Properties in Buenos Aires for Sale. The answers to 12 key questions that reveal if this year will be a good time to buy
The future of prices, where there are opportunities, the investment in a new builds, the progress of money laundering and the future of rentals, some of the dilemmas that worry those who seek refuge from their investment in bricks.
After going through one of the worst moments in the history of the real estate market in Argentina. the sector closed 2022 with some indicators that generate hope. In concrete data, with the number of deeds reached in November in the city of Buenos Aires, everything indicates that last year it recovered the levels prior to the pandemic. To which was added a new record of donations and a boom in construction works. With this scenario, specialists expect a 2023 behaviour similar to the year that ended, although tied to the ups and downs that election years pose.
“This year will be similar to, above all, the last semester of 2022, with deeds at the same level, more stable property values and an expectant demand,” says Germán Gómez Picasso, head of Real Estate Report.
But, in an unstable economy, some factors start to play with a double effect for real estate . The exchange rate adjustment that harms the completion of used real estate sales operations, but that can be advantageous for those looking for opportunities in the well because the correction of the dollar lowers the cost of construction in that currency. So those who have savings in dollars have more capital. This, added to the possibility of laundering money to buy properties, injects moderate optimism , especially considering that the developers affirm that money has already been released that has not yet been injected into the projects under construction.
The part of glass half empty is in the distorted rental market, “the new aspirational of the Argentines”, with a law that awaits a clue in Congress, a shortage in the offer and prices of contracts through the roof. In numbers, the year closed with an increase of 81.5 percent of the ICL, the index used for the annual updating of contracts. Meanwhile, the market for temporary rentals is growing, which, far from the regulations of the law, doubles the profitability of traditional rentals.
On the other hand, and as for years, The lack of credit is one of the Achilles heels of the sector and a key pending issue to activate the demand for properties. At this point, different referents warn that there could be news regarding a bill that was created during the administration of Martín Guzmán at the head of the Ministry of Economy and that this year it could be treated in the enclosure, as “the battle horse of the ruling party”.
1-How will the elections play out for the real estate market?
“Although in an electoral year it is generally expected that decisions are postponed, coming from such a deep crisis, any change in expectations could quickly speed up operations,” responds Alejandro Schuff, director of Soldati Propiedades. Regarding the dates, Carlos Spina, partner of the developer Argencons, anticipates that “we could be facing a good second semester.”
From the sector they emphasize the urgency of proposing clear rules that last and for fast, agile processes with a low tax burden, which lead to encouraging production and employment while eliminating the controls that have generated so many distortions and obstacles to production. . “We hope there will be a turning point at some point in the year in which a friendly climate is generated for the long-awaited growth, especially for the sector. That turning point is beginning to be seen in asset prices. If the trend consolidates, those who are encouraged to invest in the first months of the year may have extraordinary profits ”, warns Sebastián Sommer, director of Tayron Capital.
2- In 2023 will the momentum of the last months of 2022 be maintained?
In the first eleven months of 2022, 15.9% more deeds in the city of Buenos Aires than in the same period last year. “We are reaching 30,000 operations and everything suggests that the entire 2022 will remain at pre-pandemic levels,” says the president of the College of Notaries of Buenos Aires, Jorge De Bártolo.
Another fact that was a good sign for the year was what happened in June, July and August. Three months in which more than 3,000 properties were registered each month, a phenomenon that had not occurred since the UVA credit boom in 2018. “The demand for properties has been very attentive to prices for months. The slight rise in the number of writings and that it has been maintained for three months suggests that something different began to happen. Perhaps we are facing the change in trend that the entire market is waiting for”, advances Martín Boquete, director of Toribio Achával.
3-What will happen to the prices?
The upturn in the market also accompanies two trends anticipated by LA NACION : on the one hand, that sales prices hit the floor and, on the other, the return to the city after the fever of moving to the suburbs that was experienced straight after the pandemic.
In that sense, Schuff is encouraged by the answer: prices in several segments appear to have bottomed out. “As this trend is confirmed and perceived by buyers, it could accelerate purchasing decisions, anticipating future increases,” he analyses.
