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The fact that could anticipate that it is no longer a good business to build a house in a country - La Nacion Propiedades
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El dato que podría anticipar que ya no es buen negocio construir una casa en un country
Los costos para llevar adelante una casa tipo country aumentaron fuertemente en dólares durante diciembre
www.lanacion.com.ar
February 8, 2024
The costs to carry out a country-type house increased sharply in dollars during December
Recent inflation in pesos, combined with the sharp increase in the official dollar in the last months of 2023, took the construction costs of premium homes in private neighborhoods to a new level
The pandemic caused a drastic change in preferences when choosing where to live, and consequently triggered a high demand for properties in peripheral areas of the city . This phenomenon occurred strongly in 2021 and 2022, and continued in 2023 because the trend to seek greener and less urbanized spaces continues.
Last year, the revealing data that evidenced the new wave of migration towards gated communities was the explosive increase in lot sales, especially in the months before and during the elections. A notable example occurred in September 2023 in Aluén, where 90% of the lots were sold in just one hour , with more than 70% of the buyers being end users.
In the gated community of Aluén, 90% of the lots were sold in just one hour.
This trend could be explained by the low cost of building a country-style house in a private neighborhood at the time . “When the dollar moves, everything generally stops; but when it stabilizes and the developer, who sells part in pesos and part in dollars, has not yet copied the dollar adjustment in the peso part adjusted by CAC [construction index], buyers rush hard to take advantage of the window of opportunity before the increase ,” analyzes Horacio Benvenuto, general manager of Izrastzoff Compañía Inmobiliaria.
Since February 2023, construction costs showed a significant decline , motivated by recurring devaluations. However, recent inflation in pesos, combined with the sharp increase in the official dollar at the end of 2023 with the change of Government, took costs to a new level.
Building a premium home in a gated neighborhood stood at $1,693 per square meter at the end of December.
The cost of building a premium category home in a country or private neighborhood, including taxes and professional fees, stood at US$1,693 per square meter at the end of December , according to the latest Real Estate Report report . If you take into account that the square meter is always calculated at the value of the blue dollar, the cost of the total construction of a 315 m² country house during the last month of last year was almost US$533,300.
This value reached historical levels that are only comparable to the peak of 2018 in nominal terms , when in April it reached US$1,816/m² . Almost four years ago, during the pandemic, in May 2020, the cost of building in a gated community was at historically low levels, aroundUS$776 .Of course, at that time, all the works were stopped due to the mandatory isolation, so in 2020 the price of building fell and fell month by month but due to the cessation of activity, which, when it was reactivated, rose again.
In November, the cost to build was US$1080/m².
If the price of the dollar in the parallel market in December 2023 is considered, construction averaged around US$1,693/m² . In November, the cost was US$1080/m², so the increase in dollars in December was 56.64% compared to the previous month.
However, so that the variation in the increase in the construction cost in parallel dollars is more representative - given the considerable jump in the value of the official dollar from $375 to $827 from November to December -, Real Estate Report calculated the value of the construction cost in December (US$1,693/m²) and compared it with the average of the last 12 months. The result shows an increase of 36% in blue dollars , which shows a very pronounced rise.
If the value of building a premium house in pesos is taken into account, in December an investment close to $546,675,663 was required, while the value per square meter was almost $1,736,000. If this price is compared to that of the previous month, which was $978,249, the monthly increase would have been 77.4%. A key fact is that in just eight months its value practically tripled , since in April 2023 the construction cost was $589,250/m².
Although it cannot be predicted with certainty what will happen next month, the specialist believes that in 2024 construction costs in dollars will remain high.
The reasons for the abrupt increase and plan B
“Throughout 2023, a constant ups and downs were experienced; Every month, the construction cost in dollars varied significantly,” says Germán Gómez Picasso, founder of Reporte Inmobiliario. “From November to December alone, the increase was 56.64% in dollars. There is no doubt that a new level has been reached: dollar costs are increasing again ”, he assures.The reason behind this notable increase in the cost of construction is related to imports , since all products are linked to the value of the official dollar, which generated a sudden increase in recent months and raises costs. “There are products that are not available, others that are available but are not released due to uncertainty about the behavior of the dollar . For example, a supplier of imported faucets for high-end homes increased their prices from one month to the next. People who are building a house are worried because they expected to spend a certain amount of money, but today they find an increase in dollars,” says Gómez Picasso.
The trend points towards an increase in costs. Although it cannot be predicted with certainty what will happen next month, the specialist believes that in 2024 construction costs in dollars will remain high . “I cannot say that they will increase even more, but I can say that they will remain at these levels,” he maintains. “Starting a work is not easy today. It's all a lottery, you don't know what to do. It is a better time to buy ready-made homes - whether new or used - than to go out and build . Even those who had quality houses for sale do not know whether to sell because they cannot guarantee that with that money they will build a property of that quality again,” says Gómez Picasso.
Adding to this view is Dina Crusizio, director of LJ Ramos Pilar branch, who knows perfectly the market for gated communities in the northern area and assures that “20 years ago you sold a 100m² property in Capital and with that money you bought a lot in a closed neighborhood and making a 300 m² house was possible. Today the lots are increasing their sales value due to high demand, the cost of construction is also increasing , so that window of opportunity is more limited. We believe that this will encourage the used market : you buy a house, you already have it, at most you remodel it a little and move. Although there will continue to be a segment that buys a lot and builds the house they want, the market for already built houses will begin to be evaluated more among those looking to move to a gated neighborhood.”
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