Why Paraguay Real Estate?
Perhaps the most strikingly evident attribute that Paraguay embodies is potential; however, as so much of its potential has yet to be realized. The Paraguay real estate and property investments market today represents a cutting edge opportunity for investors seeking significant gains from a market that is working hard to provide stability and sustainability.
- There are no restrictions on foreign buyers owning real estate in Paraguay.
- Furthermore, foreign Paraguay property investments are encouraged and welcome in business and industry, paving the way for international investor commitment to Paraguay and free expatriate participation in the employment market, as long as a valid residency visa is held.
- Paraguay has only been a true, practicing democracy for 21 years, meaning that it’s still adapting to this new norm. This presents risks and hurdles to an investor – but also offers significant potential.
- GDP has grown at an average of 5 – 6% pa over the past 10 years and Paraguay has a foreign debt-to-GDP ratio of just ~10%. This becomes negative when considering foreign reserves. Therefore the financial system locally is solid and presents few systemic risks.
- The public sector is undergoing a period of intense and required reorganization under the current leadership. This is a necessity to create a solid basis for long-term growth for the nation, removing reliance away from climate conditions and international demand for soy and meat, upon which Paraguay’s current economy rests heavily.
- The potential for the nation’s economic development is arguably the most unrestricted in the region.
- To illustrate this fact: Paraguay’s agricultural sector has the capacity to triple food production output; the nation has yet to fully explore its mineral and energy resources; Paraguay offers an attractive tax regime and a low cost manufacturing base to foreign investors; geographically at the heart of South America the nation is a hub between its neighbors Brazil and Argentina and beyond.
- As Paraguay is safe from natural disasters such as tornadoes, hurricanes and earthquakes too, it is considered by many to be a safe nation to invest in.
- And while Paraguay is currently in a state of transition, investors looking for emerging potential who are unafraid of facing risk can likely profit significantly from a long-term commitment to this market of immense potential.
Paraguay Real Estate Market
The legal system in Paraguay faces criticisms of corruption; this coupled with the fact that there is no robust national system for property registration means buyers have to tread carefully.
The majority of international buyers focus on the capital city of Asunción where property rights are considered more secure.
However, as rental yields in Asunción are unimpressive considering Paraguay is an emerging market ripe for potential, the adventurous are looking at land for development and agriculture for serious profitability.
The wealth disparity in Paraguay, and the fact the nation’s leadership says it is committed to closing the gap between rich and devastatingly poor, means that over the long-term economic diversification could result in a growing middle class. This could have an inflationary effect on property prices.
60% of Paraguay’s population is below the age of 35: this is seen as a positive for the future of real estate. Demand is growing, and because Paraguay is building a well-educated and civilized community determined to achieve economic success, this will positively drive the property economy in the future.
The fact that Paraguay is a youthful nation also means there is a growing market with a large tax base. Again, these are positive fundamentals for the financial future of Paraguay – key indicators for an investor.
Paraguay has the most stable currency in the Latin American region, offers the second highest return-on-investment for the private sector, and has the lowest tax burden in the region. These all support an investment commitment.
Paraguay Property Investments, Taxes and Doing Business in Paraguay
- Round-trip Paraguay real estate costs are low at between 6.75 and 8.25% with a buyer responsible for ~5.75% of the burden.
- The real estate buying and registration process takes an average of 40 – 50 days, and buyers are strongly advised to seek independent legal representation.
- Because the property registration process nationally is poorly structured, it is critical to do intense due diligence particularly relating to the title deed and boundaries.
- Buyers should also consider having a site survey done, especially buyers purchasing agricultural land, this is to ensure risks such as flooding are understood.
- Buyers should be aware that there are certain limitations to the acquisition of land in proximity to national borders in line with local agricultural and livestock production health control and care.
- Real estate prices in Paraguay are low, even in Asunción where demand is strong. Land prices are also considered to be undervalued in relation to their potential. The low prices reflect the risk, but also represent opportunity.
- The cost of living in Paraguay is also very low, with Asunción consistently ranking as one of the world’s most affordable capital cities.
- Rental income earned by nonresident investors from Paraguayan real estate is subject to 30% withholding tax levied on 50% of the gross rent (i.e., a 15% withholding tax on the gross income).
- Leasing property is liable to 5% VAT.
- 50% of capital gains derived from the sale of real estate is subject to personal income tax: personal income tax is flat at 10% and applies when taxable income exceeds 10 times the minimum monthly wage.
- There are no wealth, inheritance, or gift taxes in Paraguay.
- The legal system supporting landlords is inefficient, for that reason investors considering letting property need to tread carefully. Rents, increases and contract duration can be freely negotiated, and there is no maximum security deposit which allows landlords to build added security in to a contract financially.
Paraguay Property Investment Visa
- You do not need a visa to buy, rent or sell real estate in Paraguay.
