Construction Boom in the Capital Deflates
After three years of steady increase, requests for construction permits in Buenos Aires, the Capital Federal of Argentina, dropped during the first half of 2008. According to the article “Se desinfla el boom de la construcción,” this drop can be attributed to a number of factors. The increase in construction costs, economic uncertainty, and some signs of deceleration in sales caused the first half of the year to close with 1.2 million square meters approved for construction in Buenos Aires. This number is 27.7 percent lower than the figure for the same period in 2007. Another factor that perhaps partly contributed to this drop is that fact that, as of July 1st, all construction companies have to present permits to the city about things such as water, gas, and light before beginning a project. Before this new law, the need for permits was restricted to certain parts of the city and only included water, making construction easier with less entangling bureaucracy.
This drop in construction permits was not the same in all parts of the city. Some areas had the same growth figures as years prior. The area of Barracas benefited from Buenos Aires mayor Mauricio Macri’s decision to move some official offices into the neighborhood. It now has six times the amount of construction as before. Additionally, the barrios of Agronomía, San Telmo, Balvanera, and Retiro have twice the number of construction projects than the year before.
Areas that did experience a severe drop in construction permits were Villa Urquiza (the largest drop of all with 59.4 percent), Belgrano (36.3 percent), and Caballito (33.6 percent). Palermo experienced a slight recession, down 6.7 percent, and Puerto Madero grew a little, by 4.4 percent.
The question, now that construction permits are reported as dropping, is whether or not this will affect real estate prices. At the moment, no drop in prices is being noticed by those in the business. As a matter of fact, the deceleration of available new housing may help to sustain prices as they are for a while to come. A final fact about the first half of 2008 that is worrying the real estate market is that for the first time since 2003, the number of mortgages being registered is lower than it was the half year before.
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