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Javier Milei Effect: The reasons why the market expects an increase in property prices
November 30, 2023
Milei's victory in the presidential elections excites the real estate market and an increase in property prices is predicted
Market specialists predict what will happen to the properties before the new government of Javier Milei
Milei's government will begin its administration with a tailwind that pushes the real estate market. “We have been sensing a kind of end of the cycle because since the middle of this year we have observed many more consultations and the completion of more operations . In both cases, a renewed look at the future of the country was combined, as well as in the investment segment the potential of the so-called 'electoral trade'. On the other hand, in terms of the evolution of the real estate market in a longer time series, it has not yet recovered the pre-pandemic rhythm but it has accelerated a lot,” analyzes Gabriela Goldszer, director of Ocampo Propiedades.
“The real estate world remains optimistic and has reacted positively to the expectation of stabilization measures and a scenario of confidence in relation to private property. This would once again push real estate prices upwards and increase sales,” adds Martín Pinus, owner of the real estate company of the same name.
In that sense, Goldszer joins the chorus of voices in the sector that assure that expectations about the market for the coming months are “optimistic but still moderate”, since they are aware of the great complexity of the economic, political and social scenario.
Cautious optimism
Beyond opinions, the truth is that the truth about what will happen with the sale of real estate will only be known when the President-elect can give greater certainty about his government plan. “In the very short term, Milei 's victory will generate a first challenge, which is the transition until December, where there will be almost no “anchors” to stabilize the economy. Especially because Milei insisted on dollarization, and a context of total absence of reserves, the greater exchange turbulence can lead to the postponement of purchase decisions,” noted Fabián Achával, from the real estate company that bears his last name.
The real estate world remains optimistic and has reacted positively to the expectation of stabilization measures
Beyond wait and see, liberal policies encourage the historically deregulated market. “Everything would indicate that the stars are aligning again for a bull market in the real estate market. Starting from real estate values in dollars on the floor, it is expected that these will achieve a significant recovery in the short and medium term,” anticipates Germán Gómez Picasso, founder of Reporte Inmobiliario . A point that Goldszer, from Ocampo Propiedades, agrees on: “A short-term factor that potentially energizes the real estate market is the perception of many people that the change of government will end up being an important factor for price increases in the sector.”.
Other brokers refer to the past to talk about expectations of long-term improvement, as long as changes in the macroeconomy are consolidated that improve the local outlook. “Historically, in the face of the latest changes in political cycles in Argentina - and after the first economic obstacles were overcome by the new governments - the increase in the square meter occurred gradually,” says Daniel Bryn, creator of the real estate monitor Invertire. The specialist adds that “generally we had low interannual increases (3/5%) and then higher ones (we reached 12%) three or four years into the mandate.” He uses the government of Mauricio Macri as an example, in which in 2015 the value of properties grew by 3.67%, in 2016 by 7.76% and in 2017 it increased by 12.28%.
This perspective of revaluation occurs in a context of recovery of the sale value of properties. “The prices in dollars at which used two- and three-bedroom apartments are published showed an increase of 1.3% during the last quarter in the city of Buenos Aires, this being the second consecutive quarter in which values improved,” he highlights. Gomez Picasso. The specialist is already talking about “green shoots” in the bricks: he analyzes that “in relation to November of last year, the average price per m2 increased by 2.4% year-on-year, not only the improvements quarter by quarter but in this “In this case, an improvement is verified in the 12-month comparison.”
Average values in dollars per square meter of used apartments in the city of Buenos Aires
In its survey, it details that the average square meter value of used apartments of standard quality without amenities based on the survey that Reporte Inmobiliario has carried out quarterly since 2005 was located in November of this year at US$1,556/m2. “In nominal terms, without impacting m² prices due to dollar inflation, the values are similar to those at the beginning of 2011,” he details.
For Martín Boquete, director of Toribio Achával, expectation will translate into demand. “I think that the real estate market is going to read this political and economic change as more similar to the market itself, a fact that for me is going to generate expectations of price growth, which should generate greater demand in the short term and expectations of higher prices. high in a future with more liberal policies ,” he estimates. In other words, he summarizes: “If people believe that prices are going to rise like I do, operations will continue minimally as they were. And if there are also more concrete measures that give us a glimpse of the future, I think that operations can be increased in the short term.”
The mystery of dollarization
One of the axes of the libertarian campaign was the dollarization of the economy. This alternative “would not be a stumbling block in our sector, in which the currency has been the dollar for more than 50 years. Our industry as a 'flagship' can demonstrate with facts that from this 'armor' it has been able to overcome major economic crises in these decades that ended in hyperinflation, corralitos, stocks, situations without credit and even anti-market rental laws," he maintains. the co-founder of Reporte Inmobiliario.
Dollarized decades ago, the real estate market can demonstrate with facts that with this “armor” it has been able to overcome major economic crises in recent decades.
