Venezuela Real Estate Report Q4 2011
Includes 3 FREE quarterly updates
Venezuela’s real estate sector is like none other in Latin America. Further afield, although it is not profiled by BMI, Iran’s may be similar. In essence, the government – and, thanks to a variety of populist policies, the public sector – is the key player. For years, the government ran a sizeable budget deficit (in spite of the general upward trend in revenues that it received from the country’s energy sector and other commodity producers). The deficit has been monetised by a compliant central bank, with the result that Venezuela has had very high rates of inflation and – from time-to-time – substantial devaluations in the bolivar. High inflation has discouraged savings and investment. Populist government policies have also discouraged the long-term commitment of funds to real estate projects.
As a result, real yields have been negative, and have been more consistent across the various sub-sectors than in other countries. Investors look for real appreciation in capital values. However, it is relatively difficult to identify what is going on as a result of the low level of transactions. Parties who are lucky enough to actually own prime property have little incentive to sell – in a country where there is, and will continue to be, a chronic shortage.
In most countries, key opportunities arise because capital is moving in response to favourable economic developments, or – as in neighbouring Brazil – specific government policies. In Venezuela, the main opportunity is a wildcard: the possibility that the current administration will completely revise its policies or, more likely, is replaced by a more business-friendly government.
The key threat is that of ongoing stagnation. Under the status quo, there is little reason for capital to flow to the real estate sector. The distortions that arise from the way Venezuela’s economy is managed also constrain the development of large retailers and manufacturers.
Venezuela’s real estate sector is like none other in Latin America. Further afield, although it is not profiled by BMI, Iran’s may be similar. In essence, the government – and, thanks to a variety of populist policies, the public sector – is the key player. For years, the government ran a sizeable budget deficit (in spite of the general upward trend in revenues that it received from the country’s energy sector and other commodity producers). The deficit has been monetised by a compliant central bank, with the result that Venezuela has had very high rates of inflation and – from time-to-time – substantial devaluations in the bolivar. High inflation has discouraged savings and investment. Populist government policies have also discouraged the long-term commitment of funds to real estate projects.
As a result, real yields have been negative, and have been more consistent across the various sub-sectors than in other countries. Investors look for real appreciation in capital values. However, it is relatively difficult to identify what is going on as a result of the low level of transactions. Parties who are lucky enough to actually own prime property have little incentive to sell – in a country where there is, and will continue to be, a chronic shortage.
In most countries, key opportunities arise because capital is moving in response to favourable economic developments, or – as in neighbouring Brazil – specific government policies. In Venezuela, the main opportunity is a wildcard: the possibility that the current administration will completely revise its policies or, more likely, is replaced by a more business-friendly government.
The key threat is that of ongoing stagnation. Under the status quo, there is little reason for capital to flow to the real estate sector. The distortions that arise from the way Venezuela’s economy is managed also constrain the development of large retailers and manufacturers.
Contents
Executive SummarySWOT Analysis
Venezuela Real Estate/Construction SWOT
Venezuela Economic SWOT
Venezuela Business Environment SWOT
Real Estate Market Overview
Real Estate Market Analysis
Table: Venezuela’s Real Estate Market – Rentals, 2010 And 2011 (per m?/month, US$)
Table: Venezuela’s Real Estate Market – Net Yields, 2011 And 2012 (%)
Table: Venezuela’s Real Estate Market – Terms Of Rental Contract/Lease, Mid-2011
Industry Forecast Scenario
Table: Venezuela’s Real Estate Market – Rentals, 2010-2012 (per m?/month, US$)
Table: Venezuela’s Real Estate Market – Forecast Net Yield, 2008-2015 (%)
Construction And Infrastructure Outlook
Table: Venezuela Construction And Infrastructure Industry Data, 2007-2015
Table: Venezuela Construction And Infrastructure Industry Data, 2012-2020
Macroeconomic Outlook
Table: Venezuela – Economic Activity
Business Environment
Venezuela’s Business Environment
Table: BMI Business And Operation Risk Ratings
Table: BMI Legal Framework Rating
Table: Labour Force Quality
Table: Latin America, Annual FDI Inflows
Table: Trade And Investment Ratings
Table: Top Export Destinations
Competitive Landscape
Company Profiles
Oriente Entidad de Inversion Colectiva de Inmobiliaria CA
Otepi
Tecnoconsult
Vepica
BMI Methodology
How We Generate Our Industry Forecasts
Construction Industry
Bank Lending
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