Due to the combination of rising rental values and the persistent decline in property prices, gross annual return of used apartments in the city of Buenos Aires in the last year it grew by 1.43 percentage points.
This emerges from the comparison between the average values of approximately 1,095 units on offer published on internet search engines and their counterpart of homogeneous units offered for sale.
“Based on March 2023 data, the average annual gross profitability of 1- to 4-room used apartments was 4.08%; while a year ago in March 2022 that same figure reached 2.65% per year”, underline the Real Estate Report analysts.
According to these records, the improvement in gross rental income between last March and the same month of the previous year. is explained by an inter-year decline in dollar sales values of 10.04% and on the other, due to an increase in rents in pesos has exceeded 160% year over year. These they grew above the exchange parity which, in the same period, was 93%.
As for the average profitability in a traditional three-year rental of used units, One bedroom apartments are the ones providing the highest income with 4.3% followed by 3-room apartments with 4.24% and studio apartments with 4.10%, while the largest three-room apartments are the only ones to guarantee an income of less than 4% with 3.66% in March 2023.
Market sources consulted, Federico Hornos, broker of Gustavo De Simone Soluciones Inmobiliarias, states that “several months ago we can see that the profitability of real estate was increasing due to the combined effect between the country’s inflation and the demand for rentals” , He says. “But this improvement must be differentiated in the properties of one, two and three environments,” he clarifies.
As for the neighbourhoods, “where greater profitability has been seen, there are Palermo, Recoleta, San Telmo, San Nicolás and Retiro. Everyone drives a percentage that is around 5% in each neighborhood,” said the entrepreneur.
Despite the increase in rental profitability, Francisco Altgelt, president of Altgelt Negocios Inmobiliarios, is more skeptical and points out that, although the traditional rent may be 3% or 4% at the start of the contract, then it deteriorates, due to the relationship between the peso and the dollar”.
The entrepreneur adds another piece of information: “profitability is calculated by taking a value of the property which is currently at low levels. If property prices start to rise, profitability will fall. It will probably be that percentage at first, but then the profitability decreases as the months go by,” he says.
“I dare not advise an owner to invest in an apartment because it has a yield of 4%, after three months he calls me and tells me that the yield has dropped, and he is right,” he said.
In any case, the current low activity in the real estate market, does not foresee an increase in property prices in the short to medium term.
Source: Clarin
