Following a challenging three-year period characterised by an oversupply of new homes and a growing housing deficit, data from late 2018 and early 2019 indicate the beginning of a revival in the Colombian real estate market. While inventories from the pre-2016 construction boom underscore the old mismatch between developer interests and the needs of businesses and households, suppliers have been flexible of late in adjusting to consumer preferences.

Moreover, the new administration of President Iván Duque has signalled that it will maintain its predecessors’ commitment to providing social housing for the poor, even as its fiscal priorities have spurred cuts in support for the middle class. A renewal of consumer confidence and favourable urban demographics are likely to sustain residential demand, while shifts in the structures of the office, retail and industrial segments should spur growth and re-situate the property market as a driver of sustainable growth in the broader Colombian economy.

Housing Rebound

New home purchases declined in 2018 to 172,000, down 0.59% against the 173,000 units sold in 2017 and 11.3% overall against the 192,000 units sold the year prior. Annual investment in newly completed homes for the 2016-18 period has followed a similar trajectory, falling from COP36.9bn ($12.6m) in 2016 to COP32bn ($10.9m) in 2017, before recovering marginally to reach COP32.3bn ($11m) in 2018.

While the market’s 2018 performance failed to reach the record highs for purchases and investment set in 2016, data indicates that the housing segment has stabilised and begun consolidating the surplus inventory built before that year. Real estate companies have been somewhat resilient to the downturn, as many firms hold a mixed portfolio of social interest housing (vivienda de interés social, VIS) and non-VIS plots, which enables them to adjust to fluctuations in housing demand and broader macroeconomic shifts.

Beneath the top-line figures the trajectories of different segments in different cities diverged over the course of 2018. The sales volumes for VIS units increased by 5.2% nationwide to 102,000 – or just under 60% of the market – as the Duque administration opted to preserve some of its predecessor’s housing subsidies. In the non-VIS segment volumes for medium- and high-tier homes, which together made up 41% of sales in 2018, dropped by 8.1% to 51,600 units and 23% to 18,900 units, respectively.

The sales volumes of VIS and non-VIS housing was reversed in terms of investment value: purchases of the former were worth 31% of all housing spending in 2018, up from 24.3% in 2016, while medium- and high-strata properties accounted for about 70% of the value of new homes sold in the course of 2018.

A region-by-region assessment also illustrates mixed results in residential activity. Sales volumes grew in several departments, including the capital, Bogotá (14.5%); Cundinamarca, which surrounds the capital (22%); Boyacá, an Andean department north-east of Cundinamarca (24%); and Norte de Santander, which sits on the Venezuelan border and houses Colombia’s largest free zone (40.6%). However, home growth in several other regions contracted, as in Antioquia, home to Medellín, which produced more than one-tenth of national GDP in 2017 (16.5%); Atlántico, the site of Barranquilla, Colombia’s fourth-largest city (17.7%); Valle del Cauca, a prominent export hub (3.7%); and Bolívar (25.2%).

Policy Interventions

Despite a sales decline in 2018, the purchase value of mid-tier homes remained stable compared to 2017. That resilience was attributed in large measure to support from the Reserve Fund for the Stabilisation of the Mortgage Portfolio (Fondo de Reserva para la Estabilización de la Cartera Hipotecaria, FRECH), which was created by the Central Bank of Colombia (Banco de la República de Colombia, BRC) in 1999 to stimulate ownership among lower-income households through the provision of mortgage subsidies.

In 2016 the BRC extended the programme to include Colombians who are housing-scarce but earn more than the upper income threshold to qualify for VIS assistance, assessed at eight minimum legal salaries in force, or COP6.6m ($2260) per month. The non-VIS FRECH subsidies, which covered 2.5% of a mortgage’s appraised value – against a 4% rate for VIS unit purchases – were extended to 57,000 households between 2016 and 2018, and are viewed as having helped reverse the housing market’s decline.

However, the Ministry of Housing repealed the legislation supporting the non-VIS subsidies in early 2019, citing fiscal constraints and the programme’s achieved success in reviving the market. The subsidy’s repeal is likely to dampen new residential sales in 2019, as is the 2% consumption tax on new, non-VIS homes that was included in the 2018 tax reform.

