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How lower interest rates and inflation in dollars impact the real estate market - Ámbito
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Cómo impacta en el mercado inmobiliario la baja de tasas de interés y la inflación en dólares
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www.ambito.com
March 18, 2024
In a context of high inflation and with falling rates, bricks are reborn as a store of value
Prices. The cost of construction measured in dollars has risen sharply in recent months
Last week, the Central Bank cut its reference interest rate from 100% to 80% nominal annual interest rate. At the same time, banks reduced the yields on fixed terms to 70%. These movements impact the decisions of savers, who look for alternatives to face inflation .
Currently, the real estate market is marked by the narrowing of the exchange gap, increased costs of construction materials in dollars and lower rates . In this context, bricks are reborn as an opportunity.
How does this recent rate cut influence the real estate market?
“Indirectly it influences because, hand in hand with that, what happened is that the dollar rose a little, and as the dollar rose, the cost of construction , which had skyrocketed and become very expensive in dollars, slowly settled down since it is not so expensive.” as it was last week measured in dollars,” explained Damian Tabakman , president of the Business Chamber of Urban Developers (CEDU).“On the other hand, financial investments are still very negative, hedging against inflation with falling rates is worse than before, so bricks can be a better protection option against inflation,” Tabakman noted.
Construction cost rises
It should be noted that in recent times, the cost of construction in dollars had become very expensive, which represented a challenge for those interested in investing in wells and even for the developers themselves, who in some cases have already begun to transfer these increases to the price lists.Currently, the average price to build a square meter in the City of Buenos Aires ranges between US$1,000 and US$1,200. “ It is still premature to know if there are sales or not, but as costs rose in dollars, there are price increases transferred to the price list ,” Tabakman concluded.
It is estimated that there are currently more than 130,000 properties under construction in the city and province of Buenos Aires. Today, purchasing a used property is below the cost of building. In addition to this, the stock of used properties is important, and prices are stable for now, which makes them attractive when investing.
“The cost of construction measured in dollars has been rising very sharply. The CAC index that is used to update contracts has two components, labor and materials, in December the materials index was 40%, that is, there is inflation in dollars. That is why many developers are raising the price list by around 10%. What is sold is what is ready before, for now what went up I did not have price validation. It is a need they have because otherwise they will be out of step with the current construction cost,” explained Gabriel Brodsky , CEO of Predial.