- Obtaining Paraguayan residency is very straightforward – albeit weighty in terms of bureaucracy – and after 3 years a resident can apply for naturalization and a second passport.
- According to the Paraguayan Embassy documents currently required for applying for residence include passport; police check; birth certificate; civil state certificate (i.e., married, divorced, separated, widowed); health certificate; consular tourist visa for the countries that require it; economic solvency statement that may be proven by placing at least US$5,000 on deposit in a bank in Paraguay.
- Documents must be legalized at the Paraguayan consulate in the country of origin with the exception of the identification document.
- Once on the ground in Paraguay it will be possible to apply for residency and the required local checks are straightforward.
- The government is keen to create an investor friendly environment, as a result it has reduced income tax from 30% to just 10%, has created free trade zones and has an Investment Incentive Act.
- Reasons to commit to an investment in Paraguay include the fact it has abundant and largely untapped natural resources, environmentally friendly and renewable energy, much of it hydroelectric, a young population, macro-economic stability, a low tax burden, and there are extensive advantages and incentives for foreign and domestic investment.
[Source: Paraguay Government Website]
Paraguay Real Estate Markets of Interest
Asunción: this is the capital and largest city of Paraguay and home to ~30% of the nation’s estimated 6.8 million citizens. 65% of the population in Asunción is under the age of 30 and attracted by strong employment prospects. Demand for housing is intense and has naturally pushed real estate costs up; unfortunately this restricts rental yields.
However, Asunción is considered the safest market entry point for investors interested in Paraguay. Couple this with the fact that Paraguay is a bleeding edge opportunity for investment success, and an investor seeking an entry into this market could still do well with carefully targeted purchases.
Real estate options span residential and commercial, with the latter offering strong prospects for medium-term growth as international business interest in Paraguay grows.
In terms of residential districts to consider Manora, Carmelitas, El Dorado, Trinidad, Herrera, Los Laureles and Villa Mora are appealing.
Paraguay Farmland Investments: The agriculture sector in Paraguay is booming, and according to the CEO of Sudameris Bank the sector actually has the capacity to triple its food production output, having more than eight million hectares still available for mechanized agriculture. It’s therefore unsurprising that investor interest in farmland in Paraguay is growing rapidly. However there are barriers to securing clear title to farmland, with a recent land return ruling in favor of displaced indigenous Enxet people worrying many investors. Approaching an investment carefully is imperative: due diligence will be required into the history of any land being considered for ownership, and for adjacent land as well.
Paraguay Agricultural Investments: – Paraguay experienced rapid recovery of investment and economic growth following its 2008 drought and subsequent additional problems caused by the world recession at that time. It has an incredible track record as a leading global exporter of soybeans and meat products, with high productivity and a high level of capacity for expansion. Added to this, Paraguay enjoys an ideal geographical location in the centre of South America with free and direct access to the MERCOSUR economic union of Argentina, Brazil, Paraguay and Uruguay.
Paraguay land and production costs are a fraction of Brazil and Argentina’s.
For investors wishing to minimize direct personal exposure to the agriculture sector whilst maximizing their investment potential, local and regional agricultural asset management companies exist.
Living in Paraguay
Expat life in Paraguay is laidback and relatively inexpensive, lived among Paraguayans who welcome international citizens willing to integrate. The main language locally is Spanish, and the quality of life achievable can be high.
There is a national disparity between the wealthy and the growing middle class versus the extremely impoverished however, and petty crime on the streets of Asunción is not uncommon.
The pace of life is quite slow, and cannot be compared to life in either of its largest and perhaps more exciting neighbors of Argentina or Brazil!
Life for Paraguayans centers around family and extended family, and nationally religious celebrations are well attended. Culturally speaking Paraguay has a rich heritage, and its principal cultural institutions are located in the capital of Asunción.
As the travel and tourism base hasn’t even begun to truly develop in Paraguay this really limits options for supported exploration of the nation.
However, anyone looking for a new frontier, or a laidback and private place to live a quiet and slower life will do very well in Paraguay.
Paraguay Location and Geography
Paraguay is often called the heart of South American because of its geographic position almost in the center of the region. It’s a landlocked country similar in size to Germany, it’s home to 6.8 million people, and in both 2010 and 2013 Paraguay experienced the greatest economic expansion in South America.
Paraguay lies on the banks of the Paraguay River, which runs through the center of the country from north to south. The terrain is made up of grassy plains and wooded hills in the east and low, marshy plains to the west.
The climate is described as tropical to subtropical, and Paraguay has 2 distinct seasons: wet and dry. The wind influences the weather, sometimes dramatically, because of the absence of high mountains to act as a natural barrier to slow their progress.
Nationally there is a great difference in levels of rainfall with substantial rainfall in the east, and semi-arid conditions in the far west.
[Source: For more information Paraguay Wikipedia]
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