From
Christian Leupold
Commercial Director of Ávilis Real Estate
Is this a good time to position yourself in the bricks? Have the prices reached your floor? It depends with which filter we look at it and the main one is the reason that pushes the buyer to venture into the search for a new property.
For what and why do they buy? Is this your first home? Has the family grown? A house for the weekend or for the summer? Or rent? These questions they inherently define different categories of real estate propositions and geographical areas. In short, they are sub-markets that evolve differently from each other. That’s right, not everything is created equal in real estate.
We can take as an example the recent pandemic and the wave of buyers looking for lots and homes in closed neighborhoods, generating an unimaginable revaluation a few months earlier. This has already happened. Here because timing is very important.
The encouraging thing is that the real estate sector is cyclical and proposals arise periodically or areas that are in an early stage of development and have sufficient foundations to generate value capture or capitalisation. That’s why location is key when it comes to placing yourself in the bricks.
However, it’s not a simple process. To realize a real estate asset, be it a house or a building, it takes from 18 to 36 months, including planning, approvals, construction and marketing. For this it is necessary to form an interdisciplinary team of architects, developers, real estate agents, notaries, etc. for each project. Management is critical to the success of the project.
In our country, the real estate sector positioned itself more than 20 years ago as the haven of value and capitalization vehicle par excellence, with very interesting and varied revaluation rates, which average between 5% and 7% per year, if we refer to the CABA departments and taking the period from 2001 to today; but also with extraordinary returns if we take for example the revaluation of land in closed neighborhoods of Greater Buenos Aires during and after the pandemic, where in some cases the values have tripled in a very short time. The rental income, on the other hand, has been positioned as an extra pension for those who have been able to buy a second property over the years.
Here we are today A turning point. That is why the important thing is to try to understand what is happening, in which cycle we are in a given market, what are the fundamentals that accompany the project or asset in which you will invest and what your reasons are.
Today we talk about apartment or cycle change in real estate. How can it be? The dollar skyrocketing, inflation the same, an election year, among other things. It is true that the macro is not encouraging at all. I wonder: when was it? I answer myself: in very few time windows in my 25 years of active economic life.
However, we have been coming for several months with indicators that are encouraging and justify the new premise. In CABA, where there are serious surveys and we have hard data to analyze the context, we can highlight that the supply of apartments has decreased, that the percentage of negotiation is lower at the time of the closing of the transaction and that the number of deeds in the 2022 is almost on par with those of 2018. That is, lower supply, greater price stability and higher volume of transactions. Imagining a hybrid chart of these indicators, everything indicates that the trend line is changing, marking a horizontal trend, after 4 years of decline.
What are the reasons for this event? Is there a recovery in the economy? A change in demand habits? A new program that promotes mortgages? Or could it be that recycling is making its mark, reviving the market? Undoubtedly no answer is affirmative.
Another, more subjective indicator is chatting with acquaintances and friends, the typical chat over coffee or dinner, where even today we talk about how much it costs to sell an apartment, that the market is slowing down and prices are very low.
What is the engine that makes us see growth in the number of deals in such a macro-challenging year as 2022? All would indicate that it is a change in expectations. But by whom? From the first buyers. That group of advanced players formed by two profiles, those with less risk aversion. The former are characterized as purely risk-taking investors of the business who understand that it is a good time to position themselves in the bricks and mortar. The second is formed by the user, the one who decides to buy in order not to lose a certain unit in a certain project outside the macroeconomic context. in both groups regulates the principle of price opportunity and supply scarcity.
This behavior is more visible in the category of well units, which is the one that has best defended itself from the decline in recent months. It is a paradox, since in this category all buyers are also betting on something that has not yet materialised. It’s about projects. They are a collection of renderings, projects and projections, or at least works in progress that are in an incipient stage.
However, in recent months we have seen how several versions have been consolidated and, in many cases, unit prices have increased.
So what scenario do we expect for 2023? Clearly a year where the intensity continues in macroeconomic terms and, moreover, for the second semester it intensifies politically with electoral definitions. It is clear that the macro climate is not expected to improve. Many times the markets move at the wrong time in the macro. We see it in the Merval index measured in dollars, with a strong recovery going on for several months.
For this reason, if the incipient momentum continues, it could generate the contagion effect e the change of expectations in other still skeptical potential buyers regarding the real estate market. It is the second group that enters the market at a later stage, but also the most numerous and the one that gives the most dynamism to the business, i.e. those that bring the largest volume to the market. We would enter a more stable and lasting second phase which confirms the change of cycle.
We will notice this month by month, especially starting from March, once the summer season is over and that is when the market tends to move in terms of operations.
Source: Clarin
