Ups and Downs: Real Estate Way of Converting Pesos to Dollars
After the crisis experienced in 2009, construction activity continued to growth reaching its peak in 2011, a trend most apparent in residential construction projects. Throughout the year sector activity grew by 9%, while employment rose 10% and the square footage averaged 697,200 m2 and indicated a second semester on the rise. In parallel, the property values continued to escalate. Measured by square metre, the number of brand new apartments in the Buenos Aires paid in dollars increased by 15%, closing the gap between the top neighbourhoods of Buenos Aires and the values of real estate in other great cities of the world.
The construction sector will continue to be one of the main driving forces behind the Argentine economy, and it has traditionally been a reliable breadwinner for the country. Despite the construction industry’s traditional dependability, since late 2011 there have been some warning signs that show wavering construction activity and development of the property market. The Synthetic Indicator of Construction Activity (el Indicador Sintético de la Actividad de la Construcción) slowed by 3.6% from November to January and new planning permission applications fell by 6% in November and December. The slowing of the market raises some interesting questionsabout the Buenos Aires real estate market. The data from recent months shows a definite trend and declinein the purchase/sale of existing homes. Factors causing this include: dollar exchange restrictions plus the general pessimism and cautiousness in the market.
Yet the market remains buoyant. Real estate continues to beat inflation (thanks to prices being paid in dollars) making it a reliable way to save and invest capital. Further to the stability of investing in property, real estate now offers a clever way to convert pesos to dollars. Exchanging pesos to dollars in the normal way is basically impossible for large transactions and so buying and then selling a property in Buenos Aires has now become a mechanism to convert pesos into dollars and, in turn, overcoming the barriers in purchasing the U.S. currency. The general slowdown of the economy is something that is guaranteed to affect the construction sector. Regardless, the real estate market will go againstconstructionactivity, remaining an investment option that beats rising inflation and an alternative to dollarization savings. The rules of the game have changed but the benefits remain the same and the sector continues to expand.
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