For Diego Cazes, director of LJ Ramos, despite the fact that the buyer is more thinking, the current floor of values makes it a good time to buy, something that Agustín Walger, director of Lepore, also shares: “people investigate, see the values and have an idea if they are correct or not. It is the best historical value, there is opportunity”, he maintains.
Leandro Molina, director of Zona Prop predicts that we are facing a change of cycle , according to a work they carried out together with a real estate agency in the northern zone: “In the last 20 years a constant has been repeated: when property sales prices hit the bottom, they begin to gradually rise over the next four years. That is to say, that a process of growth of values is coming. Therefore, it is a good moment to buy”, he explains.
Damián Tabakman, president of the Business Chamber of Urban Developers (CEDU) explains that something that characterizes this period that is coming to an end is that construction costs are very cheap in historical terms. ”And that will undoubtedly change in the stage to come. Argentine assets will be worth much more, and especially real estate”, he deepens.
In short, the trend of “stabilized values” anticipated by LA NACION in April 2022 may be a key driver to anticipate 2023. Sector specialists warn that, beyond exchange rate adjustments, there is no longer room for properties to continue falling , with the exception of certain types, such as old homes and in dense neighborhoods without “heaven”, which lose property value. market. “Also those that are in a poor state of conservation, with little natural light and without open spaces,” says Soledad Balayan, owner of Maure Inmobiliaria, adding that “sale appraisals will be a challenge and we will have to see how the offer accompanies of real estate throughout this process”.
4-How does the adjustment of the dollar impact the real estate market?
The developers agree that the market is in a moment of wait and see , mainly in that of used apartments. “In many cases in the new there is also an exchange delay that in a certain way gives a perception of more expensive construction costs. Although it always depends on the cut-off date that is taken: for example, we are more expensive than a year and a half ago, but cheaper than the average for the decade”, analyzes Spina, from Argencons, developer of the Quartier brand and president of the Association of Housing Entrepreneurs (AEV).
When analyzing the movements of the dollar, he adds that “this sort of increase in the dollar value of the wells happens because inflation beats the dollar.” Therefore, when there are sudden movements of the MEP and the blue, there is a feeling of cheapening “in the photo” but “the film will be what it has to be”. “It is true that in those moments when the free dollar soars, sales increase because people want to capture those opportunities. It would be expected that during 2023 we would have moments of these characteristics”.
Regarding the demand, today there are no final buyers for the new apartments, but sales are more at the investor or company level. However, “today there are people who have dollars in stock, and having bills of any currency, with inflation in the United States and Europe is losing purchasing power,” says Spina and adds that, if not “you get to the elections and a more accelerated devaluation occurs, as the properties in the well are sold in pesos, the sensation of a new photo of cheap real estate returns and sales accelerate ”.
The economist Federico González Rouco agrees on this point. “On the supply side, an increase in the gap can incentivize developers and a finite segment of the market that can invest in it, although it is not inexhaustible either,” he says. Along the same lines, Gabriela Goldszer, director of Ocampo Propiedades, explains that brand-new well projects “continue to be the most sought after and are positioned as the great value haven alternative for savings.”
5- What will happen to the rentals? Will there be changes in the law?
In recent years, mortgage credit in Argentina represented only 1% of GDP, according to a 2019 Presidency of the Nation report. This “lack” generated an increase in the percentage of rented homes, which in the country is already located at values close to 20% and in CABA at 35% of the total.
However, from the Center for Urban Economic Studies (CEEU) of the National University of San Martín (UNSAM) they highlight that in recent years access to housing has worsened due to several factors: the decrease in salaries measured in dollars (68% since 2012), while inflation rose (with an interannual rate of 88% in October 2022), added to the uncertainty generated by the pandemic and the approved rental law in 2020, led many landlords to decide not to rent their apartments. Therefore, with increased demand from new tenants and a reduced supply of units, rental costs have skyrocketed in real terms.
