VIEWPOINT |
Guatemala, Mexico's Neighbor in Central America
By Harriet Cochran Murrray - Cochran Real Estate - May 2006
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I had the opportunity recently to travel in Guatemala for the Semana Santa week. We stayed in the city of Antigua, which is 35 minutes by car from Guatemala City, the present capital of the country. Antigua was the former capital during colonist times, beginning in the 1500’s.
There are pine and cypress forests along the road as you drive to 5,000 feet elevation and reach Antigua in her valley at the foot of the volcano “Agua”. In 1773, this colonial town suffered an earthquake which destroyed many of its  convents, churches and buildings. After this earthquake, the capital was moved from Antigua in the Panchoy valley to Guatemala City in the Ermita valley.
Foreigners can own real estate in their own name in Guatemala. They are restricted from owning land which is located on border lines or along lakes, rivers that are seaworthy and ocean front. In theory, the Guatemalan executive branch of the government can give special permission, but one has never been granted to a foreigner.
There are official licensing requirements to practice real estate in Guatemala, but they are not enforced. The Guatemalan Association of Real Estate and Appraisers (AGBRV) provides its own standards and a code of ethics to its industry.
Property titles are kept in the National Registry for Property, which is computerized and run by the government.
When you are considering buying real estate in Guatemala, it helps to understand that all towns are laid out in a grid system. Streets (calles) run north to south and Avenues (avenidas) run East to West. Addresses are written with the name of the street first, the number of the nearest crossroad next, and lastly the property number.
Most expatriates living in Guatemala City are reported to have lived in zones 9, 10, 13, 14 and 15 which are all near the US Embassy. As times have changed many now live on the outskirts of the capital. Antigua is popular with foreign residents as well as Panajachel, located on Lake Atitlan, two and a half hours from Guatemala City.
Buying Land in Antiqua:
There is a transfer tax which is paid by the Seller and The Buyer. The amount of tax is 10% of the assessed value of the land. The Buyer pays 2.5% of this amount and the Seller pays the rest. This transfer tax is paid to the Department of Inland Revenue at the time the property is transferred. Poof of payment must be submitted to the Land Registry to finalize the sale and recording of the new owners.
For a non-citizen’s license to own, you must apply for and obtain a Non-Citizen’s Land Holding License. The cost for the stamp is 5% of the assessed value of the land, payable to the Department of Inland Revenue when the license is approved.
If you want to own property in a company name you may do so. If the company is not domiciled in Antigua or is controlled by non-citizens, the same license is required from the Revenue Registry.
Property Taxes are equal to .5% of the assessed value, due annual.
Capital gains taxes in Antigua do not exist at this time.
Land and homes values have increased steadily over the years, according to the brokerage community I was able to source. Currently in Antigua, developers of resort properties and custom homes are in business creating private communities. These developers may offer mortgage financing up to 10 years.
It can take up to a year to build a home, which is similar to our area of Mexico. In Antigua, the style of home is influenced by the climate, available wood from the forests and the risk of earthquakes. Walls are up to 20 feet thick and made of cement and stucco with wooden and metal supports. Most homes are one story and walled from the street. Rooms are built around courtyard or garden. Windows in the street side walls are framed in with an ironwork design recalling the influence of Spain. Historically in Antigua, the homes in the affluent areas occupied up to one fourth of the block, so the term “cuadro” or one-fourth, has come to mean in Spanish, a city block.
The interest of the expatriate community in Guatemala has a lot to do with its affordability. You can live a nice standard of living and the proximity to the US and Canada is appealing. Guatemala has direct air flights to the US, with connections to Canada.
The court system does not support litigious lawsuits for the sake of suing.
Guatemala produces a number of vegetable and fruit crops as well as cattle, chickens, pigs and lamb. The food sources are good and varied and do not have to be imported for a higher price.
Residency: Most foreigners receive 90 days to be in the country when they enter as a tourist. You may obtain an extension of another 90 days before you must decide what to do about your residency requirement.
