Guest Article by Hector Quintana - CEO Zen Global Consulting
In 2008, my real estate investment consulting firm named Ecuador the #1 real estate investment spot on the globe. The southern section of Ecuador’s coast between Salinas and La Entrada received our top rating from 2008-2013, with Ecuador’s capitol city of Quito claiming that honor in 2014. Investors did well, taking advantage of exceptional value, rapid market appreciation rates and a strong USD$. As Bob Dylan penned long ago, “The Times, They Are A-Changin”.
First week of January 2015, our consulting service clients received “The 2015 Global Real Estate Outlook Report”. For some, a big surprise was in store. After one of the longest runs on record for our firm, Ecuador was no longer the #1 global real estate investment hot spot. After seven consecutive years, Ecuador was dethroned by Colombia, the neighbor to the north. More specifically, the city of Medellin, Colombia was crowned king. Why the change? The reasons are founded as much in Ecuador’s economic evolution, as in Medellin and Colombia’s dynamic future.
Ecuador’s strong value drove in a great deal of real estate investor interest. As such, prices were driven up not only, or even mainly, by expat sources, but by both domestic and foreign capital. The rapid market appreciation rates were not sustainable indefinitely, and particularly overpriced markets like Cuenca, Vilcabamba and Cotacachi, have already begun to feel the brunt of a market pullback. Lastly, the increasingly strong USD$, even riding weak fundamentals, makes Ecuador real estate increasingly less attractive on a global investment basis.
Usher in Colombia, especially relative to that last point mentioned, in the preceding paragraph. Historically, the Colombian Peso (COP) trades in a band of approximately 1,700 – 1,800 COPs per 1 USD$. Today we were trading at 3,164 COPs to the 1 USD$. It has been as low as just over 3,200 COPs in recent days, which I believe represents critical support levels. Folks, we haven’t seen this in a decade. In fact, we have to go back a full generation, before we have seen such a buying opportunity in Colombia, in dollar adjusted terms. I can’t say, “Once in a lifetime opportunity” with a straight face, but I can certainly say, “Once in a generation opportunity”, without the slightest grimace.
With some predicting the COP could drop to as low as 4,000 COP to 1 USD$, the opportunities are vast. We happen to believe the current 3,200 COP support level may hold, but at any level above 2,500 COPs to the USD, a Colombian purchase is a steal. This is the opportunity that awaits you in Colombia, especially in über attractive Medellin. Here are our top 5 reasons why you should consider investing in Medellin and its real estate market, right now.
Opportunity #1: Lifestyle Value
Medellin offers exceptional, daily lifestyle value. Ecuador is still a relatively cost-effective country, but a side-by-side comparison with Quito, puts the data in perspective. Just got back from my 4th extensive Medellin trip in the last 12-months, so I can provide a fresh random sampling of common items/costs, compared to Quito:
The comparisons continue long beyond that. At today’s valuations, you can live much more cost-effectively in Medellin, on a dollar-adjusted basis.
Opportunity #2: Diversified Economy
The city of Medellin offers a much more diversified economy than similarly comparable cities around the globe. The base for Medellin’s economy, which is historically the agricultural and textile industries, continues a robust expansion. However, Medellin is no longer “yesterday’s city”.
The Medellin of today, for example, offers an expansive high-tech industry sector. The Ruta N Program serves as an ongoing incubator for innovative tech companies. Housed literally in the center of the city, this public-private venture has set a lofty goal: To be the premiere Latin American tech capital by 2021 and to be a globally dominant tech center within 20 years.
Education is another growth sector in Medellin. Topping such noteworthy locales as Mexico City, Buenos Aires, Santiago and even its own big brother, Bogota, Medellin is recognized as the preeminent university city in all of Latin America. Home to over 30 excellent major universities, in a greater metro area of 3.5 million population, Medellin stands out for educational excellence and the opportunity to expand business opportunities catering to the burgeoning education industry.
Medellin also excels in Medical services, boasting some of the best hospitals in all of Latin America. In fact, Medellin offers two JCI internationally accredited hospitals, the highest rating that can possibly be achieved on a global basis. The city also boasts 8 of the best hospitals in all of Latin America. Whether you seek long-term care, cosmetic surgery or to participate in the medical industry through a support service business function, Medellin is a hot spot for global medical care.