Meanwhile, the rental law is still dormant in the corridors of Congress and, according to sources inside the compound, there will be no news in the short or medium term. Opposition legislators point out that “they will not advance with an opinion until they have the number of votes guaranteed to advance with the modifications.” With which, unless the issue enters the agenda in view of the election year, no modifications to the most controversial articles of the law are expected during the first months of 2023.
In addition, in June of this year it will be three years since the sanction of the rental law. What does this mean? In the middle of the year, many of the contracts closed in 2020 will culminate — the norm sanctioned in the midst of a pandemic that stretched their term from two to three years — and specialists affirm that in the renegotiations the increases will be even greater than those registered up to the present. moment. The tendency to close contracts outside the law will also increase. In this sense, they project that the next semester will be the worst in history for the rental market .
“In the first quarter there will be no stock of units on offer in the market and in the second the prices will jump much worse than the level they have been increasing,” explained Marta Liotto, president of the city’s Single College of Real Estate Brokers. from Buenos Aires (Cucicba)
From this entity they warn that according to a study that they have been carrying out with real estate brokers for more than a year, the renting offer does not exceed 4000 real properties . And what is even worse: the shortage of the rental market does not seem to have bottomed out. “It is evident that we are moving quickly towards “zero rents”, or towards a marked informality, rents between “ friends and family ”, says Gómez Picasso, from Real Estate Report.
6- Are there fewer properties for sale?
An important piece of data from the last month of 2022 that could also be read as a sign of reactivation is a sharp drop in the supply of properties for sale: in CABA there are 142,338 properties on offer, according to data published by the Real Estate Monitor. How is this drop in the number of published units explained? There are three reasons: “First of all, in the last few months there was a good amount of sales that absorbed part of the inventory. In addition, given the great pressure that owners feel from real estate agents to be honest with prices, many give up on the sale. Finally, there are many properties that went from sale to temporary rental, which corroborates the rise in the supply of properties for this business , ”replies Daniel Bryn, owner of Invertiré Real Estate.
However, there is a surprising fact: “60 percent of the offer is above market value and there are only 41,000 properties that are published at real value,” says Fabián Achával, owner of the real estate agency of the same name.
In any case, the rising numbers of the deeds and the floor in the sale prices excite some brokers with making 2023 the year to carry out operations. “The time to buy is today. We have cases of properties that can be acquired up to 45% cheaper than five years ago. I think prices hit a floor and, in an election year, added to the laundering of used apartments approved by Congress, the market will begin to recover,” agrees Martín Pinus, owner of the real estate agency of the same name.
Another phenomenon is that many people are resolving their housing needs and desires that had been put on hold by the pandemic. “The balance is positive taking into account where the activity came from and the indicators of both completed operations and query dynamics have improved. As well as the validation of the prices of the projects that we have launched”, analyzes Goldszer.
7- Why are there so many construction works in a context of expectant demand?
In recent years, the cost of construction represented an opportunity that resulted in the large number of new works that are advancing in the city of Buenos Aires . In the last six months of last year, with the fluctuations of the foreign currency, the costs to develop a building experienced rises and falls in dollar bills due to differential movements in the currency price compared to increases in costs in pesos in an economy that closed the year with inflation between 95 and 97 percent.
The answer to why developers decide to bet on new projects in a context where property prices are falling in almost all areas and sales operations are at low levels, is given by the cost of construction, which in recent years In the last three years it was US$595/m², 40.26% lower than in the three previous years, when it was US$996/m².
In numbers, the CAC index – the one carried out by the Argentine Chamber of Construction and is used to update the quotas of projects under construction – registered in 2022 an annual increase of close to 96% . “Recent history shows us that in election years the ruling party does everything possible to step on the price of the dollar. In other words, it will be a year with the start of fewer new works and also expectant in this sense of what happens in the elections”, warns Gómez Picasso. The platform that follows month by month the evolution of how much it costs to build a building between party walls determined that in November of last year the cost of a building of just over 1000 m² in horizontal property and eight floors, required an initial budget that exceeded $175,000,000. However, if compared to the maximum peak of May 2017, the costs are -in dollars- still 40% below, despite the fact that this percentage has been varying strongly in recent months, always depending on the degree of devaluation. “The rises and falls in dollar bills generate doubts in the builders since there is no predictability in one or two years about what the final cost of the apartment will be, that is why in this type of situation the units are usually overcharged to lower risks of losses”, admits Gómez Picasso.