Temporary Residency is one year, renewable for $65.00US or $500 quetzals, the national currency. Permanent Residency is five years, renewable, and costs about $350US or Q3,000. Permanent Pensionada or Rentista status is for life and requires no fee.
To receive the Resident Retired Citizen Status (Pensionado) or Investor Resident Status (Rentista) you are required to furnished evidence of income of $1,000US a month for yourself, and additional income of $200US a month for each dependent.
To become a resident, proof of the income is required as well as a marriage certificate, if applicable, and evidence of no police record issued by your police department. You also need a certified copy of your passport and a letter of validity of same, issued by your embassy. If your passport and letter of validity are not in Spanish, they will need to be translated into Spanish by an official translator.
You can begin your permit by working with the Guatemalan consulate nearest your home in the states or Canada, but you are not required to attain residency prior to arrival. Remember, you can reside up to 180 days as a tourist before applying for residency status.
In Guatemala City Zone 15, “Vista Hermosa” real estate of small homes and condominiums can range in price from $100,000US to $250,000USD. Larger walled estates can cost from $300,000USD to $1,000,000USD. Rents range from $850USD to $4,000USD a month.
Zone 14, known as Canada, is one of the nicest districts with foreign embassies and large estates. Large homes sell from $500,000USD to $4,000,000USD. Monthly rents in this area can be $2,500USD to $6,000USD. Here the supply of town homes and apartments are limited with prices per square meter of construction ranging from $900USD to $1,500USD.
Also in zones 2, 5, 7, 11, 12 and 13 in Guatemala City, middle class homes for native professionals and expats run up to $125,000USD.
Now, in the outskirts of town up to 15 minutes away, new construction of large estates can start at $25,000USD. These areas are located on the highway to El Salvador.
Guatemala’s economy encourages free enterprise and the country has the potential to experience significant growth. Inflation is low and the monetary system is stable. Before 2000, records showed that almost 500,000 Guatemalans were living in the US with continued immigration of about 8,000 per year. During this time, about 10,000 Americans lived in Guatemala City.
The National Association of Realtors*, in the USA, describes Guatemala as a country with a growing economy due to the abundance of natural resources and a stable monetary rate. Inflation is low and lines of credit are being stimulated for business opportunities with national and foreign investors. Tourism has been second in revenues for the country since l986.
Guatemala’s real estate industry is largely centered in Guatemala City, with a population of about 2 million people.
The country has had a serious problem up until this time with the inequality of land distribution. This was a significant motivating factor in the 30 year civil war which ended recently. Brazil and Pakistan are the only other countries in the world with this degree of inequality of land ownership.
Land has been a source of political conflict for generations, since former governments gave the land of the indigenous people to supporters of their governments. A report from the Conampro of Guatemala estimates only 2% of the population of Guatemala own large tracts of land and 98% own no arable farmland at all. Guatemalan rural worker organizations have been seizing unused estates in an effort to make the government purchase the land to redistribute. This effort has not been successful to any large degree up to this point.
Under Guatemalan law, foreigner can acquire, maintain and dispose of real property with few restrictions except for the protected areas formerly mentioned in this article.
Foreign firms developing projects in designated tourism zones are eligible for income tax exemption on revenue from their investments as well as duty-free importation of any goods or materials not made in Central America. Foreign investment laws have allowed foreign investors to receive profits and capital without restriction.
Administration procedures are still a burden to the investor with much red tape and delay in permits. While corruption in the government is a fact of life, political violence has abated, but crime is still high. Foreign investors should use local legal counsel to obtain fair treatment in the court system.
*NAR under the division of CIPS, April, 2006.
Harriet Cochran Murray
E-mail: harriet@casasandvillas.com
Information for this article has been furnished by: Operadora de Fondos LLoyd, S.A. and Producciones Viva.
This article is based upon legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller conduct his own due diligence and review.
For additional information on properties, for sale or lease within the bay please visit Harriet Murray Website, call or e-mail me at: harriet@casasandvillas.com
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