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Prices, credits, sales, rentals: The 9 keys to what will happen in the real estate market before the Milei government
December 12, 2023
Rising prices and a new era: Market specialists anticipate the next steps of real estate and define the problems that prevent its prosperity
By Mercedes Soriano
The 9 effects that the real estate market expects in the Milei era
“A bad present with a bright future. ” This is how more than half of the market players label the sector photo. This is the diagnosis reflected in the survey carried out by Reporte Inmobiliario , a report that seeks, in the first days of December, to reveal the high expectations of the real estate and construction market.
Although today's numbers have the sector in suspense, seven out of 10 people affirm that Javier Milei's government will be positive for the real estate market. Full of enthusiastic optimism, the voices of the sector hope for the recovery of an item that has trembled to the rhythm of the Argentine soil for years. And that promising future can be summarized in nine keys that anticipate the coming market.
Seven out of 10 people surveyed affirm that Javier Milei's government will be positive for the real estate market
1. Property prices will rise
Traditionally, brick functioned as a classic haven of value . The last three years have undermined this reputation following the decline in property values. But the first glimpses of recovery have already arrived to vindicate the market.“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,” highlights Germán Gómez Picasso, co-founder of Reporte Inmobiliario.
The specialist speaks of “green shoots” in the bricks: he analyzes that “in relation to November of last year, the average price per square meter 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.”
Reports recorded that there have been two consecutive quarters in which an improvement in property values has been detected
“Everything would indicate that the stars are aligning again for a bull market in the real estate market. Starting from dollar values at the bottom, it is expected that these will achieve a significant recovery in the short and medium term,” anticipates Gómez Picasso.
Gabriela Goldszer, director of Ocampo Propiedades, agrees on this point: “A short-term factor potentially energizing 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.”
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.
A large part of the market has high expectations regarding the revaluation of bricks
Damián Tabakman, president of the Business Chamber of Urban Developers (CEDU), has the same reading as the brokers. “If Argentina were to move towards a path of normalization, what would be expected in the economy as a whole is that these Argentine assets that were so cheap for so many years would begin to revalue.”
In that sense, he opined that real estate prices “are going to rise in dollars significantly,” and especially “premium ones sooner than one thinks.” The leader of businessmen in the sector was very optimistic in the discussion table he shared with Mali Vázquez, director of institutional relations at CEDU, and Jorge Cruces, director of IRSA within the framework of the first edition of the Banco del Hogar event organized by the Mortgage Holder two weeks ago.
Beyond the revaluation, some specialists speak of a sincerity of the published values. "As long as the new government has a more open policy and appropriate measures to calm inflation, we understand that all this price boiling - although in principle certain costs related to the dollars of the official exchange rate are going to increase - will eventually be It will purify, calm and speculative costs will disappear to arrive at more efficient figures,” analyzed Miguel Ludmer, director of Interwin.
2. The market is excited about the return of mortgage credit
Another problem that worries the participants of the survey carried out by Reporte Inmobiliario is the lack of access to mortgage credit, a vital tool for buying a home. “As long as there is such high inflation, it is difficult for very long-term credits to be financeable and takeable,” explains Tabakman.But six out of 10 respondents see light at the end of the tunnel and believe the arrival of this type of financing is possible with the new management. “I am very optimistic regarding the impact it would have on our sector and on Argentine society in general, but I am more cautious regarding the moment in which this may occur,” said Tabakman. in the same talk.
For Daniel Bryn, creator of the real estate monitor Invertire, it is necessary for Argentines to recover the purchasing power of their salary so that there are credits 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.
One of the biggest problems in the market is the lack of mortgage credit
If mortgage credit reappears, prices would adapt to the new panorama. “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,” Diego Cazes, general manager of LJ Ramos Brokers Inmobiliarios, analyzes the potential scenario in case it happens.
When consulted by LA NACIÓN, the new Secretary of Housing, Iván Kerr, said that his plan includes the creation of mortgage loans but “there is no credit in the world that works with two or three digits of inflation” and that to apply those measures “we must overcome the waves, fix the macroeconomy to move towards a policy of subsidizing demand as exists in other countries, also in other countries the Procrear are not built by the State but by private ones ." We must move from a construction State to encouraging private parties to get involved in the country's housing solution. We are going to work on all those instruments but they only work with the macro in order. We must once again generate the market, trust and stability.”
3. Concern about the future of the dollar
When asking about the obstacles facing the country, another of the underlying problems in the market is the volatility of the exchange rate. The real estate broker Juan Pablo Baca affirms that “disarming the Leliq bomb at the expense of high inflation will cause the blue dollar to lose against the price index, so it will not be a business to keep the bills under the mattress, and the real “estate will be one of the sectors that will absorb it.”
The volatility of the exchange rate is another of the problems that shakes the market
One of the axes of the libertarian campaign was the dollarization of the economy, which in this case would solve the exchange problem. 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 in these decades great economic crises that ended in hyperinflation, corralitos, stocks, situations without credit and even anti-market rental laws," he maintains. the co-founder of Reporte Inmobiliario.
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.” eliminating the prices implicit in the interplay of the different alternative dollars.
4. Legal uncertainty: key for those who invest in the sector
There is a portion of the market that considers another impediment as the main detractor of the market: legal uncertainty. In his speech upon assuming office as president, Javier Milei spoke of respect for private property, one of his banners in the campaign that is closely linked to the scourge in question.In his first words in his new role, he quoted Professor Alberto Benegas Lynch (son) who says: “Liberalism is the unrestricted respect for the life project of others based on the principle of non-aggression, in defense of the right to life, to freedom and property, whose fundamental institutions are private property, markets free of state intervention, free competition, division of labor and social cooperation.”