Moreover there is a lag in the exchange rate that will inevitably have to adjust sometime in 2023. “If one is based on recent history, it is typical that in times close to elections the ruling party steps on the value of the dollar price, if this happens again in 2023 the cost of construction in dollars would be high again, follow the chat with THE NATION Gomez Picasso.
But how do these fluctuations affect the final price of well projects? “The key is that it is sold in pesos and people think in dollars. When the informal dollar rises faster than inflation, there is a feeling of cheapening, of greater purchasing power, of being able to buy more meters. And, on the contrary, when inflation beats the dollar, and there is an arbitrariness in the period where the cutoff is made, we can say that construction is becoming more expensive”, answers Spina with five works and more than 300,000 m2 in execution. In the same sense, Santiago Tarasido, CEO of the construction company Criba – which has more than 500,000 meters under construction – expresses, “the real estate and private works sector continues to reinvent itself to take advantage of some favorable conditions such as a construction cost that remains low in dollars”.
For Gustavo Llambías, RED partner and vice president of the Association of Entrepreneurs for Housing in terms of development and construction, “the current trend of building for stock will continue, waiting for better conditions to sell and with the understanding that We are facing historically low costs and sales prices that have reached their minimum and that should improve with a change of context that is expected from the change of administration at the end of 2023.
8-Why is temporary rental a good business, what profit does it leave?
There are fewer and fewer apartments to rent under the traditional contract model and more temporary ones: with 13,195 units for rent under this modality in the city of Buenos Aires, the offer accumulates a rise this year of 27.98%, according to the data from the Real Estate Monitor.
The explanation for this phenomenon is that they are not governed by the rental law and the profitability is up to three points higher than that offered by a traditional rental . In terms of concrete earnings, a temporary rental in CABA leaves an average of US$560 per month —although in a top project in Palermo it can triple that number-, while a traditional rental leaves approximately US$287.
The growth of that business was overwhelming: in November 2021 the temporary rent was only US$222; with which it registers an increase of 189%.
“The growth, in addition, is driven by the increase in the arrival of post-pandemic tourists and based on the value of the dollar: 11 people arrive in Buenos Aires for each temporary rental that is rented . This shows that there is a market for the temporary to take care of it, taking into account that hotel rates are more expensive and many have closed”, points out Bryn.
9-Will laundering move the market?
Savers who chose to declare money invested $47,349,674,152 in projects that are less than 50% complete since March 2021, according to data from the Federal Administration of Public Revenues (AFIP).
Today the sector is already in the second stage of construction laundering with a 10% rate until February 17 . “The increase in the rate for construction money laundering corresponding to this second stage and the appearance of multiple money laundering options have weakened the expectations we initially had about the impact of this measure for the reactivation of the sector,” Mali Vázquez points out. , Institutional Director of the CEDU.
On the other hand, Spina explains that “there are many people who laundered and still have not used that capital. There is a one-year extension, so some large-volume news for the new-unit market may appear.”
10- Is it a good time to donate a property?
Real estate donations already exceed the historical record that was registered in 2021 in the city of Buenos Aires: until November 10,633 operations were recorded . This means 11% more than in 2021. In other words, so far in 2022, every 2.8 deeds of sale, there is a donation. To gain relevance from the increase, one can appreciate what happened in 2007, a very good year of property purchase and sale operations: in this case there were 7,727, one every 9.5. While in 2018 — in a market with observable credit and donations — it was a donation for every 17 deeds in the Federal Capital.
