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The real estate market is experiencing an unusual situation: the cost of construction per square meter now exceeds the average sale price of used properties in the City of Buenos Aires . While construction costs hover around US$2,500 per square meter , used units are selling for an average of US$2,370 per square meter , creating a gap that is straining profit margins and redefining sector strategies. This mismatch is explained by the sharp increase in materials, labor and taxes , in a context of inflation in pesos without a significant real devaluation , which ended up generating an increase in the cost of construction in dollars , explained Beltrán Briones , financial manager of Estudio Kohon . Just 18 months ago, building cost between US$750 and US$800/m² ; today, the floor is located at US$1,500/m² just for construction , and reaches US$2,500/m² when including taxes and land . A narrowing gap The coexistence of two parallel markets —the used market, with still-depressed prices, and the new construction market, with updated costs—creates a gap of nearly US$500/m² , which could be closed in the next 14 months. With a stock of 70,000 used properties for sale and an average of 5,000 deeds issued per month , developers project that once that supply is absorbed, the value of the well will become the new market benchmark . Furthermore, in premium areas such as Belgrano or Recoleta, land prices can reach US$1,200/m² , further raising the bar for new projects. Lorenzo Raggio , general manager of Interwin , maintains that no development can be launched today for less than US$2,500/m² if all hard and soft costs are considered. Does it make sense to build? Despite rising costs, developers like Briones and Raggio insist that investing in bricks and mortar remains a valid strategy , especially given the return of mortgage lending and the rebound in rental yields, which reached 5.6% annually in dollar terms in March. They also emphasize that many off-price prices still dont fully reflect the new cost levels , offering a limited window of opportunity . Another key factor is the possibility of importing inputs , which could make strategic materials cheaper . Developers are already purchasing products from China, Brazil, and Turkey , which is beginning to offset the impact of domestic increases. A greater supply of construction financing is also anticipated , provided the banking system advances with mortgage lines for developments under construction. The role of credit and the change of cycle According to Briones, with more than one million active loan applications in the country, even if 20% are approved, the impact would be massive: 200,000 new buyers entering the market, in turn generating multiple transactions in a chain. This dynamic, coupled with inflation eroding dollar savings , reinforces the interest in real estate as a safe haven. However, Raggio warns that the sectors recovery requires macroeconomic stability : a stable exchange rate, low inflation, and improved expectations. Theres no room for improvisation today; we need financial backing and a clear strategy, he emphasizes. Developers perspective The current phenomenon—dollar inflation, distorted relative prices, rising profitability, and a shortage of new units—marks a cycle transition. Developers agree that those who invest now, with solid projects and good locations , will be able to capitalize on the price readjustment that will consolidate in the coming months, provided the economic environment is favorable. |
