In a pre-election year marked by a decline in foreign investment and a consumer market struggling to access housing, 2018 will be a “cautious” year for the real estate sector, according to Daniel Porcaro, academic coordinator ofthe Specialization Diploma in Real Estate Business at the School of Architecture.
“There is a fundamental shift taking place in the market that needs to be analyzed,” the expert explained during the conference titled “What Can We Expect from the Real Estate Market in 2018?” on Thursday, March 15.
The real estate sector, both in urban and suburban areas, has seen modest growth compared to other sectors in the country, and has not grown by more than 10% over the past 10 years. According to the speaker, this can be explained by the country’s low population growth over the past 17 years.
Porcaro focused on two major factors influencing market trends: housing affordability for end consumers and foreign investment.
When considering price trends, it is important to take into account the variations that exist across different neighborhoods and areas, due to the redistribution of the housing supply since 2012. The presentation used data on the average for Montevideo and the Cordón neighborhood (an area where the development of publicly subsidized housing has been concentrated).
In October 2007, the price per square meter in Cordón was $1,000, whereas ten years later, it stands at $2,500. Meanwhile, the average in Montevideo, which was below $1,800, is currently above $3,000. This shows that while there is an upward trend in Cordón, prices in the rest of the capital are beginning to decline.
Housing prices in Cordón rose by nearly 150%, while the average for Montevideo shows an increase of about 50%.
And, as Porcaro pointed out, looking at purchasing power, in 2007 a salary of 50,000 pesos could buy 1.5 square meters in Pocitos and 2.5 square meters in Cordón. Ten years later, while purchasing power in Pocitos remains the same, in Cordón it can buy 1.5 square meters.
“There’s a much wider selection in Cordón. Prices have gone up. The prices of the units on the market should start to come down because the square footage buyers can realistically expect has decreased,” Porcaro said.
Meanwhile, with regard to foreign investment, there has been a significant decline in deposits held by non-residents in the country since 2014.
According to Porcaro, investment in the sector grew from 2009 to 2012, driven by the so-called “Kirchner effect” in Argentina and the opportunities offered by the Law on the Promotion of Social Housing (No. 18,795).
However, starting in 2014, with the political changes in the neighboring country and the first steps toward regulating money laundering, foreign investment flows began to shift, and as a result, investment gradually declined.
Given the current context—marked by a dollar exchange rate that is unlikely to see any major surprises and difficulties in attracting real estate investors—the expert suggested focusing on the labor market. This is because a hypothetical increase in labor costs would make the housing market less attractive to buyers.
In short, according to Porcaro, “the effective measures taken to improve the housing supply must now be complemented by a policy to stimulate mortgage lending.” The expert argued that the focus should not be on boosting supply but rather on stimulating demand through better credit opportunities, in line with recent measures taken by Banco Hipotecario to resume lending to individuals for home construction and the introduction of new credit and savings products.
https://youtu.be/53iuhMSGry0?si=MewIZJMPQTbPwazh