Santiago, Chile – Real Estate Bubble or Opportunity?

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While I have been away from home for quite a while, I do not intend to leave you loyal BiggerPockets readers hanging — I’m here to make an appearance from abroad, and will do my best to bring you the latest “BiggerPockets International Edition” (like House Hunters International!)

As a real estate investor, we shouldn’t often limit ourselves to just our local markets alone. Good opportunities are extremely hard to come by in a local market at a specific time. While it is difficult to get familiar with a new market, let alone a new country, I think it is always beneficial as a real estate investor to consider, or at least monitor, other real estate markets all over the world. After all, I did make the move to Las Vegas from New York to invest in a market that, at the time, offered tremendous opportunity. I made a ton of mistakes and I still made money. What’s to say you can’t find another market with a similar opportunity to make a killing?

I’m currently in Chile, and unfortunately, the best time to invest in the Santiago real estate market had already passed. After having a pleasant chat with another real estate investor in Santiago, I learned not only more about the market, but had the opportunity to see the signs that called for either a prosperous real estate market or a property bubble that was slowly forming.

First of all, from a macroeconomic prospective, Chile has been prospering thanks to its main economy being dependent on copper prices (we probably often get frustrated by vagrants stealing copper wires in houses,) which have been quite high. The government favored investors and businesses, despite the fact that income inequality was quite high.

Second, Santiago contains nearly half the population of Chile and everyone, it seems, practically lives in Santiago. People are all moving to Santiago, whether they be Chinese, Koreans, Palestinians, Turkish, Africans, or Chileans from elsewhere. Apartment buildings are scattered all over the city and new ones are continually being constructed. After talking to a few residents, I realized rents have been rising at a tremendous pace as well. Some rates have gone up nearly 100% within the last 5 to 6 years, and as we know, higher rents are definitely a bonus for real estate investors. On the other hand, it is a bit concerning that Chileans are suddenly forced to pay so much.

With that in mind, it is interesting to note that 5 to 6 years ago in Chile, a typical mortgage would have a monthly payment that is nearly twice as high as rent. As a result, many Chileans preferred to rent rather than own. But now, with rents rising to the point where it is as much as mortgage is, suddenly Chileans are becoming much more interested in owning an apartment than in renting one.

Needless to say, housing prices, like rental prices, have gone up quite fast as well. The question is how much higher would housing prices go before they become unaffordable for Chileans? After all, the average salary, I hear, is about $1,000 USD a month, while a typical apartment now costs about $120,000. The average mortgage rate is around 7%! In just a quick glance we can deduce that housing prices are beginning to move beyond affordability for the average Chileans.

On the other hand, if Chileans begin to believe that housing prices are going to continue to go up, how likely will it be that they do everything in their powers to get a piece of a property now?

Fortunately, I hear that the banking system in Chile has not been as wild as the US banking system had been in the mid 2000s. Chilean banks still require a hefty down payment – hopefully that will stay the same. If the Chilean banking system opens the floodgates, it is highly likely that we will witness a property bubble similar to that of the US.

So, as of right now, I am still a bit wary about the Santiago real estate market. I don’t know if it will continue to rise or if it will stabilize. All I know is that I will invest in Santiago if the market ever goes through a crash. All the signs are eerily similar to Las Vegas during its heydays. So who knows, maybe in a few years the whole market there may crash. If it does, I don’t mind making a trip down there to invest in as much property as I can.
Photo: alobos Life

About Author

Leon Yang

Leon Yang is an active real estate investor in Las Vegas. He is a buy and hold guy who also likes to flip from time to time. His main passion is to traveling to the less traveled places and inspiring others to become financially independent through real estate.


  1. jeffrey gordon on

    When I was there for the first time on a late summer skiing trip in 2007 we visited Valparasio for a day. Of all I saw in Chile the beaches there and newer developments looked like great long term real estate to own–not sure if they have earthquake insurance, but the newer buildings should be better built than the older ones.


    • Leon,
      Thank you very much for your article about real estate in Chile. I am a real estate agent in Chile and will follow all comments closely. I’m interested to see what everyone on BiggerPockets has to say!

  2. Hey Leon! I live in a foreign country right now (ran a property management company here for a few years too), and I would be very, very concerned about rents becoming unaffordable for the locals. You said they are almost equal to a home purchase now, and if I’m doing my math correctly, I show a mortgage payment of $638.69 on a $120K purchase price, 7% interest, 30 yr term, 20% down. On a salary of $1,000/month, that is a 64% debt to income ratio. I’d say both rents and home purchases are basically unaffordable now.

    For a real estate investor, the reason this would concern me would be because in order for the locals not to be out on the street (a major turnoffs to the expats living there and/or considering coming, btw), you would start seeing either:

    1. Multiple families living in one house, which leads to a tremendous amount of wear and tear on the rental unit.

    2. High vacancies, unless you plan solely on catering to expats, which can be risky. What if the area stops becoming appealing because of the large homelessness issue?