The Colombian Chamber of Construction (Cámara Colombiana de la Construcción, CAMACOL) expects these policy changes to have divergent effects across the sector. Market-wide sales of new units are projected to grow by 2.1% to 176,000 in 2019, while the commercial value of those purchases could grow by up to 9% to COP35.2bn ($12m). The difference in those rates can be attributed in part to an upwards shift in non-VIS demand. CAMACOL expects mid-tier sales to fall to 50,300 in 2019, representing a contraction of 2.5%, while its December assessment projects sales of high-end properties to grow by 22.2% to 23,100. The split in those market trends, in turn, is rooted in a gap in available supply: as of November 2018 there were roughly 58,300 new properties of stock for sale in the middle segment, more than double the inventory in the high end. Lastly, CAMACOL expects that demand in the nationwide VIS segment will grow marginally to reach 102,200 units in 2019, accounting for 58.2% of new unit sales.

Selling Stocks

Colombia’s residential property stock expanded rapidly between 2012 and 2016, driven by government initiatives to subsidise the home ownership of low- and middle-income families. Property launches grew at a compound annual growth rate (CAGR) of 8.2% over that period, from 133,000 to 198,000, marginally higher than the 7.7% CAGR of property sales, according to the National Administrative Department of Statistics ( Departamento Administrativo Nacional de Estadística, DANE).

That gap widened significantly in 2017, as a yearslong series of macroeconomic shifts – caused by slumping prices on the global oil market, which created a shortfall in fiscal revenue and prompted a hike in the sales tax, undercutting consumer confidence – reduced new property sales. CAMACOL counted a record-high 148,000 new, unsold units in November 2017, two-thirds of which were VIS properties, despite persistent concerns about deficits in both the quality and quantity of available housing.

In response to falling demand, builders slowed or stopped development, and initiations and launches fell steeply in most regions over the course of 2017 and 2018. More recently, however, as the rate of economic growth has picked up nationwide – GDP expansion hit an eight-year low of 1.4% in 2017, rebounded to 2.7% in 2018 and is projected by the OECD to reach 3.5% in 2019 – consumer confidence has slowly recovered from the lows of 2016.

Moreover, DANE’s Real Index of New Home Prices, which measures property values relative to a base established in December 2006, has been static since the summer of 2015, after rising steadily for more than a decade. Together, these factors have slowly lifted demand, and the stock of new units fell to 126,000 in February 2019. Likewise, while the rate of new launches remains in the red across the market, the growth of initiated VIS projects returned to positive territory in 2019, and in February of that year achieved year-on-year (y-o-y) growth of 13.9%.


Housing in many of Colombia’s largest cities is characterised by segregation, due in large part to a stratification system launched in Bogotá a half century ago. Under the scheme, urban properties were classified on a scale of one to six based on conditions like access roads, roofing materials and yard sizes, with one being the least valuable. Households in strata one, two and three receive subsidies for their public utilities, while those in strata five and six paid a surcharge for water, electricity and the like; residents in strata four homes paid the market rate. In effect, wealthier residents cross-subsidised services for poorer ones.

In 1994, after a period of uneven implementation based on incomplete data, Congress passed Law 142 to standardise the assessment methodology and mandated its use in stratification nationwide. When the law passed, the system, which remains one of a kind worldwide, enshrined a commitment to solidarity in a country where the poverty rate exceeded 40%. There is some evidence to be believe that the initiative has bolstered the attempt to reduce relative poverty: the development of stratification has coincided with a slight reduction of Colombia’s Gini coefficient, which measures socio-economic inequality on the basis of income distribution.

However, since its inception, the system has faced criticism of several kinds. First, the model has formalised a divide between the rich and poor. Second, the scheme does not account for characteristics like a family’s size, income or disabilities, but relies on a building’s appearance as a proxy for economic means. Thus, while OECD data indicates that the rate of poverty declined from 50% to 28% between 2002 and 2015, many residents continue to receive subsidies based on where they live, even if their incomes have become sufficient to afford their utilities.

These problems are most acute in Bogotá. Within the city the gap has widened between the city’s northern neighbourhoods, lined with luxury apartment complexes and office developments, and the southern areas, where informal housing is prominent and the infrastructure is strained. Moreover, 86% of residents pay subsidised bills, despite the prosperity that the city enjoys relative to much of the country.

In February 2017 the UN Human Settlement Programme and Colombia’s District Planning Department proposed broadening the stratification formula to consider inputs like family structure, education and age. However, the National Development Plan 2018-22 submitted to the Congress by the Duque administration did not change those criteria, but suggested reducing aid to groups one and two and eliminating it for stratum three.