In addition, it is 360% more than in 2020, a year of a pandemic and with the legal applications prior to the reform of the Code. This data is key since, with the 2020 reform, the number of donations grew to more than 11,000 in 2021. Sources from the College of Notaries of CABA pointed out to LA NACION that “it is not unreasonable to think that 12,000 could be reached when the balance of 2022 is made.” Why this jump to the record? There is “backward” data that continues to be corrected, as a result of 5 years of observability of donations.“It is possible that this growth will begin to soften in a while, but it is also true that people are beginning to value this tool more and more,” they explain at the Buenos Aires College.
In addition, they are already beginning to observe a “cultural” issue, in the sense that people began to perceive the donation of real estate as a tool to avoid delays in successions.
11- Is the return to the City consolidated and are there opportunities in “spillover neighborhoods”?
In recent years, the sector’s expectations have been placed on the residential segment, especially in the suburban market, as a result of the pandemic and the migration to the green. But, this last year, both developers and real estate agents began to observe a growth in sales in the demand for properties located in the city of Buenos Aires .
“The market has been slowing down for years. But suddenly we noticed a decision to bet on the City again that, although it may be slow, is genuine and well thought out. Today CABA drives better again. We have noticed that for a few months one of the branches that works best is the one in Recoleta and Palermo”, indicates Cazes.
In the same sense, the director of Soldati believes that after a long period of adaptation to the new work and consumption modalities resulting from the pandemic, “we are entering a period of certain stability or a new, more permanent status quo, a certainty that could also speed up real estate purchase decisions”.
Boquete, by Toribio Achával puts another topic on the table: the drop in the value of apartments is an opportunity for foreigners and “Buenos Aires continues to be the most beautiful and desired city in South America. And it is also the cheapest. This cannot be sustained for long.”
In addition, new areas are emerging that are integrated into the neighborhoods that were traditionally the most sought after.
One is the area of Avenida Huergo, in the lower part of Buenos Aires, which promises to be one of the vedette areas as a mirror neighborhood of Puerto Madero . Two key undertakings are built there: Huergo 475, the one carried out by Consultatio and Criba, and the Quartier towers. “When we started our first Quartier in the area, I had a view that was a wall and trucks passing two km away. per hour. Today with the Paseo del Bajo, the landscape is already completely different, with the dikes and the river in sight”, recalled Spina.
In addition, the “spill” neighborhoods of Palermo are growing, which extend to Villa Crespo, Chacarita and Colegiales with new projects that are integrated into their cultural scene and identity.
12- Are there real estate opportunities in the interior of the country?
With property values plummeting, those with savings can afford to look at different options, and for those who are not tied to a particular area of the country, there is the possibility of buying a unit for US$1,000/m² or even less.
The plateau in property values that brokers have been talking about for a long time in the city of Buenos Aires (CABA) and surroundings is also observed in the interior of the country, and even, with a progressive rise in the last year. Thus, the chances of getting lower prices increase in some areas of other provinces.
According to data from Zonaprop, there is no neighborhood in the Federal Capital where you can get a unit for less than US$1,000/m², although prices continue to register a very slight drop.
In the case of inland cities, you can still find properties with a value of less than US$1,000/m². According to a Real Estate Report report carried out in eleven locations, the values grew by 0.23%. It is the fifth consecutive quarter in which a small rebound has been achieved, after the marked drop in banknote dollars at the end of 2019 and all of 2020. However, in relation to the maximums registered in May 2019 for those same areas, the average current value is almost 40% below.
Within the survey , only two of the eleven cities show a value per square meter above US$1,000/m² : One of them is Mar del Plata, which presents an average value of US$1,065/m² in departments of two and three Used environments located in the urban area.
While the other city is Bariloche, with an average value of US$1,510/m². In this city of Río Negro, prices start at US$1,035/m² and go up to US$1,785/m².
The case of Bariloche is a place that has seduced for some time now. Daniela Aiello, partner and director of the real estate agency Finca Sur de San Martín de los Andes and one of the founders of the COPIP regional real estate congress, comments that she sees interest from national developers and investors in the area but also from those from Buenos Aires, Bahía Blanca, Rosario, Córdoba and Mendoza.
While temporary rentals grow, the lack of supply for traditional rentals is a problem given a growing demand for people who choose to live in this city.
Source: La Nacion (mechanical translation)