However, hedue to the lack of supply of real estate for rent and the update imposed by the ILC (Central Bank index to update rentals), have generated a small bubble that has raised rental prices if the real market value of a property is analyzed against the amount paid monthly for the lease, so today there are some properties that are leaving a profitability close to 5% per year.
Although these amounts are not related to the historical profitability of real estate on lease in the main cities of the country, today those who have a three-room apartment for rent in the City of Buenos Aires, they can receive an income of more than 100,000 pesos, an amount that can help the economy of any middle-class family or a retiree, to collaborate with the cost of living month after month.
Likewise, those who have equipped apartments in the City of Buenos Aires, Rosario, Córdoba, etc., can resort to temporary rent that leaves dividends in dollars well above the legal term lease contracts. Here it should be noted that the administration of temporary rentals requires a lot of dedication and attention to tenant clients, since it is an all-inclusive service. The same thing happens with houses in gated communities or countries where profitability can reach 8% per year.
As for the neighborhoods of the Federal Capital with the best performance in terms of income, Real Estate Report mentions Constitución (3.49 percent), Monserrat (3.36) and Parque Patricios (3.75), San Cristóbal (3.83), Villa Crespo (3.65) and Villa del Parque (3.49).
In other countries of the world, profitability grants greater benefits than in our country, for example in Spain real estate profitability reached 7.4% in 2022. In neighboring countries such as Chili closed the year with a price/rent ratio of a house at 5.5%, in the capital of Uruguaythe return on investment is between 4% and 6% per year, in Colombia, the return is between 6% and 10%; in USA, between 7% and 10%; in Brazil, between 3% and 6%; in Paraguay, between 5% and 8%; in bolivia, between 6% and 8%; in Peru, between 4% and 7%; and finally in Ecuadorbetween 4% and 6%.
One aspect to take into account in our country is that many real estate developments are currently being built in wells, buildings that will be ready to be inhabited within 18 months, and if the progression of sales does not rise very quickly – expected situation in the short term- it is feasible that many brand new properties will enter the rental market in many citieswhich will increase the supply of real estate and eventually the reference prices of this type of unit.
The cause of the drop in profitability is due to many factors that act simultaneously, but the most important is that real estate is the capital stock and rent is the flow of investment and real estate cannot be rented to another other than the one that lives in Argentina, and those who rent are from the sector of the economy that is paying the most for the adjustment, since it has income in pesos and expenses in pesos. Thus, If it is taken into account that for the profitability analysis a market value is set in dollar bills, with an exchange rate gap of more than 147% and with an exchange rate trap, against a monthly payment in pesos for the rent, it is very difficult to analyze a profitable return.
Likewise, the supply of real estate not only grew due to construction but also due to the increase in the price of the value per square meter for more than 15 years, which allowed for very good returns for those who left on time. But those who kept the properties are already aware that the sale value has decreased between a 35% and 45% in dollarsin the last four years, because the offer is greater than the demand -in CABA today there are 163,000 properties for sale and 3,000 are sold per month-.
Therefore, we are facing a buying market and although the sale price of the real estate would be close to its floor today, the recovery of the values will not be immediate and to reach the historical prices of the real estate it will take several years and actions generated by the state, so that access to housing can be done through predictable mortgage loans and that can be afforded by the Argentine middle class.
President of CAMESI (Chamber of Real Estate Services Companies), President of Keymex Argentina, auctioneer and public broker
Source: Ambito