Demographic Shift

Pressure to change the subsidy system and residential profiles is growing with shifts in Colombian demography and lifestyle preferences. According to DANE’s 2018 census, between 2015 and 2018 single-person households increased from 11% to 18% of all residencies, as students move to cities in pursuit of education, younger Colombians marry later in life and separate more often, and fewer households provide care for elderly family members. Living alone also correlates strongly with higher levels of income and education, and as many as 46% of Bogotá’s residents in stratum six are the only members of their households.

The effects of such a shift are quickly becoming apparent in new building portfolios. “Developers have begun adapting to new demographic trends by focusing more on units for single people or couples, instead of big families,” Juan Gómez Roland, CEO of Medellín-based construction company Óptima, told OBG. “In turn, this has reduced the average area of units.” Additionally, there is evidence to suggest that the shift towards solitary living is driving an increase in the percentage of households that rent, rather than own, their residential property.

The demographic shift may also have repercussions for older properties. Industry stakeholders have suggested that there has been an increase in the remodelling and rehabilitation of older buildings in recent years, in order to cater to changing lifestyles and household structures, as well as new requirements in terms of architecture and design.


Mortgage depth, a metric often used to assess the availability of home loans, has fluctuated considerably in Colombia over the course of the last two decades, but has been trending upwards of late. Measured as a share of GDP, the value of outstanding mortgages reached nearly 10% in the late 1990s, as they were regulated by the BRC as a preferential security. However, a rapid withdrawal of foreign capital following the Asian financial crisis caused a liquidity shortage, and by 2006 the value mortgages represented just 2.8% of GDP.

A suite of policies meant to make home ownership more affordable has been integral to improving Colombia’s mortgage portfolio-to-GDP ratio. Mortgage depth reached 6.7% in September 2018, and the Duque administration insists that it can deepen that rate to 8.5% by the end its term in August 2022.

Recent data suggests that such a target may not be unattainable, as the mortgage portfolio was valued at COP63.6bn ($21.8m) in February 2019, marking y-o-y growth of 12.9%. According to CAMACOL, this expansion is in line with progress in efforts to expand domestic financial inclusion and initiatives to help to increase access to formal housing. Overall, between April 2018 and March 2019 the value of mortgage disbursements grew by 11.3% to COP17.9bn ($6.1m). Non-VIS loans made up four-fifths of the market and grew by 11.6%, while VIS mortgages made up the remainder and grew by 10.3%.

In addition to this public assistance, commercial interest rates have declined significantly of late. Over the course of the two-year period between March 2017 and March 2019, average, peso-denominated mortgage rates for VIS and non-VIS housing declined from 12.8% to 11.6% and 12.4% to 10.4%, respectively.

In spite of these efforts and favourable market conditions, mortgage depth remains well below the high water mark set prior to the credit crisis of the late 1990s, as well as the contemporary ratios observed among most OECD states and some of Colombia’s regional peers. Moreover, despite its recent growth, mortgages accounted for 13.8% of outstanding credit by value in February 2019, a little less than half of the COP137.3bn ($47m) in outstanding consumer credit and a little more than one-quarter of COP246.5bn ($84.3m) in commercial credit.

Given the market’s needs in terms of new housing, with a deficit of 1.9m homes, an annual urbanisation rate of approximately 250,000 households, and a rate of home ownership just above 40%, it is noteworthy that the mortgage market faces an uphill battle.


The coexistence of an oversupply of new housing and deficits in available properties in Colombia’s largest cities can be attributed predominantly to the high valuation of urban land, especially in the capital. Rapid and high-density urbanisation has driven up the cost of city plots, often in excess of growth rates of earnings variables like wages and investment returns. Since 2006 the median price of land in the capital has grown 13.5% faster than the consumer price index, according to the BRC. “On average the weight of land prices on the final price of the projects can reach 15-30%, depending on the segment” Edwin Chirivi, vice-president of sectorial development at CAMACOL, told OBG.


While recent results in the residential property market remain mixed, there is considerable cause for optimism about the trajectory of business properties. Construction of new office spaces regained momentum in 2018, as the segment added 919,00 sq metres to nationwide inventory, according to DANE. There were significant disparities in the increases of gross leasable area (GLA), as Bogotá and Medellín accounted for the lion’s share of additions.

According to the global real estate consultant Colliers International, the capital added 23 office buildings and increased its GLA by 2% to 2.7m sq metres, with concentrations in facilities for government entities, co-working spaces and business-process outsourcing. The occupancy rate also improved over the course of the year to reach 88.9%, leaving vacant inventory of some 304,000 sq metres.

At year-end 2018, 39 projects with a projected GLA of 593,000 sq metres remained under development, and Colliers has predicted that the developers will add 15 new projects to the segment portfolio over the course of 2019. The consultancy rated 63% of these projects as A+ and gave a further 35% – such as Urban 165, Torre 126 and Floresta Business Centre, which are expected to launch in 2019 – an A rating.

