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Real Estate News The cost of construction skyrocketed: How much does each square meter cost and what will happen to the buildings in progress - La Nacion Propiedades

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The cost of construction skyrocketed: How much does each square meter cost and what will happen to the buildings in progress - La Nacion Propiedades





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March 30, 2024


A report revealed that the salable square meter measured in nominal dollars reached US$1,318.82, 11% more than the historical maximum in November 2017 when it stood at US$1,179/m²; It has already increased by 80% in the last four months

By Candelaria Reinoso Taccone


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Construction cost grew more than 80% in the last four months

The cost of construction measured in dollars rose again and accelerated in March . Today the salable square meter measured in nominal dollars reached US$1,318.82, 11% more than the historical maximum that was recorded in November 2017 when it stood at US$1,179/m², according to the survey carried out every month Report Real estate. If the comparison is with respect to February, the increase was 26%. The revealing data is that it grew more than 80% in the last four months, when at the beginning of December it was US$714/m².

The same report details that in February, the rise in the cost had slowed: it grew only 3.19% compared to January , but it came from the shock of the first month of the year, when it had shot up 29.41% compared to December .


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The construction cost grew more than 80% in the last four months, when at the beginning of December it was US$714/m².

With these numbers, the Real Estate Report report details that building an eight-story building between party walls plus a retreat, composed of two-room semi-flats and amenities, was slightly over a million dollars.

Why did it increase so much?​

The reality is that a macro phenomenon occurred that was unthinkable a few months ago . On the one hand, the value of the dollar stabilized in a range close to $1,000 and on the other hand, there was an inflation effect that accumulated an increase of 59.32% since December of last year. “The cost of building in pesos has also been moderating,” says Germán Gómez Picasso, founder of Reporte Inmobiliario. In fact, it slowed down its rate of increase compared to what it had experienced during the last two months (in January 38.89% and in February 20.31%) and in March it increased “only” 9.04%.

Looking to the future, the specialist affirms that “the trend throughout 2024 will surely be very similar, costs in dollars would continue to increase in the construction industry ,” he assures.


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The cost of construction measured in pesos slowed down its rate of increase compared to what it had experienced during the last two months (in January 38.89% and in February 20.31%) and in March it increased “only” 9.04 %.

The specialist elaborates that the sharp increase in the cost of construction in pesos that occurred in January is explained because many inputs used are commodities or imported goods that were sold at the value of the official dollar and the devaluation in December 2023 had an impact. It went from $400 to $800, which ended up skyrocketing costs in pesos . Therefore, the inflation combo and the correction of the official dollar contributed to the significant increase in costs in pesos.

Today the outlook is different, and although inflation in pesos has begun to moderate, the fact that the blue dollar remains stable ends up increasing costs in this latter currency - because more dollar bills are needed than before to buy in pesos. “It is clear that with the current level of real estate prices today it is advisable to hurry up and buy properties before these costs end up being transferred to the sale prices,” adds Gómez Picasso.

What is the risk for ongoing construction?​



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The CAC index experienced rapid growth from November to February and increased by 98.03%.

The increase in the CAC index (from the Chamber of Construction ) deserves a separate analysis , which is the one used to update the installments in pesos that an investor pays per month when purchasing an apartment under construction.

In February, the CAC index increased by 6.78% compared to January, but in the first month of the year versus December the impact had been greater: 14.15%. “The index experienced dizzying growth from November to February and increased by 98.03% , even with a practically stable dollar. Although it does not continue to increase at the same speed, we continue to operate with a backward exchange rate,” explains Carlos Spina, partner and commercial director of Argencons, the developer that created the Quartier brand .


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The CAC index increased by 6.78% compared to January but in the first month of the year versus December the impact had been greater: 14.15%.

The CAC index is made up of 50% labor costs and 50% material costs, and in recent months, the most notable increase has been seen in materials. In December alone, that cost increased by 41.47%, while that of labor increased by 11.36%. “As in other industries, suppliers are concerned about the possible impact of a future devaluation and took preventive measures ,” explains Spina. “Now that this situation has not materialized, corrections are expected to be made,” she says.

