Land in Buenos Aires: Scarce and Expensive
Land in the city of Buenos Aires is scarce and high valued prime real estate. At the moment, the most sought after land in the city of Buenos Aires are lots between 1000 and 1500 square meters with a front of 8.66m. Many developers carefully contemplate the decision to buy a plot of land to build on due to the expense of construction and land. The increasing prices of land due to its inherent characteristics of a raw material, depending on its location, proximity of urban areas, landscaping and green area makes every piece of land unique.
In land offers in Barrio Norte (North District), in the City of Buenos Aires, are almost non existent. A plot of land on the 2600 block of Arenales construction costs for 1000 square meters of work would be USD 700,000 and a rate around U$D 600. There are plots of land in Barrio Norte that can reach between USD 800 and rate of USD 1,000; however the selling rate has lowered the profitability of projects. For example, projects that cost USD 1000 are priced at USD 3,000 which at this price is hard to sell. However, the construction should allow for a 30% return, which is a good profit. On the 600 block of Pedro Goyena in Caballito, the construction of 1300 square meters of would cost USD 880,000 which is 370 meters of land at a rate of USD 700 . The sale of land will be active until March 2011.
Today, negotiations of land vary, before, the buyer made an offer for the amount of land, now the buyer makes an offer for the cost of square meters built. It is becoming increasingly difficult for developers to find vacant land to build on at a reasonable cost. Few developers realize that the price of land is mainly determined by the cost per square meter built.
According to some developers, the transfer of wealth from the developers to the land owners is increasing due to the developers desire to build in areas where there is high profitability as a result revaluation of the land occurs and a spill over of wealth is experienced by the land owners. There are some developers that do not support the high prices of Caballito, Palermo or Belgrano and they choose to build in Almagro or Núñez. Many developers are looking in different areas of the Buenos Aires to build, such as San Telmo, Barracas and Villa Crespo, with the hope that land prices in the ritziest areas will begin to fall as they turn their attention to other areas of the city. The vast majority of real estate developments are small units, between 2000 and 5000 square meters with investments of two to four million U.S dollars with many investors.
The opinion of some developers is that land owners know they have a valuable resource and the value of their land is not elastic. The prices will not fall dramatically, unless there is a drastic change in the economy. It is certain that there is a market for new land, which was scarce there months ago; however there are more offers because of the decrease in land negotiations. Developers claim that the intermediaries influence the value of the land because they allow the land owners to value the land at much more than it is worth. Land is being valued based on the price that it can be sold in the area, the price of building on the land and returns. In Palermo Nuevo (New Palermo) for example, where there is a scarce supply of land, the selling price is reported at being no less than USD 700 and in some cases can climb to U$D 1,000 and in Palermo Hollywood it is around 550 US dollars (USD). There are also land owners who do not need the money and would rather hold ownership of the some of the land to reap the monetary benefits of the new building project. The price of land continues to rise and in order for developers to be profitable, they claim that they must sell at higher prices ranges.
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