The real estate paradox: low prices and low demand

The real estate market is slowly starting to wake up. Gradually and especially in the suburbs of large cities. The resumption of sales is caused by the general decline in prices over the past two years (35%), but even so, the majority of owners have not resigned. An illustrative fact is that in Capital 8% of the properties are for sale but “70% is well above the real values”, Says Fabián Achával, economist and owner of the real estate company of the same name.

The data arises from the comparison of the prices that are published with respect to the closure of specific transactions. The study conducted jointly by several real estate agencies reflects huge market distortions: dollar volatility, exchange rate traps, lack of credit and the Rental Act. In CABA there are 163,000 properties for sale. Of that total, 138,000 are apartments, houses and townhouses. Most are up to 60% above market value. 11% is in the price, but the remaining 19% is lower.

“This means that 41,000 properties reflect the real price or are for sale”Summarizes Achaval. The stock buildup began in April 2018, parallel to the big jumps in the dollar. “Three years ago there were 40,000 properties for sale, which is the historical average of the capital. Today there are four times as many and a lot of the merchandise is out of price, “says Daniel Bryn, owner of the real estate company of the same name.

In the sector they believe that the supply is oversized since many properties, “at current values, are almost impossible to sell”. Proceedings collected in Capital (3,000 were completed in June, an increase of 23% year over year). In the cumulative of the first half there are 13,000 transactions, well below the same period in 2018 (31,332). In the province the situation is better, but the trend in the capital continues. “Last year it was very bad, now it’s not that bad”Describes Bryn.

It is still unclear whether prices will continue to fall. Some believe they can still go down, but there are others who claim to have hit rock bottom. “The real estate market is very affected and there is no desire to buy,” interprets Diego Cazes, of LJ Ramos. The expert argues instead that the improvement in the Province has to do with the pandemic, which has changed the way people work. “I think the euphoria is over,” he says.

Most of the 163,000 properties for sale in the capital are apartments. There are 119,000 and represent 73% of the total. The rest are townhouses (7%), houses, land, shops and offices (4% each) and garages (3%). According to an Inversiónre report based on data from the ZonaProp portal, the districts with the greatest offer They are Puerto Madero (20%), San Telmo (16.6%), Núñez (14.6%), Parque Patricios (14.5%), Villa Urquiza (13.6%), La Paternal (13.2%) ) and Belgrano (12.8%).

According to data from Zonaprop, to CABA the average price per square meter is US $ 2,265. “All neighborhoods experienced price drops on an annual basis, with the exception of Montserrat, which increased by 2.8% over the year,” the report said, stating: “Those that fell the least were Puerto Madero. (1.7%), Monte Castro (4.5%) and Santa Rita (6.2%). And those with the largest decline are Nueva Pompeya (14.6%), Agronomia (10.6%) and Parque Patricios (10%) “.

Bryn claims that “40 months ago, the square meter of used is down“. Ariel Champanier, of Re / Max Premium, comments that “the minor victims were in the premium areas. In the lower middle class neighborhoods (Flores, Floresta, San Cristóbal, Congreso, Agronomia and Barracas) it costs more to sell ”. The curious thing is the phenomenal discrepancy between the published prices with which the operations are closed. Analysts acknowledge that they are baffled.

“At CABA, for 6 months we have observed a plateau in sales prices. That is, they stopped falling. On the contrary, in the province of Buenos Aires the values ​​have recovered and in some cases, today they are above the pre-pandemic ”, explains Alejandro Bennazar, head of the CIA (Argentina Real Estate Chamber).

On the market, it is argued that this has to do with the effects of the pandemic and the long period of compulsory confinement, the increase in remote work and the search by many people to live in areas far from large urban centers. They say that this is part of a global trend and that it is also repeated within the country.

