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Properties: the reasons why it is becoming more and more expensive to build - La Nacion Propiedades
Source:
January 02, 2025
Building a building reached the highest value in dollars since 2008; how it impacts the real estate market
By Candela Contreras
Building a building reached the highest dollar value since 2008 Rodrigo Nespolo
Construction costs in Argentina continue to rise to record levels . Last November , building a building of just over 1,000 m² in total on eight-story condominium property required an initial budget of close to $1.4 billion , according to the survey conducted by Reporte Inmobiliario.
In this way, the most relevant data is that due to the increase in the cost of construction measured in pesos - which increased in the eleventh month of the year in relation to the previous month by 3.02% - and the evolution of the exchange rate , the increase in dollars climbed strongly , increasing 11.45% in relation to October, being the highest nominal value in dollars since 2008 - year in which the series began. Ultimately, although the increase in the index of the Argentine Chamber of Construction (CAC) measured in pesos slowed down due to a more controlled inflation, the flat dollar ended up generating a need for more dollars to build the same square meter.
This data placed the cost per salable square meter at US$1,615 , considering the parallel market quote, and the total value to be invested in the construction of the typical building was positioned above US$1.27 million. For reference, in June it was US$1,276/m2 and in December 2023, US$1,010.21/m2.
“This increase corresponds to a process that has been gradually taking place with construction increases in dollars due to a double effect : first, the costs , which although lately at a slower pace, have been increasing month by month by 2-3% , and on the contrary, the dollar has been falling in terms of the exchange rate . So, this combination of this double factor means that in dollars you have to invest more each time to build the same square meter ,” explains José Rozados, founder of Reporte Inmobiliario, the platform that has been carrying out this survey every two months for years.
More and more dollars are needed to build the same square meter
The immediate consequence of this context is a reduction in demand for units in the works being built . “On the other hand, there is much greater dynamism in the sale of used apartments because they are sold at a lower value per m² than what it would cost to build them today . And that is without considering the cost of the land or the profit,” adds Rozados.
The specialist's comparison raises a key point: being able to differentiate the market dynamics between the business of brand new or unfinished properties and the used market. "They are two different businesses: brand new properties are a business in which a developer produces, assumes risks and assumes that demand will be able to pay those costs. Whereas, in the case of used properties, it is more about replacement. In other words, business is not the original goal. This analysis explains why the speeds of increases are very different," explains the founder of Reporte Inmobiliario.
Looking to the future, the specialist adds how fluctuations in demand could influence prices. What does this mean? “It is very likely that, as demand for mortgage credit increases , the sale prices of used cars will begin to rise until at some point the market will balance out and the price of brand new units will become more tempting .”
Lisandro de Achával, director of Achaval Cornejo, refers to this: “Although there is still no stability in the sector and the construction sector is facing a complex moment due to the increase in the cost of construction, there are positive signs for next year , including the fact that the supply of properties for sale is decreasing, which may lead to an increase in prices .”
However, real estate developers admit to being concerned about rising construction costs . “Although the CAC index is slowing down today, the cost of building in dollars increased by 60% during 2024 , while closing prices for used units did not rise more than 6%,” said Carlos Spina, partner and commercial director of Argencons, the developer that created the Quartier brand.
In other words, in comparison, Spina shows that used apartments are still cheap and, in addition, they have financing from banks for 20 or 30 years with mortgage loans. While the entrepreneurship sector is at a disadvantage . “ The business of developers is affected and, to get out of this situation, we need incentives, so that projects in the pipeline have some difference with respect to the supply of used ones,” he explains and among the tools he asks for the possibility of having credit in dollars, or that the lines of financing for works in construction have, for example, lower interest rates.
www.buysellba.com
Source:
January 02, 2025
Building a building reached the highest value in dollars since 2008; how it impacts the real estate market
By Candela Contreras
Building a building reached the highest dollar value since 2008 Rodrigo Nespolo
Construction costs in Argentina continue to rise to record levels . Last November , building a building of just over 1,000 m² in total on eight-story condominium property required an initial budget of close to $1.4 billion , according to the survey conducted by Reporte Inmobiliario.
In this way, the most relevant data is that due to the increase in the cost of construction measured in pesos - which increased in the eleventh month of the year in relation to the previous month by 3.02% - and the evolution of the exchange rate , the increase in dollars climbed strongly , increasing 11.45% in relation to October, being the highest nominal value in dollars since 2008 - year in which the series began. Ultimately, although the increase in the index of the Argentine Chamber of Construction (CAC) measured in pesos slowed down due to a more controlled inflation, the flat dollar ended up generating a need for more dollars to build the same square meter.
This data placed the cost per salable square meter at US$1,615 , considering the parallel market quote, and the total value to be invested in the construction of the typical building was positioned above US$1.27 million. For reference, in June it was US$1,276/m2 and in December 2023, US$1,010.21/m2.
“This increase corresponds to a process that has been gradually taking place with construction increases in dollars due to a double effect : first, the costs , which although lately at a slower pace, have been increasing month by month by 2-3% , and on the contrary, the dollar has been falling in terms of the exchange rate . So, this combination of this double factor means that in dollars you have to invest more each time to build the same square meter ,” explains José Rozados, founder of Reporte Inmobiliario, the platform that has been carrying out this survey every two months for years.
More and more dollars are needed to build the same square meter
Impact on the real estate market
This phenomenon directly affects the final value of the properties . Rozados points out: “If the cost of building or producing a certain product increases, the final sales value will also grow due to the impact of this increase. This causes the sales value of units under construction or brand new to also increase or the developer to assume a lower profitability .”The immediate consequence of this context is a reduction in demand for units in the works being built . “On the other hand, there is much greater dynamism in the sale of used apartments because they are sold at a lower value per m² than what it would cost to build them today . And that is without considering the cost of the land or the profit,” adds Rozados.
The specialist's comparison raises a key point: being able to differentiate the market dynamics between the business of brand new or unfinished properties and the used market. "They are two different businesses: brand new properties are a business in which a developer produces, assumes risks and assumes that demand will be able to pay those costs. Whereas, in the case of used properties, it is more about replacement. In other words, business is not the original goal. This analysis explains why the speeds of increases are very different," explains the founder of Reporte Inmobiliario.
Looking to the future, the specialist adds how fluctuations in demand could influence prices. What does this mean? “It is very likely that, as demand for mortgage credit increases , the sale prices of used cars will begin to rise until at some point the market will balance out and the price of brand new units will become more tempting .”
Lisandro de Achával, director of Achaval Cornejo, refers to this: “Although there is still no stability in the sector and the construction sector is facing a complex moment due to the increase in the cost of construction, there are positive signs for next year , including the fact that the supply of properties for sale is decreasing, which may lead to an increase in prices .”
However, real estate developers admit to being concerned about rising construction costs . “Although the CAC index is slowing down today, the cost of building in dollars increased by 60% during 2024 , while closing prices for used units did not rise more than 6%,” said Carlos Spina, partner and commercial director of Argencons, the developer that created the Quartier brand.
In other words, in comparison, Spina shows that used apartments are still cheap and, in addition, they have financing from banks for 20 or 30 years with mortgage loans. While the entrepreneurship sector is at a disadvantage . “ The business of developers is affected and, to get out of this situation, we need incentives, so that projects in the pipeline have some difference with respect to the supply of used ones,” he explains and among the tools he asks for the possibility of having credit in dollars, or that the lines of financing for works in construction have, for example, lower interest rates.
www.buysellba.com
