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Construction costs rose 69% in dollars in 2024, reaching their highest level since 2018 - Infobae
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www.infobae.com
April 07, 2025
Rising material and labor costs have pushed costs to record levels, although property values remain stable. The real estate market has yet to incorporate the new level of investment required to build.
Although there are more than 50,000 homes under construction in Buenos Aires, the total cost of building in dollars accumulated a 120% increase between October 2023 and December 2024.
According to a report by the Tejido Urbano Foundation, the cost of construction in Argentina rose 69% in market dollars during 2024, marking the largest year-over-year jump since 2018. The increase is explained by two main factors: a 26% rise in the price of materials and a 116% increase in labor costs. With this increase, the total cost in dollars accumulated a 120% increase between October 2023 and December 2024.
This evolution is a response to a structural transformation in the market, driven by a narrowing of the exchange rate gap, which in the past allowed for construction with cheaper dollars than those on the black market.
Now, with a narrower gap between the official and informal exchange rates, the real cost of building a home has increased considerably.
Fernando Álvarez de Celis , executive director of the Tejido Urbano Foundation, explained that this change has had a direct impact on developers. “Three phenomena are observed in ongoing projects: some absorb the increased costs by lowering or even losing profitability; others renegotiate with investors based on the new values; and in some cases, construction is halted or slowed down,” he notes.
As for new ventures, they are concentrated only in the most profitable areas. "In the rest, almost no new projects are detected," he added.
The rise in materials prices has brought them to their highest levels in 50 years. Pressure on the local market and difficulties in accessing imported inputs have directly impacted the value of cement, steel, sanitary ware, and other key items.
Domestic inflation also weighed heavily, continuing to distort costs in pesos in a context of economic uncertainty.
The rise in labor costs also broke historical records. In 2024, this component increased 116% in dollar terms, and in December, the jump was 19% in that month alone.
Álvarez de Celis noted that this adjustment was a response to wage pressure in an environment where workers sought to match or exceed inflation. "It was a necessary update, but it ends up raising the budget of any project," he warns.
The exchange rate was another determining factor. The appreciation of the market dollar during the year was due to the convergence of exchange rates between the different exchange rates. This movement was directly reflected in materials linked to the dollar. Cement, aluminum, iron, and plastics reflected this variation. In January, the informal dollar rose 6%, although construction costs fell 4.5% that same month, as a result of a temporary slowdown in prices.
Despite this context, home values did not keep pace with the rise in construction costs. “The real estate market has seen years of few transactions. The stock of used properties for sale in the City of Buenos Aires amounts to 110,000 units. By 2024, 60,000 transactions were completed. There is still room for recovery before a widespread price increase occurs,” warns Álvarez de Celis.
Source: Federico González Rouco, economist at the consulting firm Empiria, based on data from the Statistics Department of the Buenos Aires City Government and Rava
The impact was also felt in the sector's overall activity. Construction fell 18% annually, affected by both rising input costs and the halt in public works. This decline comes at a time when the housing shortage remains unresolved and new solutions are needed to facilitate access to housing.
The outlook for the future remains open. Álvarez de Celis believes a significant drop in costs is not expected in the short term. "With the dollar at this level, it's difficult to think of moderation. There are developers experimenting with other, more economical options, and others waiting for a rise in property prices that will allow them to readjust the equation," he maintains.
Opening up imports could act as a buffer in the medium term, facilitating access to lower-cost inputs and improving competitiveness. However, this strategy depends on broader macroeconomic definitions and the normalization of foreign trade.
In this context, the market is moving cautiously. Developers are carefully evaluating the areas where they will build, prioritizing neighborhoods with high demand and quick sales potential. Meanwhile, homeowners looking to sell must face competition from a large inventory, which has not yet reflected the new replacement cost.
The balance between construction costs and sales prices remains strained. The future of the market will depend on how this gap is resolved and how inflation, the exchange rate, and disposable income evolve. For now, activity remains marked by caution and the need to adapt to a changing environment.
www.buysellba.com
Source:
El costo de construcción subió 69% en dólares en 2024 y alcanzó el nivel más alto desde 2018
El encarecimiento de materiales y mano de obra elevó los gastos a niveles récord, aunque el valor de las propiedades permanece estable. El mercado inmobiliario aún no incorpora el nuevo nivel de inversión requerido para construir
www.infobae.com
April 07, 2025
Rising material and labor costs have pushed costs to record levels, although property values remain stable. The real estate market has yet to incorporate the new level of investment required to build.
Although there are more than 50,000 homes under construction in Buenos Aires, the total cost of building in dollars accumulated a 120% increase between October 2023 and December 2024.
According to a report by the Tejido Urbano Foundation, the cost of construction in Argentina rose 69% in market dollars during 2024, marking the largest year-over-year jump since 2018. The increase is explained by two main factors: a 26% rise in the price of materials and a 116% increase in labor costs. With this increase, the total cost in dollars accumulated a 120% increase between October 2023 and December 2024.
This evolution is a response to a structural transformation in the market, driven by a narrowing of the exchange rate gap, which in the past allowed for construction with cheaper dollars than those on the black market.
Now, with a narrower gap between the official and informal exchange rates, the real cost of building a home has increased considerably.
Fernando Álvarez de Celis , executive director of the Tejido Urbano Foundation, explained that this change has had a direct impact on developers. “Three phenomena are observed in ongoing projects: some absorb the increased costs by lowering or even losing profitability; others renegotiate with investors based on the new values; and in some cases, construction is halted or slowed down,” he notes.
As for new ventures, they are concentrated only in the most profitable areas. "In the rest, almost no new projects are detected," he added.
The rise in materials prices has brought them to their highest levels in 50 years. Pressure on the local market and difficulties in accessing imported inputs have directly impacted the value of cement, steel, sanitary ware, and other key items.
Domestic inflation also weighed heavily, continuing to distort costs in pesos in a context of economic uncertainty.
The rise in labor costs also broke historical records. In 2024, this component increased 116% in dollar terms, and in December, the jump was 19% in that month alone.
Álvarez de Celis noted that this adjustment was a response to wage pressure in an environment where workers sought to match or exceed inflation. "It was a necessary update, but it ends up raising the budget of any project," he warns.
The exchange rate was another determining factor. The appreciation of the market dollar during the year was due to the convergence of exchange rates between the different exchange rates. This movement was directly reflected in materials linked to the dollar. Cement, aluminum, iron, and plastics reflected this variation. In January, the informal dollar rose 6%, although construction costs fell 4.5% that same month, as a result of a temporary slowdown in prices.
Despite this context, home values did not keep pace with the rise in construction costs. “The real estate market has seen years of few transactions. The stock of used properties for sale in the City of Buenos Aires amounts to 110,000 units. By 2024, 60,000 transactions were completed. There is still room for recovery before a widespread price increase occurs,” warns Álvarez de Celis.
Investment decisions and future
The gap between costs and prices directly impacts investment decisions. As construction became more expensive, sales prices failed to adjust to the new level, reducing expected profitability. Several developers suspended projects due to lack of economic viability or sought more economical construction methods, such as modular structures or mixed-use systems with a lower burden of traditional materials.
Source: Federico González Rouco, economist at the consulting firm Empiria, based on data from the Statistics Department of the Buenos Aires City Government and Rava
The impact was also felt in the sector's overall activity. Construction fell 18% annually, affected by both rising input costs and the halt in public works. This decline comes at a time when the housing shortage remains unresolved and new solutions are needed to facilitate access to housing.
The outlook for the future remains open. Álvarez de Celis believes a significant drop in costs is not expected in the short term. "With the dollar at this level, it's difficult to think of moderation. There are developers experimenting with other, more economical options, and others waiting for a rise in property prices that will allow them to readjust the equation," he maintains.
Opening up imports could act as a buffer in the medium term, facilitating access to lower-cost inputs and improving competitiveness. However, this strategy depends on broader macroeconomic definitions and the normalization of foreign trade.
In this context, the market is moving cautiously. Developers are carefully evaluating the areas where they will build, prioritizing neighborhoods with high demand and quick sales potential. Meanwhile, homeowners looking to sell must face competition from a large inventory, which has not yet reflected the new replacement cost.
The balance between construction costs and sales prices remains strained. The future of the market will depend on how this gap is resolved and how inflation, the exchange rate, and disposable income evolve. For now, activity remains marked by caution and the need to adapt to a changing environment.
www.buysellba.com