There are 6.36 million owners in Argentina. The data comes from the permanent survey on families conducted by Indec. According to a survey conducted by Real Estate Report, 74% would like to move. “If we go to the causes, the majority want to have a park, a garden or a terrace: (37.9%). A second group says they want to change neighborhood or city (27.7%) “, lists Germán Gómez Picasso, founder and director of that consulting firm

There is a long way from wanting to being able. Because difficulties remain for the real estate sector, in particular the obstacles to trading with dollars and the lack of mortgage credit, a chronic evil in Argentina. “All activities (construction and sales operations) are below normal parameters”, says Emilio Caravaca Pazos, president of FIRA (Real Estate Federation of the Argentine Republic).

The director says that the reality of AMBA is repeated almost all over the country. Greater contraction in large cities and provincial capitals and a more relaxed situation in suburban areas. As for the values, Caravaca Pazos argues that the resistance of many owners to the lowering of prices “favors those who do it“. And he adds that at the moment “demand does not validate supply and that is why there is an excess of stocks”.

For Cazes, the migration to green spaces is over and today many intend to return to the cities. However, the availability of offices in the best buildings in downtown Buenos Aires is around 17%. “It’s still very high,” graphs.

Spare parts, purchases and rentals

Property prices continue to fall. Some believe they have hit rock bottom, but there are opposing views. For now, a report from the specialized portal ZonaProp indicates that the average price per square meter at CABA today is $ 2,265. “All neighborhoods experience price drops year over yearwith the exception of Montserrat which grew by 2.8% ”, he points out.

They also describe the average value per square meter in different areas of the country. For example, in GBA North: $ 2,251. In GBA west and south: US $ 1,728. In the city of Córdoba the average price per square meter is US $ 1,132 and in the city of Rosario it is US $ 1,537. Experts say that, in general terms, the downward trend is quite widespread and that “the only thing that is sold is the price “.

The outlook for rents continues to be complicated by the lack of supply. Many owners have withdrawn from the market from the issuing of the rental law. Despite this, the ZonaProp report indicates that prices have risen but “just below inflation”.

In May, the rent of a 2-room apartment in the City was averages $ 60,262 per month, this is 6% more than the previous month. “In 2022, rents accumulate an increase of 28.5% and the supply of apartments remains limited”. While there have been many plans to amend or repeal the controversial Rent Law, nothing has happened so far. In this regard, the director of Real Estate Report, Germán Gómez Picasso, says that “rental income has improved due to the lack of supply and the increase in prices”.

This has a partial impact on the real estate business. The most sought after by investors are the studios, which are currently the most affected. “What is sold the most today are the 3 environments, which account for 30% of sales. Then come those with 2 rooms (26%) and those with 4 rooms (20%). Room 1 is underrepresented as the investor does not find it attractive, ”says Soledad Balayan, of Maure Inmobiliaria.

As usual, construction costs improve when the dollar price jumps. At least for those who have hard currency tucked under the mattress. According to Real Estate Report, despite the increase in the prices of materials, the cost of renovating bathrooms and kitchens has improved for dollar banknote savers ”.

If you took the price of the blue dollar at the end of July, to renovate the bathroom and kitchen of a standard apartment, you would have to invest almost 2.4 million dollars, or 8,053 dollars. Due to the latest write-downs, this represents $ 1,579 less than was needed three months ago“. At the beginning of 2018, $ 17,070 was required to do the same job. Therefore, the cost of remodeling both environments is currently 52.78% less“.

There is another factor that drives both the construction and purchase of properties as havens of value. Gómez Picasso points out that “the traditional dollar saver sees that the US currency is depreciating and in some cases chooses to pour part of their savings into real estate and construction,” he says. He also adds that “this has generated more real estate sales and also jobs, ranging from building homes to expansions and renovations.”

But despite the increase in the number of deeds which is recorded above all in the province of Buenos Aires, uncertainty and pessimism prevail in the real estate sector. Most believe that at current prices “this is a good time to buy”. Others believe that the values ​​could continue to decline, “but not much more”.