Bolivia’s construction boom continues
January 25, 2015
More than 60 construction projects are under way in Santa Cruz, the country’s most populous and economically prosperous city, according to Bolivia’s construction institute, Cadecocruz. Of which, 46 are residential projects, 13 for mixed residential and commercial use, four for office projects and five for hotels.
Mixed-used developments are increasing. For an instance, the Marriott hotel, which is currently being build alongside the 400-foot Riviera Towers skyscraper, includes residential apartments and a commercial center. Moreover, some of the planned condominium projects in the country include Turquesa Beach, with a planned artificial lake, and Urubo Golf, with 700 living units and a promised championship course.
Bolivian municipal authorities approved 30 million square feet of space for new construction in 2014, according to government statistics.
Despite rapid improvement in the past several years, Bolivia’s housing market remains underdeveloped which offers a huge opportunity for foreign investors. “Businessmen from all over the world are interested in Bolivia’s undeveloped market,” said Carlos Saavedra, Bolivia’s former government minister.
There is now a growing interest from Europeans, mainly Swiss and Germans. Though, “the market in terms of foreigners remains very much an insiders’ one”, according to HWZ Inc.
Residential properties in Bolivia are much cheaper than most parts of South America. One- to two-bedroom houses and condominiums are priced below US$50,000. On the other hand, larger houses with several bedrooms located in the city are sold below US$100,000.
“A normal U.S. style brick and concrete home with a 1,200 square feet interior, 3 bedrooms and 2 bathrooms on an 8,000 square feet lot 3 miles from the Central Plaza costs about $60,000,” according to the real estate company Jackson Rivero Bienes Raices.
Residential rents are also low. The monthly rent for one-bedroom apartments starts at just US$75 while it is about US$150 for houses. In the capital city of La Paz, a two-bedroom apartment can be rented for only US$215 per month.
Taxes are moderate in Bolivia
Rental Income: Rental income bearned by individuals is taxed at a flat rate of 25%.
Capital Gains: Capital gains are considered as part of income and taxed at the standard income tax rate of 13%.
Inheritance: Inheritance tax is levied at 1% for spouses, ascendants, and descendants.
Residents: Residents are taxed on their Bolivian-sourced income at 13%.
Buying property costs are low in Bolivia
Buying property costs are around 4.5% of property value. The buyer pays for the 3% transfer tax and the 0.50% registration fee. The seller pays for the 1% legal fees.
Economic growth to continue after Morales’ reelectionPresident Evo Morales, who first became president in 2006, led the country’s strong economic growth in the past nine years. Bolivians also saw dramatic increases in the minimum wage during his administration, rising to US$205 in 2014 from just US$65 in 2005. Some of the notable projects during his administration include improving education, healthcare and increasing low-income housing supply for the poor.
Morales, Bolivia’s first indigenous President, was reelected during the October 2014 elections. He is now considered as the longest-serving president of the country.
During his inauguration, Morales vowed to continue to reduce poverty, reform the country's floundering judicial system, implement universal health insurance and continue to expand basic services like potable water and electricity for the next five years.
Bolivia’s economy grew by about 5.2% in 2014, from real GDP growth rates of 6.8% in 2013, 5.2% in 2011-12, and 4.1% in 2010, based on figures from the IMF. GDP per capita more than tripled to US$3,031 in 2014, from just US$952 a decade ago, according to the International Monetary Fund (IMF). However, Bolivia remains one of the poorest countries in South America. Income inequality is high, with the majority of the population engaged in subsistence farming.