Damián Tabakman, president of the Chamber of Urban Developers (CEDU), agrees with this perspective and states: “As in all sectors, with the change of government and the devaluation, manufacturers considerably increased their prices, but now that they cannot sell , they stopped increasing . "I don't see our sector as an exception in this sense."


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With a flattened dollar and inflation in pesos that continues, investors find themselves facing an unthinkable situation: they need more dollars than before to pay for each square meter.

This increase took by surprise the investors who bought an apartment in a well , because although some allocate the surplus pesos they have to the brick - difficult to generate in a cold economy like the current one - others usually pay the installments with the dollars saved, that usually change to pesos to meet monthly commitments. And now they need to exchange more dollars than before to obtain the pesos - meaning that on the one hand the pesified quotas skyrocketed and on the other, the currency in which they saved was devalued.

This means that with a flattened dollar and inflation in pesos that continues, today they find themselves facing an unthinkable situation: they need more dollars than before to pay for each square meter. “It would be a serious mistake to incur significant late payment or even lose contracts due to a discrepancy in one, two or three installments. Sooner or later, the situation will be regularized . We are facing an exceptional circumstance, where the exchange rate is lagging and is being used as an inflationary anchor in the short term,” advises Spina.

In this context, the businessman presents two possible scenarios: “one is that this situation persists, that inflation calms down (as a result of the economy slowing down), a stage of investment recovery begins and that all assets increase in value.” . In this case, although it will be more expensive for the investor, everything they are paying will have a higher value. The other scenario is that this situation is temporary, that it does not work and that there is a correction in the exchange rate, thus compensating for the gap that we are currently experiencing. In that case, the sudden increase in an installment that doubles in value would be rather anecdotal, considering that a total of 30 installments are generally paid,” he argues.


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Those who are paying in installments with saved dollars could face difficulties covering the payments.

Tabakman also acknowledges that those who are paying in installments with saved dollars could face difficulty covering the payments. “ This could generate defaults , but we must consider that developers are very familiar with these types of changing scenarios, as are investors in general,” he says. Regarding the possibility of stopping the works , he responds that it is common for renegotiations to begin and for the works to be completed in some way. “Even if the cost increase is significant and sudden, everyone is waiting to see how and when the variables balance out again . Especially if it is feasible to pass the cost increase on to the price. That would be the key,” he comments.

The specialist also suggests that this situation can generate both opportunities and risks for real estate development . “That investor who paid everything in dollars at the beginning of the work, in a couple of years, will obtain a great benefit if the delivery is completed. On the other hand, the developer will suffer huge losses in that transaction,” he explains.


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Given the shortage of sales of construction supplies, especially due to the paralysis of public works, inflation in the sector is expected to stabilize.

However, he emphasizes that all this is theoretical, since the market does not operate that way . “The developer, if he incurs losses, generally communicates with the investor and renegotiates the terms, especially if he sold many units and does not have enough funds to complete the work,” argues the Chamber director.

Regarding the impact of the dollar on the cost, it must be taken into account that the dollar component of the construction cost is relatively low . “Most of the cost is denominated in pesos and is of national origin. Although it is true that some inputs will begin to be imported, the opening of imports has not yet been significant,” explains Tabakman. However, given the shortage of sales of construction supplies, especially due to the paralysis of public works, inflation in the sector is expected to stabilize.

“Abroad, many construction supplies are considerably cheaper and of better quality, at least at the current exchange rate,” says Tabakman. Steel and cement are key elements in construction and are currently more expensive in Argentina than in the region . However, importing them currently presents difficulties due to tariffs and non-tariff barriers, although it is expected that these restrictions will become more flexible over time. “Argentine manufacturers of construction supplies, as in other sectors, argue that taxes are higher and logistics are more expensive in the country, which has an impact on the final price of steel and cement compared to the prices internationals”, concludes Tabakman.



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