Opportunity #3: Real Estate Market
With the strength of the USD$, the Euro, the Pound Sterling and even the Aussie and Canadian Dollars, versus the COP, real estate hasn’t been this dirt cheap in Medellin in an entire generation. A good comparison is to look at Medellin, side-by-side with Quito (Ecuador), in itself an exceptional investment market, and Cuenca (Ecuador), the media darling of the last 6 years:
The above real estate results are like-for-like assets currently on the market. The “Target Property” estimates were respected and are exact same or very close, to ensure that the variance is statistically insignificant. The data stands for itself. Medellin is prime real estate investment territory for USD$ buyers, or those in countries with similar strong currencies vs. the COP. Whether you are looking to build a strong real estate investment portfolio or just looking for a nice place to settle down and retire, Medellin will offer more than just about any other market today.
Opportunity #4: Well Developed Infrastructure
While already raving about Medellin’s extensive university system, the high quality medical facilities and similar infrastructure items, I am now focusing on core infrastructure. Electric access is plentiful, with a robust grid. Potable water is readily available in Ecuador. Medellin passes the “tap test”. It is safe to drink the water. In the urban areas public sewer is provided, while in rural areas of Medellin you are mostly on septic or variants. Medellin has a first-class airport, being the second largest in Colombia, after El Dorado in Bogota. Currently, direct flights exist from the USA, Spain, Panama and Curacao to name a few locales. The list and frequency is rapidly expanding.
Everywhere you look you see new infrastructure development and construction. Nowhere is this more visible than in the roadways arena. Medellin is furiously building roads to try and keep up with demand. We always promise candor and this is one area where Medellin is doing well, for now, but they are not ahead of the curve as we would ideally like them to be in the future. Given the growth explosion we see ahead for this city, it is a fair question to ask, “Can roads expand fast enough to handle the increased population?” Only time will tell, but at least it is a clear priority with Medellin’s current government.
Opportunity #5: Tourism Sector
Admittedly, I saved this for last. However, attractive and compelling many aspects of Medellin might be (e.g., the real estate sector), no sector offers the explosive opportunities that Medellin’s tourism industry offers. Imagine this for a moment. A climate that is warm and sunny year-round, but with temperatures seldom exceeding the high 70sº F. Yet Medellin and the surrounding valleys are verdant green, because of the mostly gentle nighttime rains. It is everything Cuenca, Ecuador promised it would be…but wasn’t. Medellin is truly the land of eternal Spring…12 months of the year. Little, if any variance.
Does that sound like an appealing locale in which to retire? A locale that our clients would enjoy as a second home? Perhaps, simply an exceptional atmosphere in which to spend some quality vacation time? Yep, that’s what we thought as well. Then why is tourism in Medellin not booming?
The answers to the both figurative and rhetorical question are both simple and complex. Complex, because reality lasts but a moment, when ruptured, but dispelling ancient myths can take decades. To some, sadly, Medellin is still the home to long deceased Pablo Escobar, the once prominent drug kingpin. While that image is ever so slowly washing away, a percentage of the global traveler population still sees the old Medellin, through the eyes of random violence. More is needed to be done, in order to welcome travellers, investors and retirees to this modern, clean, green and relatively safe metropolis.
To that latter point, candidly, Medellin’s government and private sector have done a much better job at promoting technology, educational opportunities and affordable medical treatment options than they have in promoting tourism. That is about to change…dramatically. In fact, the change has already been initiated. A public-private venture in Medellin is gearing up for a global tourism campaign, to usher in the “new” Medellin and dispel the old myths. New hotel flags (hotel chains) are being planted as we speak, in preparation for the tourism explosion. Buying or rehabbing boutique hotel sites is a perfect venture. So is a touring or travel agency aimed at a specific target market. Inexpensive raw land and exceptional sites exist to construct new hotels and the market will readily absorb them. In fact, the market needs more quality hotel rooms right now.
Tourism is vibrantly alive in Medellin, today, but also represents a true ground floor opportunity for the future. A growth industry that will offer major dividends to early participants.
Our advise is to trade out of USD, Pound Sterling or, even, Euro-based economies, such as the USA, UK, Germany, Ecuador, etc. and reposition those assets into Colombia, where your current day buying power offers a once in a generation value opportunity, coupled with an exceptional growth environment. Exactly where Ecuador was 7 years ago when we recommended it. Medellin, Colombia is our selection today.
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