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Venezuela Real Estate Report Q4 2011
Business Monitor International, Sep 2011, Pages: 36
Business Monitor International's (BMI) Venezuela Real Estate Report (Q4 2011) provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Venezuela's Real Estate industry.
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.
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