For his part, Goldszer adds that, although it will not be a novelty for the sale and purchase of real estate, “the simplification of prices into a single dollar will be positive, eliminating the prices implicit in the interplay of the different alternative dollars. ”
To evaluate the impact of this measure, Achával recognizes that it is key to know what the conversion exchange rate and the level of salaries in dollars will be, the central driver for the real estate sector.
Other economic variables
For Daniel Bryn, creator of the real estate monitor Invertire, there are two intrinsically linked variables that must be acclimated to the market: purchasing capacity and stocks.
The dollarization of the purchase and sale market allowed it to overcome major economic crises in these decisions.
On the one hand, it double-clicks on the relevance of Argentines recovering the purchasing power of their salary so that there are mortgage loans again. “Today it takes an average of 5.20 salaries to buy a square meter while in credit periods (like the last one for the UVAs) only two were needed. Therefore, it is not enough to just recover the credit, but also people's saving capacity”, he analyzes.
Despite being a distant dream, experts do not lose hope that it may reappear at some point during the new management and facilitate access to housing. “If there was a credit, properties that are in the order of US$100,000 to US$200,000 would automatically increase in price, because in general it is the smaller properties that are purchased with credit and that type of product is very sensitive. Today something is anticipated that will surely happen with this government,” Diego Cazes, general manager of LJ Ramos Brokers Inmobiliarios, analyzes the potential scenario in case it happens.
Secondly, Bryn puts on the table the release of the stocks so that people can freely buy currencies and operations flow better: “Now it is difficult to buy the dollar and justify their origin if people buy it through an informal channel”.
Part of the success of sales in the medium term depends on the improvement in purchasing capacity and stocks.
Once this ground has been paved, he predicts an improvement in sales: “With these conditions we would be in a normal market with monthly operations of 7,000 deeds per month versus the 4,000 we have today.”
In another order, a third factor that could encourage sales is money laundering for the purchase of homes. “It will depend on whether they do it for wells or used ones. In the second case there were many more operations than in the first, but it may be on the agenda,” says Bryn.
Free market and deregulated rents
For the experts consulted, the maxim of respect for private property is a relief for the market. “There is no doubt that the concept of market freedom constitutes a positive scenario. The real estate market is made up of an important segment of investors who form their expectations and make their decisions with the logic of the financial market, that is, taking real estate as another asset in their investment portfolio. And in this sense, both in the history of the Argentine market and in the world market, the market economy is a fundamental value. This could potentially constitute a strong boost for the sector. Above all, after a long period of low expectations and in some cases marked pessimism,” summarizes Goldszer.It is on this liberal side that the fate of a fundamental leg of the market comes into play: housing rentals. In fact, not even a week had passed since his election that the president-elect already expressed his intention to repeal the law that regulates them today.
Specialists agree that the repeal of the law could generate greater investments in the sector
Gómez Picasso, for his part, believes that “the promise of repealing the current rental law will surely generate greater investments in a sector that was practically disappearing.”
Soledad Balayan, director of Maure Propiedades agrees, and adds that "with regard to contracts, these should always have been between parties but with a minimum regulatory framework so that what was agreed is fulfilled."
For Boquete, the rental law is closely linked to the dollarization plan that Javier Milei proposed in his campaign. “The rental market was dollarized due to inflation. If the use of the dollar begins to be allowed to agree on contracts and the exchange rate is set by the market - and not the pressure of the State or a law - decision-making would be freed up in both supply and demand, they will feel more comfortable and it will be possible to sign contracts for more than three months,” reinforces the director of Toribio Achával.
Cazes thinks similar to Boquete and believes that the deregulation of rents will be good news for the market: “It will help the developments and their sales, because if it is known that it is heading towards that and whoever buys in a project expects one or two years depending on the progress of the work, it is super positive because investors appear.”
Time to build?
Damián Tabakman is president of the Business Chamber of Urban Developers and also interprets that the change of government generated a lot of optimism in Argentina. For him, another niche of opportunity at this time is construction. “The most important thing is that it is still very cheap to build in our country, measured in dollars. And real estate prices did not move while financial assets rose 50% this week. That draws a lot of attention from our investors who believe that the cycle of cheap bricks in the country is ending and we should not miss the train,” he says.This interest could be validated with the movement of companies that produce construction materials. “The activity was in demand in the pre-election, there was a high demand for materials, especially many advances for collection with which people part with the pesos,” says Diego Aguirre, CEO of Construyo al Costo, and adds: “The rearrangement of prices has already happened, there was a strong increase in October and the evolution of prices will depend on the evolution of the dollar.
For Cazes, the big unknown is to see how it accompanies the rise in values in relation to the blue dollar. “If this falls and there is inflation, the cost of construction continues to rise in dollars and that can hurt developers a little. Then we have to see if the rate of rise in used property values keeps pace with the higher cost of construction of developments. If it is stable, it would be dangerous because inflation will continue to exist and therefore when you begin to see the photos of the construction cost projection and see that it is going to cost more and more in dollars, it will be a source of concern. ”, he analyzes.
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