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Ranking: What position does Buenos Aires occupy among the 25 most expensive cities in the world to buy an apartment
December 4, 2023
Taking the same reference values from an international ranking of the 25 main cities in the world, an Argentine entity manages to know where Buenos Aires would be.
Although the city of Buenos Aires is not included in the ranking, the transparency of its methodology allows it to be integrated into the list using the same variables as the other cities analyzed.
Over the past decade, real estate markets around the world have been largely sustained by low financing costs, driving home prices to extraordinary levels. However, due to the end of low interest rates, inflation-adjusted values are falling faster than in the 2008 financial crisis . This change especially affects cities that have already been identified as risky for a real estate bubble.
For years, the Swiss Bank UBS has been producing the UBS Real Global Estate Bubble Index , a tool that measures the risk of a real estate bubble in 25 of the world's main cities. This index analyzes various indicators, the key being the salary effort necessary to purchase a home, rental income and other crucial economic variables.
Rising rates led to an increase in the preference for renting rather than buying in several cities around the world.
According to this index, the decrease in values does not affect all regions in the same way. In cities where buying homes with short-term loans was common, rising interest rates have directly hit homeowners, who are now forced to sell at lower prices. Likewise, in areas where home ownership was already challenging with low interest rates, rising rates have led to an increase in preference for renting rather than buying. Cities such as Toronto, Frankfurt and Stockholm are experiencing a faster and stronger correction due to the combination of several factors.
Although the Argentine capital did not appear in the official UBS ranking, the transparency of the methodology allowed Reporte Inmobiliario to annually incorporate price and salary data, revealing an intriguing perspective. Despite the downward trend in property prices this year, Buenos Aires has been highlighted as one of the most expensive cities in the world in relation to the average income of its inhabitants.
Ranking according to housing price in relation to income
In this year's edition, only Zurich and Tokyo remained in the bubble risk category, compared to nine cities a year ago.
To measure the relationship between income and home values, UBS analyzes the number of years a service worker must spend to buy a 60 m² apartment near the center of selected cities.
In the September 2023 edition, Hong Kong leads the ranking, requiring 22 years of salary to buy a 60 m² home, although with a slight decrease compared to 2022. On the other hand, cities such as Miami, Madrid and San Francisco show a more favorable relationship between income and housing prices, with a five-year salary effort.
In what position would Buenos Aires be located?
Buenos Aires would occupy second place in the ranking of the most expensive cities in relation to the average income of its inhabitants.
The site specialized in the housing market took as a reference value the last price per square meter paid for average three-room units according to the index prepared by the University of CEMA and RE/MAX Argentina in conjunction with Reporte Inmobiliario in August, -US $1744-, which translates to a total cost of US$104,560 for a standard 60 square meter apartment.
The surprising conclusion is that, when comparing this cost with the average remuneration of registered workers in the private sector, it would take 19 years of complete income, considering that the person allocates their entire salary, to acquire a home of these characteristics.
In this way, Buenos Aires would occupy second place, despite the drop in housing prices experienced in recent years, revealing the even greater drop suffered by real wages.
How many years does it take to recover the investment?
In the city of Buenos Aires, it would take 23 years of rent to amortize the purchase of an apartment.
At the same time, the UBS report also evaluates the time necessary to cover the full purchase cost through the income generated by the rental. According to this analysis, 23 years of rent would be required to amortize the purchase of a 60-square-meter home, 11 years less than the 34 years required last year. This position of Buenos Aires in the ranking is lower than that of 12 other cities and higher in the remaining 19 cities, including Paris, London, New York and Madrid.
In the words of José Rozados, one of the founders of Reporte Inmobiliario, the recent UBS ranking reveals the harsh reality that the Argentine capital faces in terms of access to mortgage loans. Rozados highlights: “The main reason for the UBS ranking is to act as a radar to manage risk in mortgage loans, and observe to what extent the requirements and rates of these loans are causing an increase in housing prices that, At the same time, it requires increasingly greater salary effort and/or administering incentive policies that allow maintaining or even increasing the number of operations in the market.”
The position of Buenos Aires in this ranking clearly reflects the economic reality facing the city. This positioning “constitutes a clear obstacle to overcome,” indicating the difficult situation that explains the “real impossibility of implementing mortgage credit lines for the purchase of homes, in a context of inflation and macroeconomic imbalance like the current one.”
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