Students in Buenos Aires reactivate the real estate business in CABA: what opportunities are there?

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The conditions of the rental law, the return of face-to-face negotiating and the exchange rate impacted a sector that begins to move in December 2022 and does not stop in 2023.

The increase in the flow of foreign students, the shortage of supply, the controversial conditions of the rental law and the competition from temporary-use properties have made the real estate market for university students in the city of Buenos Aires a segment that begins to move in December when the most far-sighted begin the search to have the issue resolved when classes begin.

María Franco, country manager of Mudafy, a personalized consulting proptech , points out that the market experienced a reactivation. “During the pandemic, we noticed that the incorporation of virtual classes meant a drop in the demand for apartments by students since there was no need to be close to the universities. Post-pandemic, even though some hybrid schemes are maintained, most universities require attendance, and that caused demand to recover,” he reports.

With the return of face-to-face classes, the student real estate market was also reactivated

Luciana Noli, manager of Noli Propiedades, affirms that the families of young people who are looking for apartments to study in the city -many of whom come from Greater Buenos Aires- arrive early because competition is increasing, as a result of market difficulties and insufficient supply. “Many times, they start in December to be able to rent in March or to do renovations before classes start,” he says. And he adds that this process has been anticipated because it is no longer convenient for many real estate agents to take reservations for two months. “The best properties come out quickly. The market is very competitive,” he illustrates.

Regarding the offer, Franco states that buildings have been developed with common spaces that are increasingly geared towards young people. “They include green spaces, coworkers, delivery warehouses and kitchens. These new buildings have one or two rooms since they are the type most in demand by students,” he adds.

According to Mudafy’s records, young students are also an interesting segment for selling units. “What we see is that there are many parents who buy the first property for their sons or daughters,” he asserts. And he completes: “According to a study carried out by our Business Intelligence team, parents who buy represent 27 per cent of the total demand and are in the top 3 use cases.”

Franco assures that there are also investors who buy temporary rental units for students. “It is a dynamic that can give a profit margin of 5 per cent per year , but that, depending on the unit type and neighbourhood, can be up to 8 per cent (versus the average 2.82 per cent of a rental permanent)”.

The areas of the city chosen by young people make up a wide circuit. “They are mainly areas with good access and close to universities, study centres and places of entertainment,” sums up Franco. “For many years, Recoleta has occupied the most demanded place, mainly the areas near the Faculty of Engineering and the vicinity of the subway line D corridor. Secondly, some areas like Palermo, Belgrano and Núñez offer two- and three-room apartments and good access,” he adds.

It also states that, after the pandemic, there was a change in the criteria that guide the searches. “I think the main change had to do with the revaluation of the quality of life and the need to have outdoor spaces,” he says. “Consequently, spaces with more green, light and ventilation were demanded and, above all, with areas designed for teleworking,” he adds.

Foreign students mark the market

“The prices of student apartments have increased because the offer is being absorbed by foreign students,” says Germán Gómez Picasso, director of Real Estate Report, who asserts that a good part of these students come from neighbouring countries. “It is much cheaper to access a private university in Buenos Aires than in Brazil,” he illustrates.

Data from academic centres support this statement. For example, the University of Belgrano indicated that there was a 760 per cent increase in foreign students in 2022 compared to the previous year since only in the last 12 months did face-to-face classes resume. In addition, they affirmed that they are working intending to achieve a new increase of approximately 80 per cent in 2023 compared to 2022.

For her part, Guadalupe Sanz, Director of Admissions at the Torcuato Di Tella University, indicated: “In the last year, we have observed that the number of foreign undergraduate students we receive to carry out an exchange has increased by about 35 per cent. At Di Tella we have more than 140 agreements with foreign universities, and we continue to work on developing new agreements with international universities”.

Gómez Picasso clarifies that the supply shortage affects all segments, not only the one aimed at young people and students. “There is very little on the market. In the city, 400,000 families or people rent, and less than 2,000 properties are on the main offer portal, “he points out. He also asserts that many rentals are registered in an informal circuit. “Some owners do not want to enter the system’s current rental law. So, agree with family and friends,” he says. According to the executive, the law also affects new real estate developments because it discourages the entry of investors who finance the construction of new rental units.

The duration period is one of the most questioned aspects of the standard. “Those who choose to rent informally to their friends are not covered by the generalities of the law in terms of terms, update rates and extension. The conditions can be freely agreed between the tenant and the owner”, explains Claudio Vodánovich, Secretary General of the Argentine Real Estate Chamber.

To advise students who come from the interior, the Argentine Real Estate Chamber has signed agreements with different institutions linked to young people from different provinces, such as the Casa de Misiones in Buenos Aires. “The objective is for them to contact a registered real estate agent to guide them and facilitate the search because it is not easy for someone from the interior. Families seek peace of mind when hiring to avoid deception,” he adds.

New developments in Palermo

“Customers from the interior really like Palermo,” says Noli, who has an offer in that area and in others, such as the vicinity of the Faculties of Economics and Medicine of the UBA, Recoleta, San Telmo, and Puerto Madero.

Precisely, Palermo has undergone a transformation in recent years. In the area, new developments arise every year in the vicinity of the University of Palermo headquarters. Still, while in 2022, there were 143,364 m2 under construction, in 2021, that figure rose to 154,203 m2, while in 2020, it was 148,203 m2, according to an October report by Real Estate Report. However, according to work, the percentage of enterprises in the start-up, demolition or promotion stage with posters is higher than the average in recent years.

The characteristics of the developments match the profile of the students. “As in previous years, it can be seen that the typology that is most abundant in the projects is the one that corresponds to studio apartments, followed by two rooms and two-bedroom apartments in a much smaller form,” says the Real Estate Report report.

In South Palermo, in the area bounded by Soler, Scalabrini Ortiz, Córdoba and Gallo streets, the area sought by students from the University of Palermo, there is a drop in the cost of construction measured in dollars, which is attributed to the various devaluations and the drop in investor demand.

According to work, the lowest sales value recorded in the last survey is US$2,900 per square meter (m2), with a price ceiling of US$3,700 per m2. In 2021, the floor was US$3,034 per m2, and the maximum price was US$3,900 per m2.

“The average value per surface unit for all the enterprises in formal sale offer surveyed reached US$ 3,287. He continues that said value is located 2.81 per cent below the average US$ 3,382 per m2 of 2021”.

Regarding “used” properties, the Real Estate Report survey indicates that the average value for two-bedroom units is US$ 2,484 per m2, while a year ago, it reached US$ 2,837 m2 and, in 2020, US$ $3142 per m2. The current used price is 24.4 per cent below the average cost of “brand new” in the area.

Source: The original version of this note was published in number 351 of Apertura magazine.

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