San Telmo in Buenos Aires, a neighbourhood that was among the least profitable for investors, has changed
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In a few months, San Telmo went from being an unprofitable option for investors to being one of the neighbourhoods with the highest returns; the reason for this change.
In the heart of Buenos Aires, the San Telmo neighbourhood surprised locals and strangers with a notable change in the profitability of its apartments. From going unnoticed as a less profitable option, this historic corner became the new protagonist of the real estate game, offering opportunities that few expected.
Until a few months ago, studio apartments in San Telmo barely reached a modest 3.63% profitability, according to a report by Reporte Inmobiliario. However, in a notable turnaround, today, the same category of properties has seen a significant increase, reaching a profitability of 4.08%. The two-room apartments, for their part, stand out even more with a higher profitability of 5.49%.
This drastic change has catapulted San Telmo to the top of the most profitable neighbourhoods for property investment. The cobbled streets and historic houses of Buenos Aires are now considered an unrivalled asset, offering investors the opportunity to obtain high returns. With an average value of US$79,000 for two-bedroom apartments and a monthly rent of $320,000, the profitability achieved in this neighbourhood exceeds all other available options.
What could have triggered this pronounced change? One hypothesis points to the growing tourist attraction of the area, generating a significant increase in temporary rentals , whose values are handled in dollars and reach considerably high figures. This phenomenon, in turn, puts upward pressure on the value of traditional and long-term rentals in the San Telmo neighbourhood.
Sustained demand for short-term rentals, driven by the neighbourhood’s historical and cultural beauty, creates an environment conducive to landlords raising their prices . The limited availability of long-term rental options has allowed property owners to set their own terms, taking advantage of the opportunity to maximize returns on their investments.
In the latest Real Estate Report report, other neighbourhoods that appear as the most profitable include Villa Crespo, where a studio apartment in this neighbourhood near the coveted Palermo leaves a profitability of 5.33% , buying a property for US$75,000 and a rent of $295,000 per month. Parque Chacabuco follows with a profitability of 4.97%, where a two-room apartment costs an average of US$75,000, while the monthly rent costs $275,000. Another neighbourhood with high profitability is Balvanera, where a studio apartment costs US$51,500 and monthly rent is $180,000, which leaves profitability of 4.74%. In Almagro, a two-bedroom costs US$74,500 and rents $250,000 per month, which leaves a profitability of 4.55%.
However, although some neighbourhoods may represent an investment opportunity for those who want to bet on brick as a haven of value, the reality is that the economic volatility of recent months left a marked mark on the real estate market, surpassing the increase in rents and the decrease in property sales values. This phenomenon led to a notable decrease in the gross profitability of residential locations.
To illustrate this impact, Reporte Inmobiliario compared the average values of the 532 units available for formal three-year rentals in pesos with the units for sale in each city neighbourhood. The results reveal a significant decrease in the annual gross profitability of used apartments with one to four rooms, which stood at 3.48% in October. This value represents a substantial decrease compared to the 4% registered until July.
In the breakdown of the average profitability at the beginning of a rental contract, two-room apartments stand out as the most profitable, offering 4.1%. They are followed by studio apartments with 3.57% and three-bedroom apartments with 3.51%. On the contrary, the largest four-room units have the lowest profitability, reaching a modest 2.75%.
So, faced with the numbers that show a drop in profitability in terms of rentals, the San Telmo neighbourhood is surprising for its unexpected turn: from being one of the least profitable a few months ago for investors to be one of the most convenient.
Source: La Nacion ( translated )
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