    A market correction could happen too, making things more affordable again, which could significantly impact your cash flow. Or, families of Chileans may start pooling their money to buy a home, which lowers the tenant base.

    I think you’re smart waiting this one out to see what transpires. Have fun travelling!

  3. Leon thanks for that great analysis. I was recently reading another article by Ali Boone and she also invests abroad, particularly in Nicaragua. It is quite evident that there may be something waiting to happen in order to make it an advantageous opportunity for foreign investors. Now that you mention it I will keep an eye on the local news to see of any trends. Best of regards.

  4. I saw the same thing in Brazil’s real estate market. I live in Las Vegas working as a real estate investor, but lately its really hard to find a deal in Las Vegas. Most of the houses went up in price, banks are realizing only the worse property in their inventory and because of big investment companies brought homes to rent them cheap. Its hard to find responsible tenants without lowering the rent.
    Now in Brazil I believe that after the World Cup, high inflation and expensive living. The real estate market will bubble. I notice when I was there that many people cannot afford their car payments and credit card bills. Soon we will see a bubble. If that happen I will be going there for sure.
    The only problem with Brazilian real estate is its really hard to do an eviction on the last Homeowner or Tenant. Everything goes with the courts which is really slow and takes at least 1 year to happen.

    • Good observations about Brazil, Patricia. I know in some Latin America countries, such as Uruguay, they require six month’s rent be paid up front. I think this is done to mitigate eviction issues, since obviously it shows the ability to save and budget to be able to save that much rent. You should check and see if that is the norm in Brazil if you do decide to proceed forward.

      • No its not the norm. My parents own a couple of rental in Brazil and boy I will tell you how hard is to evict them in case you need. The best thing is to hire a restrict property managing company (imobiliarias) so they take care of the problem with the tenants. Most of the time they leave a lot of utilities bills for you to pay and the property in horrible condition. Now if you need to evict someone for a foreclosure. Its harder because they will take you to court and make your it impossible. When you buy a foreclosure home in Brazil the best is an empty home or you will have to pay a lot of fees for an attorney to evict them. Thats is why before you buy you need to do a huge research on the foreclosure court process to see where the bank are with the eviction process and if the homeowner did not sued the bank before you even try to sell it.
        When we talking about nicer areas in Sao Paulo Brazil it gets a little harder because sometimes the person who is getting foreclosed is a family member of some judge or politician. Thats almost impossible to evict on those people.

        • Well then Brazil does not sound like somewhere I would want to invest – that sounds rough!!

          Love that I just learned the Spanish word for property manager tho πŸ™‚

          Thanks for sharing this valuable information.

        • Spanish no!!! Portuguese! Don’t make mistakes with our language πŸ˜‰

          We aren’t “cucarachos” despite our geografical position in Latin America.

  5. Summing up, nowadays, it is the worst time to invest in real state market in Brazil… It’s clear like water that we has been living in a real state bubble… but the prices have begun to pierce the limits of our payment capacity. I have been saving money and waiting the burst. It’s unacceptable for me that an apartment in Sao Paulo can be more expensive than in NY, London or Tokio (3 cities that exactly aren’t the cheapest in the world). It’s an ugly, poor and violent city, with caotic traffic, air pollution and rude and arrogant people. It’s unacceptable that I win more money than 98% of brazilian population and it’s simply impossible buying something worthy and compatible with my incomes without acquire an almost-whole-life-debt, paying for 35 years and saving money and stripping expenses only to pay the mortgage, either.

    Sorry by my outflow, I had to do this in an international forum. Doing that in brazilian foruns is not enough anymore.

    I thought that prices would drop after World Cup… but I hope this bubble bursting still in 2013. It can happen. I’m crossing my fingers.

  6. Steven Prescott on

    It’s interesting on the bubble theory, especially about the comment of Vegas. I am just not buying in Vegas not with the intention of buying and flipping but just because the rents cover the mortgage and I essentially have an option on the upside for “managing” the property. I’m in San Diego and in my view the west side of Las Vegas and the Summerlin area are still at bargain basement prices. The delta between Vegas and the SoCal coast is still about 5X when it should be closer to 3X. I loved Summerlin so much, I am actually considering moving there for a time to see if I can handle a year there.

    When it comes to Chile, we may just be seeing the closing of a gap in arbitrage. There is nothing that separate Chile from a powerful U.S. State like California. Chile has the human capital, natural resources, coast and strong independent judiciary and legal system to bring it into the first world. The fact they aren’t even approaching “1st world” price levels means to me that there is still opportunity to ride the “arbitrage” opportunity that exists between a U.S State like California to the country of Chile.

    That being said, favorable financing and favorable rental market mean that there is still value left in Chilean real estate. I’m not talking about easy money like Vegas circa 2010 where if you had cash, you could take advantage of the extreme burst of a bubble. I mean more subtle moving markets that ebb with economic expansion.

    My Two Cents Everyone !

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