Property Prices are predicted to increase by 20% in 2011

Those that are hoping that property prices in Buenos Aires will decline are in for a rude awakening. The situation is quite the opposite; real estate developers predict that by the end of 2011 the value of housing will have grown 20 percent.  The increases in price are related to the demand for housing. This demand is predicted to continue this year and throughout next year.

Despite the economic situation, the demand for housing in Buenos Aires will continue to grow given that the dollars that support the development of housing projects will come from the commercial market. This influx of money will drive the property prices. The price for construction is getting more expensive with each project. The high prices of construction materials and the low salaries will not halt the raise in price.  All of these factors will result in an increase in property prices of at least 20% by the end of 2011.

Some experts believe that it is unreasonable to hope for a decrease in prices, especially given the heightened cost of apartments. There is no doubt that property prices are going to rise and will be felt heavily by the upper class. The increase in property price will also be felt by the segment of people who are in lower economic classes, however on a smaller scale.

Developers claim that construction costs in Argentina are between 20% and 25% more of what they are in Brazil or in Chile. The increase of the value of square meters is not the only effect caused by the high cost of construction. Some experts believe that the housing market will be reconstructed by this increase in property cost.

This year 7.5 million square meters of land has been granted constructed permits. By 2011, it is predicted to reach 8 million square meters. The amount of land is predicted be maintained around these levels. Profitability will decrease, each time yielding a smaller profitability margin.  The profit margins are very low and in some cases they are nonexistent.

Some specialists believe that the shrinking of the market will lead to the disappearance of some construction businesses that do not know how to adapt to this new reality. This translates into the necessity of companies in the construction sector that know how to meet the needs of specific segments. Companies that would survive in this atmosphere would be those that could diversify and expand their clientele, which would not only include housing tenants but also commercial business tenants.

What would change this scenario? There are no doubts among entrepreneurs and businessmen, that the emergence of mortgage credit for the middle class would open new doors for real estate investments.

Go back to Argentina Real Estate News:

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