A minority percentage of players in the sector point to legal uncertainty as the problem behind the hit market
His cabinet shares this paradigm. Iván Kerr, current secretary of Viavienda, said in dialogue with LA NACION that housing production must leave the public axis. “We must change the minds of national and provincial officials, generate a cultural change to understand that housing is not just about building houses with State resources.”, all the same and on the outskirts of cities, but that the work can involve the private sector.”, with inclusion projects within existing cities and neighborhoods,” he summarized.
5. Milei wants to repeal the Rental Law and the sector supports
One of the hottest topics that hurt the sector was rent regulation. The terms of the law signed in 2020, as well as its modifications sanctioned in October 2023 , crushed supply, skyrocketed prices and contorted the relationship between owners and tenants. Landlords are concerned about the low return on rent, the risk of default on the part of the tenant, and in that sense they are upset by the length of time that an eviction trial could last, which exceeds the duration of the rental contract.Not even 24 hours had passed since his election that Javier Milei had already expressed his intention to repeal the law that regulates them today. The President's desire to free the rental market echoes among real estate developers and investors.
Javier Milei said that he wants to repeal the rental law and many sector specialists agree
Gómez Picasso, for his part, believes that “the promise to repeal 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 “regarding contracts, these should always have been between parties but with a minimum regulatory framework.” so that what was agreed is fulfilled.”
For Martín Boquete, director of Toribio Achával, 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 be felt more comfortable and it will be possible to sign contracts for more than three months,” he reinforces.
Experts consider that the deregulation of rents will bring the figure of the investor back to life
Cazes thinks similarly 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.”
6. The new President is going to limit public works
Javier Milei already spoke out regarding public works and stated that he will seek to cut expenses . “We started by cutting public works and bringing them to zero, and we put out to tender those that are in progress. Contracts are respected,” he said. In execution, based on official calculations, there are about 3,500 works throughout the country, of which about 2,300 depend directly on the national budget and involve $309,898,545.82.Regarding this issue, the market is divided in two. 63.4% of those consulted by Real Estate Report support the measure.
Javier Milei already spoke out regarding public works and stated that he will seek to cut expenses
But the remaining 36.6% view this proposal negatively. “What we are hearing about the future of public works is really alarming. At UOCRA, we have 450,000 construction workers, half of whom depend directly on public works projects. We are talking about 225,000 people who could be left unemployed, which would trigger an inevitable social crisis. This situation is even more disturbing when we consider that this sector represents 55% of tax revenue,” said Mali Vázquez, architect and executive director of the Business Chamber of Urban Developers (CEDU), at the event organized by Banco Hipotecario.
7. The cycle of “cheap bricks” is ending
The private construction sector experienced “a little summer” of prices in 2023. “The last year was good, even much better than the world of resales or used ones,” analyzes Tabakman, and explains that from his vision it is due “To a large extent, our sector has been channeling the universe of idle pesos hand in hand with this very high inflation that we have as a refuge of value.”Faced with a scenario that expects changes and volatility, Tabakman stated at the Mortgage Event that today construction is an opportunity. “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.
Tabakman affirms that it is still very cheap to build in our country, measured in dollars
At the same time, he measures the temperature of the sector and warns that “there is a feeling that the construction processes must be accelerated now because then building, manufacturing and creating square meters in Argentina is going to be much more expensive than now.”
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 start 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.
8. The appointment of Iván Kerr anticipates a good dialogue between businessmen and the new government
The market took the appointment of Iván Kerr as head of the Housing Secretariat as a good sign. Lawyer, graduated from the University of Buenos Aires, with a Master's Degree in Business Law from the Universidad Austral, Kerr was general manager of the Housing Institute of the City of Buenos Aires between 2011-2014, and member of its Board of Directors in 2014-2015. He was also a member of the Pensar Foundation and elected deputy for the City of Buenos Aires in 2013 and 2015. During the Macri government he also served as president of Pro.cre.ar and was a member of the Executive Council of ACUMAR from 2016 to 2019.Kerr follows a philosophy of the private sector as the protagonist and the State as a secondary actor. As LA NACION announced upon the confirmation of his new position, for the official limiting housing policy to public works is not something that is aligned with his thinking and his professional career in recent years, in which the former official had achieved an evolution under the concept that the housing solution is not only bricks and the construction of social housing.
Iván Kerr will be Secretary of Housing in the government of Javier Milei
In general terms, his plan will aim to create mortgage loans, demand subsidies, construction incentives and a Procrear with private investment.
9. The increase in used sales validates the change in cycle
The change of cycle began as a rumor more than a year ago and today the numbers confirm it. In October, 4,559 properties were registered in the city of Buenos Aires, a record that can be read as an increase of 53.3% compared to the figures collected a year before. The number encourages real estate expectations, since it proved to be the best October in the last six years.”It is a year and a half of not comparing negatively with the previous period, and it gives some peace of mind to detach ourselves from a period of three or four years of decline. Our greatest desire is to work together to collaborate with the new elected Government on a comprehensive housing policy,” observed Jorge De Bártolo, president of the College of Notaries.
The numbers are encouraging and are measured against the golden era of the real estate market of the last decade. “To find similar figures you have to go back to the times of the UVA mortgage credit boom of the government of former president Mauricio Macri. For example, in October 2018, 3,671 deeds had been carried out,” warns Germán Gómez Picasso, co-founder of Reporte Inmobiliario. October operations surpassed those of 2017 - the climax year for the property world - and were 26.32% away from the record of 6,188 operations in October 2017.
“There is a feeling of 'let's write now', so August and September were like December in other years, in which people want to complete all the pending procedures before the end of the year,” he had noted last month. María Magdalena Tato, secretary of the Buenos Aires College of Notaries, an argument that was reaffirmed in October.
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