English and Spanish, viewing photos, country maps – many questions remained unanswered, supporting interest to this topic.

There were suspicions that the websites of Venezuelan real estate agencies were not updated frequently, not keeping pace with the change in the exchange rate, and the villas and hotels offered for investment with a loop of the old luxury style of the 90s for millions in foreign currency caused bewilderment and lack of understanding: how much does it really cost outside “asking price “. And most importantly – what to do with such properties.

From one side we have the richest country in terms of oil resources in the world, but Venezuela has been plunged into a wandering crisis for many years. The country has the highest inflation in the world (905% since the beginning of 2019).

Two factors influenced the ongoing interest in this topic: the desire to understand (at least hypothetically) what could be done to overcome the crisis in the country and a request from a European client who wants to invest some capital in Venezuelan real estate and to wait for the situation to develop for ten years, having reconciled beforehand with a possible loss of invested funds, but at the same time make maximum attempts to calculate high risks and aimed accuracy of the investment.

My efforts were successful and finally I managed to find a person from Caracas who has been heading an asset management company with offices in three countries for 21 years, including Venezuela.

For the moment, an investor has a good opportunity to enter this market if his strategy is long-term: changes in the country can happen very soon or not soon. Everything depends on the political situation, that is extremely difficult for a long time.

At the same time, Venezuela has oil reserves, beautiful nature and many sources with the potential to generate income from.

Most of the savings of local citizens are outside the country (trillions of US dollars). Capital will return to the country later and subject to stabilization of the situation.

Real estate investment opportunities in Venezuela fall into two segments:

  1. Middle class properties. Example: twenty years ago apartment costed 100 – 120 thousand US dollars. Currently (April 2020) market price is 15 – 20 thousand respectively.
    The moment for investing is successful now, however, it will take more time to return the invested funds, since the middle class will need to take loans to purchase such apartments.
  2. Luxury real estate segment. There is less potential to grow in price so rapidly compared to the previous option, however, buyers of such properties do not need bank loans.

For example, prices for such properties can rise by 100 – 150% (less than middle-class real estate).

  1. Beachfront properties (Margarita island, etc.)
    At the moment, this is depressive type of real estate and are not suited for investment despite attractive photos and stories about the tourist potential. If the property is not located in the city, there is a risk that the state may confiscate property. Investment in hotel sector is not suitable for an obvious reason.
  2. Often you can find suggestions to invest in cities with tourist attractions (such as Merida), but now it is best to consider Caracas only. There is a problem with power outages throughout the country: the government redistributes it in order to maintain capital city.
    People from other cities and towns move to Caracas for this reason.
    The situation for the restoration of power supply in Venezuela will take years.

At first it seemed to me that legal procedures would be of great complexity (how to draw up, transfer funds, in which currency, what taxes should be paid, who will control the registration of real estate, etc.), however, there is a whole department dealing with paper work, where all processes are debugged.

The investor can choose the desired properties himself or invest in a special fund related to Venezuela in which a portfolio has already been formed and to receive fixed dividends.

Changes in Venezuela occur hourly and reliable sources of information are in no less deficit than food, medicine and electricity.

With all this, the liveliness and openness of the local people is amazing, with whom they managed to communicate at least remotely. All these processes have led to thoughts about the country’s chic potential and the need to reduce any complaints about our life, focusing thoughts on how important it is to value what is now even if taking into account the circumstances of spring 2020.

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