Argentine Real Estate Crisis: Profitability has slumped to an all-time low
The average return reached 2.8% this year meaning it takes 36 years to recoup the investment. Selling prices dropped in 87% of the city neighbourhoods
The profitability of the properties continues its downward path and, with an average of 2.8% a year, reaching a new all-time low, according to a report prepared by ZonaProp.
The survey highlights that the devaluation of the peso in August caused the price of rents measured in dollars to fall sharply. Although the sale value of the properties declined, this was much less marked in some locations.
Thus, today it takes 36 years to recover the investment made in a property. This number is 22% more time than a year ago.
Constitution (3.9%), Balvanera (3.4%) and Monserrat (3.3%) remain the best neighbourhoods for rent-seeking investors because they present the best annual return on investment.
In pesos, rents showed an average year-on-year increase of 29.7%. Renting an average two-room apartment in the city costs AR 17,380 per month, a figure that represents a rise of 2.9% in the month. The departments of 3 rooms and 70 meters are rented for AR 24,331 per month.
Constitution is the neighbourhood with the highest year-on-year increase in the price of rents, with 55%. La Paternal (42%) and Saavedra (41%) are the other neighbourhoods that rose above average.
In November, the average price of an apartment in Buenos Aires was USD 2,507 per square meter. That number is down 0.5% in relation to the month previous representing the largest monthly drop since 2012. From March accumulates a fall of 2.1%.
An average apartment of two rooms and 50 square meters has a value of USD 131,000 dollars. On the other hand, one of 3 rooms and 70 square meters reaches USD 184,000.
“The price decline is widespread, while in June 2018 69 of the neighbourhoods showed increases, currently, 87% of the neighbourhoods showed decrease or stagnation”, the report stresses.
The neighbourhoods of the northwest of the city such as Villa Santa Rita (-6%), Vélez Sarsfield (-5%) and Villa del Parque (-5%) are the ones with the highest year-on-year drop.
For its part, the southwest zone is the one that best resists this low. In fact, Centro/Microcentro experienced an increase of 3%, St. Nicholas 2% and Constitution of 2%.
Regarding the price per square meter, the maximum values are in Puerto Madero which is quoted at USD 5,715 a meter, Palermo (USD 3,489) and Las Cañitas (USD 3,465). The average values are located in Saavedra (USD 2,685), Parque Centenario (USD 2,515), Centro/Microcentro (USD 2,382), Boedo (,USD 2,250) and Montserrat (USD 2,169).
The lowest prices are in La Boca (USD 1,732), Constitución (USD 1,714) and Villa Lugano (USD1217).
Source: La Cronista
Note: The core reason for this crisis is investors both local and foreign have shown little interest in exposure to Argentina now that the earlier leftist Peronist government is back in power. Its leadership included the feared ex-President Christian Kirchner whose incompetence and eye-watering corruption made Argentina a basket case shunned by the world.