Property Values in the City of Buenos Aires
The Argentine economy grew 8.9% in 2003, 9.0% in 2004, and 9.2% in 2005; figures no lower than 6% and up to about 8% are predicted for 2006, and the City of Buenos Aires is thriving. Large, elegant offices are being constructed along side of plush high-rise apartments, and the development of a new part of the city, Puerto Madero, is dynamically and dramatically changing the city’s skyline.
Property appreciation and construction in Buenos Aires is in a boom market. The exchange rate, being as beneficial as it is to foreign investors, has enabled foreign investment to be a prime mover in this market. Real Estate is yielding significant equity and profits in the city of Buenos Aires as well as other parts of Argentina.
Buenos Aires is one of those places people love. It is no surprise that the press in Europe and the United States such as New York Magazine, the New York Times keeps writing about Buenos Aires. Everyone who visits comes back wanting more. They also come back to buy.
Why? Even the most expensive neighborhoods such as Recoleta or Palermo are only a fifth of the prices of other major cities such as Paris, NYC or London.
As guideline the price per square metre in Recoleta is US $2000 and between US$1200 to $1500 in Palermo Viejo. In Rome the equivalent of the same neighborhood prices are US$7000 to US$9000 per square metre.
Second, properties rent high here. So if someone is a seasonal resident they can easily rent out the place. 7% rate of return is reasonable and it is even possible to get a higher return. That is because the tourism market is growing at an incredible speed. In 2003, there were 1 million tourists. In 2005, there were 4 million and by 2010 it is predicted that 10 million tourists will be visiting Buenos Aires. 4 and 5 star hotels already have an occupancy rate of over 80% so good places to rent to tourist with great amenities are always going to be in demand.
Third, prices are going up. When the crisis happened in 2003, real estate dipped 80% and bounced back within 2 years. Now prices are above what they were before the crisis. Does that mean they are experiencing a real estate bubble? The situation is very different from the United States and Europe because most properties were bought in cash. Since the crisis Argentines do not trust their banking system and few people use mortgages to buy property. So these real estate prices are real. In fact, real estate is a secure investment in Argentina. