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Construction costs slow down and prices trail inflation - La Nacion Propiedades
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Se desacelera el costo de la construcción y los precios se ubican detrás de la inflación
En un contexto de marcada inestabilidad económica y transformaciones, el sector de la construcción en la Argentina enfrenta una nueva suba de precios pero menor que la del mes anterior
www.lanacion.com.ar
February 19, 2024
In a context of marked economic instability and transformations, the construction sector in Argentina faces a new price increase but less than that of the previous month
Indec revealed how much the increase in the Construction Cost Index was in Greater Buenos Aires
The cost of construction continues to increase, but showed a slowdown compared to the previous month. After the National Institute of Statistics and Censuses (Indec) revealed in December the highest increase in recent years : 30.1% (in relation to November), January registered an increase of 15.5% compared to the previous month, compared to an inflation of 20.6% in the first month of the year, thus accumulating an increase of 251.5% in one year.
According to the Construction Cost Index in Greater Buenos Aires (ICC) carried out by the state agency, the increase is a consequence of the 13.2% increase in materials, 19.3% in labor and 15 .2% in the “General expenses” section. This indicator measures the average evolution of the cost of private construction of buildings for housing in the Autonomous City of Buenos Aires and 24 districts of the Buenos Aires suburbs .
“ The construction sector does not escape the giant macroeconomic changes that Argentina is currently experiencing. The implementation of deregulatory policies caused a considerable increase in the prices, in pesos, of construction materials,” analyzes the president of the Business Chamber of Urban Developers (CEDU), Damián Tabakman.
In turn, the market leader points out that, although “the works have sufficient solvency to face the situation”, the developers are forced to transfer the cost increases to the sales prices . This raises questions about the acceptance of these increases by demand and could influence the dynamics of the real estate market . “We have to see how prices are rearranged, which come hand in hand with the sales costs per square meter,” he says.
A sum of increases
The report specifies that the increase in the workforce occurred because the analysis contemplates the new values established by the salary agreement of the Construction Workers' Union of the Argentine Republic (UOCRA), of January 8, 2024, applicable to the labor categories provided for in the Collective Labor Agreement 76/75 since January of this year. In addition, the increase in labor categories impacts the “General expenses” chapter, because it contains the item “Serene”, which is framed within the same resolution.For its part, in the case of materials, the largest increases occurred in the category of elevators (39.9%) and ceramic sanitary articles (28.4%) . This is followed by: concrete and cement products (22.2%); taps and stopcocks (20.7%); cement, lime and plaster (19%), metal products for sanitary and electrical installations (16.8%), iron pipes and accessories (15.7%) and glass (15.5%).
Material costs increased by 13.2% in the last month
In addition, the report includes a chapter on “General Expenses”, which refers to elements that are not specifically materials or labor, but that are directly incorporated into the execution of the construction. For example, the rental of loader loaders accumulates an increase of 239.2% in one year, followed by the year-on-year increase registered in backhoe loaders (255.3%) and scaffolding (220.3%).
During the last two years, construction costs measured in dollars were subjected to a roller coaster ride , fluctuating in time with inflation in pesos and continuous devaluations. Germán Gómez Picasso, director of Reporte Inmobiliario adds the concern that developers have that the blue dollar is falling so low “the meters sold in dollars are out of our reach, we perceive dollars at $1000 from buyers on one side but they turn around and "Costs in pesos increased a lot due to the devaluation of the official in December."
The cost of building a house in a country increases by more than 50% in dollars
One of the markets in which this increase was evident is that of investments in properties within gated communities. Recent inflation in pesos (20.6% in January), combined with the sharp increase in the official dollar at the end of 2023 with the change of Government, took costs to a new level.
The cost of building a premium category home in a country or private neighborhood, including taxes and professional fees, stood at US$1,693 per square meter at the end of December , according to the latest Real Estate Report report. If you take into account that the square meter is always calculated at the value of the blue dollar, the cost of the total construction of a 315 m² country house during the last month of last year was almost US$533,300.
This value reached historical levels that are only comparable to the peak of 2018 in nominal terms , when in April it reached US$1,816/m² . Almost four years ago, during the pandemic, in May 2020, the cost of building in a gated community was at historically low levels, around US$776 . Of course, at that time, all the works were stopped due to the mandatory isolation, so in 2020 the price of building fell month by month but due to the cessation of activity, which, when it was reactivated, rose again.
If the price of the dollar in the parallel market in December 2023 is considered, construction averaged around US$1,693/m² . In November, the cost was US$1080/m², so the increase in dollars in December was 56.64% compared to the previous month .
Recent inflation in pesos, combined with the sharp increase in the official dollar in the last months of 2023, took the construction costs of premium homes in private neighborhoods to a new level
However, so that the variation in the increase in the construction cost in parallel dollars is more representative - given the considerable jump in the value of the official dollar from $375 to $827 from November to December -, Real Estate Report calculated the value of the construction cost in December (US$1,693/m²) and compared it with the average of the last 12 months. The result shows an increase of 36% in blue dollars , which shows a very pronounced rise.
If the value of building a premium house in pesos is taken into account, in December an investment close to $546,675,663 was required, while the value per square meter was almost $1,736,000. If this price is compared with that of the previous month, which was $978,249, the monthly increase would have been 77.4%. A key fact is that in just eight months its value practically tripled , since in April 2023 the construction cost was $589,250/m².
The reason behind this notable increase in the cost of construction is related to imports , since all products are linked to the value of the official dollar, which generated a sudden increase in recent months and that raises costs. “There are products that are not available, others that are available but are not released due to uncertainty about the behavior of the dollar . For example, a supplier of imported faucets for high-end homes increased their prices from one month to the next. People who are building a house are worried because they expected to spend a certain amount of money, but today they find an increase in dollars ,” says Germán Gómez Picasso, founder of Reporte Inmobiliario.
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