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Why is it more attractive to buy a used apartment today than to invest in a new construction project, and what are the costs associated? - Infobae
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Por qué hoy es más atractivo comprar un departamento usado que invertir en pozo y cuánto cuesta en cada caso
En qué influyen los costos de construcción y la situación económica. Cuál es el ideal para quien busca invertir sus ahorros o acceder a un crédito hipotecario
www.infobae.com
December 26, 2024
How construction costs and economic situation influence. Which is the ideal for those looking to invest their savings or access a mortgage loan?
By Jose Luis Cieri
A couple walks through a used apartment with the intention of buying. The sector is active (Illustrative Image Infobae)
In a context marked by the still uncertain macroeconomic situation, inflation (albeit lower) and a stable dollar, used apartments gained ground as the most attractive option for buyers in the real estate market in the city of Buenos Aires.
According to recent data from Zonaprop, the average price per square meter of a used property in the city is USD 2,045, while units in the construction phase reach USD 2,435, which represents a difference of nearly 19 percent. This difference, added to other economic and market factors, tipped the balance in favor of already completed homes.
According to an analysis by Daniel Bryn of Zipcode, who compiles the Monitor Inmobiliario report, this trend is due to several key elements. Firstly, used properties offer the advantage of being ready to move into or rent immediately, eliminating the risks associated with construction times and possible delays in projects in progress. “In an inflationary scenario, this possibility of generating income from day one is especially attractive for investors seeking immediate profitability or who wish to minimize the impact of opportunity costs.”
In addition, the used property market was favored by a greater supply of available properties and by the reintroduction of mortgage loans (in CABA, almost 1,000 homes are already sold with bank financing according to the Buenos Aires Notary Association). Several owners are looking to sell to dollarize their savings or cover financial needs, which generated opportunities for buyers, who can negotiate significant discounts.
According to Susana Valle Fonrouge , director of GPS Properties, “with used properties you already know what you are paying,” which provides greater predictability compared to well-developed projects, where final costs can vary considerably.
The impact of construction costs
Construction costs are a determining factor in the loss of attractiveness of projects in the pipeline. According to the CAMARCO Indicator (Argentine Chamber of Construction), last November, the cost of building in CABA increased by 66.2% year-on-year. This increase, combined with the stability of the dollar, generated inflation in dollars that directly affects developers and, therefore, the final price of the units for sale.The dynamics of inflation-adjusted peso costs versus dollar-denominated property prices introduces a level of uncertainty that discourages buyers.
In contrast, finished units offer a set price and are not subject to variations derived from construction costs. According to Bryn, this predictability is key in a context of high inflation (inflation only slowed down 5 months ago and is now below 3% per month) and uncertain economic projections, where buyers seek to minimize risks.
In addition, the used property market was favored by a greater supply of available properties and by the reintroduction of mortgage loans (in CABA, almost 1,000 homes are already sold with bank financing according to the Buenos Aires Notary Association). Several owners are looking to sell to dollarize their savings or cover financial needs, which generated opportunities for buyers, who can negotiate significant discounts.
According to Susana Valle Fonrouge , director of GPS Properties, “with used properties you already know what you are paying,” which provides greater predictability compared to well-developed projects, where final costs can vary considerably.
The impact of construction costs
Construction costs are a determining factor in the loss of attractiveness of projects in the pipeline. According to the CAMARCO Indicator (Argentine Chamber of Construction), last November, the cost of building in CABA increased by 66.2% year-on-year. This increase, combined with the stability of the dollar, generated inflation in dollars that directly affects developers and, therefore, the final price of the units for sale.The dynamics of inflation-adjusted peso costs versus dollar-denominated property prices introduces a level of uncertainty that discourages buyers.
In contrast, finished units offer a set price and are not subject to variations derived from construction costs. According to Bryn, this predictability is key in a context of high inflation (inflation only slowed down 5 months ago and is now below 3% per month) and uncertain economic projections, where buyers seek to minimize risks.
The success of policies such as divisible mortgages and an eventual reduction in construction costs will be key factors in reviving interest in well-constructed projects.
Currently, a used three-room apartment averages USD 155,000, while a sub-standard one reaches USD 209,204, both with a surface area of 70 m2.
Risk perception and access to credit
The perception of risk also plays a crucial role in the preference for second-hand apartments. Delays in the delivery of projects in progress and, in some cases, the suspension of works due to financial problems of the developers increased caution among investors.According to real estate chambers, the lack of solid guarantees and the limited construction progress in many projects discourage buyers.
Used properties stand out as a safer option, with verifiable documentation and greater liquidity in the market. These units, ready to occupy, make it easier to recover the investment in case of resale.
The shortage of mortgage credit limits access to subprime units, as rates are high and available amounts are insufficient.
Market and future projections
According to industry surveys, demand for used apartments will remain strong in the short and medium term.Reports from Zonaprop and Mercado Libre indicate that the value of used properties rose by an average of 10% year-on-year in most neighborhoods of Buenos Aires, reflecting greater interest on the part of buyers.
Home values are trending upwards now, experts suggest buying before prices continue to rise (Illustrative Image Infobae)
In contrast, the pace of new construction starts has slowed considerably. Bryn added: “Projects in CABA registered a 35% drop compared to 2019 due to higher costs, economic uncertainty and competition in the well segment. Despite the slowdown, the excess stock forces developers to offer more attractive conditions to attract demand.”
One measure that could partially reverse this trend is the implementation of the “undivided mortgage” or future mortgage regulations .
This instrument allows developers to offer units under construction with mortgage financing ( Banco Ciudad presented a recent proposal ) and facilitates access to credit for buyers. Although it is still in the adoption phase, this tool could increase demand for units under development by reducing the need for high down payments.
A market in transformation
The real estate market is undergoing a transformation, with a clear preference for used properties due to their lower price, immediate availability and lower exposure to economic and construction risks.Although the developments in the off-plan stage continue to move forward, with more than 50,000 homes under construction in CABA, “they are an interesting option for those seeking to finance their investment and obtain greater margins of appreciation in the long term. However, current challenges have reduced their attractiveness compared to previous years,” concluded Valle Fonrouge.
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