Paraguay Real Estate: Trying to Overcome Obscurity

Paraguay hardly makes headlines.  Neither has it made a name for itself as a tourist destination.  Travelers tend to skip over it and head to nearby countries instead.  …

Paraguay hardly makes headlines.  Neither has it made a name for itself as a tourist destination.  Travelers tend to skip over it and head to nearby countries instead.  This relative obscurity has attracted a certain brand of retirees and real estate investors.  Those looking for “low prices, peaceable country, a healthy environment, and warm weather,” will be pleased said Michael Forrest, who works with Viviana Arriagada – owner of Propriedades MEGA SRL – to assist foreigners with acquiring property in the country.

Some investors are also choosing to invest in farmland in Paraguay.  “Fifty percent of all farmland buyers are from neighboring [countries],” said Peer Voss, owner of www.ventacamposparaguay.com.  “These are professional farmers who know best how to evaluate [such real estate] and they see the best price and value in Paraguay.”

Paraguay at a Glance

Affectionately known as the heart of America, Paraguay is bordered by Bolivia, Brazil, and Argentina.  The Paraguay, river for which the country is named, divides the country all the way from the North to South.  The country is also home to Itaipu dam, where the biggest hydroelectric power plant in the world is located.  As for a coastline, Paraguay is landlocked.

Slightly smaller than California in size, approximately 6.9 million Paraguayans call the country home, according to the CIA’s World Factbook.  Most of its citizens have settled in the southern part leaving the north sparsely populated.  The climate ranges from temperate to subtropical.  The eastern parts of the country get plenty of rain while the west is dry.  The terrain mostly consists of plains, hills, marshy land, forest, and scrub.

Before it was discovered by the Spanish, the country was home to multiple indigenous warrior tribes whose descendants still live in present day Paraguay.  Asunción, the capital city, was founded in 1537 by a Spanish explorer.  Paraguay gained its independence from Spain in 1811.

Recent Paraguayan history is marked by wars and political chaos.  Not many stable nations change presidents 31 times within fifty years; Paraguay did this between 1904 and 1954, according to a country study published by the Library of Congress.  In 1954 Alferdo Stroessner took power and held onto it for an astonishing 35 years.  Since his removal, Paraguay has been a relatively functioning democracy.

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The Paraguayan economy is largely dependent on agriculture and the informal sector that includes tons of tiny businesses and vendors, according to CIA’s World Factbook.  Issues hindering the country’s economic growth include lack of transparency, under developed infrastructure, and political instability.

Services make up 58.2 percent of the Paraguayan GDP while agriculture and industry put in 23.4 and 18.4 percent respectively.  In the same token, the service sector employs the lion’s share of the population at 52 percent while agriculture and industry put food on the tables of 31 and 17 percent of the population respectively.  Over the past five years, rising global commodities demand has helped Paraguay post sustained economic growth.

Residential Real Estate in Paraguay

Residential prices are holding steady despite the global financial crisis, according to Voss.  Compared to other countries in the region, the property prices in Paraguay are a bargain.  For those adventurers looking to avoid popular expatriate destinations with inflated house prices, Paraguay comes off as ideal.  It also helps that Asunción consistently ranks as one of the cheapest cities in the world.  “This low price level applies to everything – houses, construction, and labor,” said Voss.

“Prices have risen a little [over the years] but are still very good,” said Forrest.  If the stickers on the houses listed at http://www.dragonfly75.com/py/mega-listings.html – Propriedades MEGA SRL’s website- anything to go by, then they seem downright affordable.  “A 100 square meter apartment may cost only USD 40,000. Houses in Asuncion tend to be worth around USD 500 to USD 600 per square meter,” he added.

Farmland Real Estate in Paraguay

Farmland property prices have fallen by about 20 percent since peeking in mid 2008, according to Voss.  The market is has yet to recover to 2008 levels but prices are now steady.  “In the western half of the country you can still buy large tracts of (semi-arid climate) virgin forest on really fertile soils for US$100/hectare.” He said.  “Lots usually start at 4000 hectare.”

Buying Property in Paraguay

Paraguay has no restrictions when it comes to foreigners buying property in the country.  “Foreigners are treated like locals,” said Voss.  “They can also freely engage in business,” said Forrest.  With 10 percent income tax and 10 percent VAT, Paraguay also has one of the region’s lowest taxes.

Just like buyers anywhere else, those who look into purchasing property in Paraguay are urged to do their due diligence.  There is a lot of corruption in the system.   “Paraguay has its share of unreliable property titles, but the public escribanos or notaries are trustworthy,” said Voss.  The job of these escribanos is to look into property titles and to let buyers know if there is a problem.  There are also rumors of peasants taking someone’s property and claiming it for their own use in areas outside Asuncion.

Looking Ahead

The residential market should remain steady unless something dramatic happens in the world economy.  Good farmland is a limited resource.  “Developed farmland should – inflation adjusted – rise annually by 5 percent,” said Voss.  “Virgin, undeveloped land with sufficient soil fertility is ridiculously cheap and should at least double- inflation adjusted – over next 3 years.”  This prediction maybe a tad too exuberant but a dash of optimism maybe what investors need to take the plunge into a country like Paraguay.

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