For its part, Medellín’s developers increased the city’s GLA by 7% in 2018 with the launch of five new buildings to bring total inventory to 703,000 sq metres. At 90.9% the occupancy rate in Medellín is slightly higher than that of Bogotá. Colliers lists 11 projects under way that will add to the city’s 64,000 sq metres in currently available office stock.

In both cities the dwindling availability of land and high demand to live in the city centre have pushed developers towards the outskirts to find a profitable tranche. Bogotá’s peripheral corridors have become primary growth drivers for new office construction and now account for 67% of all new projects. In the Las Palmas neighbourhood of Medellín, two large, parallel avenues – the transversal inferior and the transversal superior – have become the site of close to 60% of the city’s new developments, as the area provides proximity and ease of access to the airport.

Elsewhere, over the course of the last decade significant investments in transport and logistics infrastructure have fuelled real estate speculation across the Caribbean coast, particularly in Barranquilla. The signing of a free trade agreement with the US in 2012 and the completion of the Panama Canal expansion infused investors with a sense of optimism about the region’s economic potential as a transit corridor, and developers poured in to build office and industrial infrastructure.

Their expectations were not met by demand as fast as some had hoped, and at the end of 2018, 30% of Barranquilla’s 225,000 sq metres of office inventory remained vacant. Colliers reports that two projects scheduled for completion in 2019 will add 10,700 sq metres to the 65,700 sq metres of office GLA currently available in the city, and economic improvements in the region are likely to push down the city’s rate of office vacancy.

Meanwhile, Cali, Colombia’s second-largest city by area, has recently attracted the attention of investors, and developers are scheduled to add 37,000 sq metres to the current office inventory, representing an increase in segment GLA of 22.4%.

Industrial Space

The industrial property market is divided between lots, warehouses and logistics complexes like free trade zones (FTZs). Many of these properties offer facilities known as flex warehouses, which can be converted into offices, storage spaces or some combination thereof. Their appeal has grown of late, as they often offer lower lease prices than other urban properties – in Bogotá, costs per sq metre were 50% lower than median GLA prices – and DANE reports that construction of industrial space grew by 27% in consolidated terms in 2018.

The largest industrial corridor in Bogotá, Sub Urbano Calle 80, expanded by 4.7% in 2018 to reach total GLA of 1.46m sq metres, due to the finalisation of the third stage of the Siberia Business Park. The total industrial space in the wider metropolitan area increased by 2.3% to reach 3.83m sq metres, driven by 6.4% growth in Colliers’ A+ category. The consultancy noted that 90% of that new sum comprised buildto-suit (BTS) projects, wherein prospective tenants work in close partnership with developers to design purpose-specific, customised facilities.

Across Colombia’s four largest markets for industrial real estate – Bogotá, Medellín, Cali and Barranquilla – the development of BTS and A+ facilities continues to gain momentum, as firms increasingly seek quality infrastructure, despite their higher average costs. Meanwhile, interest in FTZs has fallen within inland cities like Bogotá, even as it remains robust in Barranquilla, demonstrating the complementarity of FTZs with the business priorities of international merchandise ports.

Commercial Property

The Colombia commercial market added 1.53m sq metres to grow by 28% in 2018, as many projects launched during the pre-2016 building boom opened for business. Medellín opened Viva Envigado, a 140,000-sq-metre property that became the largest mall in the country. In Bogotá commercial GLA increased by 7% to 1.63m sq metres, propelled by the opening of the Gran Plaza El Ensueño in the south-west of the capital. The areas surrounding the mall, which have the city’s highest residential growth rates, and neighbourhoods with similar profiles are seen as offering the greatest potential in the commercial segment.

Shopping centres in Colombia have historically been owned by several independent entities and managed by an independent party, in contrast to the single-owner model that prevails in many developed property markets. However, the local dynamic has been changing in recent years, as foreign investors bring along their preferences and local owners become increasingly willing to sell their stakes to focus on their core business (see analysis).


The residential real estate segment is likely to continue its recovery in 2019, as the market stabilises and absorbs oversupply. Moreover, changes in retail and office management and rising demand for flexible, bespoke industrial spaces are likely to leverage and sustain new trends in the ways that firms physically conduct their business in Colombia. While cross-segment growth may not accelerate significantly in 2019, developers have demonstrated foresight that should help the supply side adjust to ongoing structural changes in the property market.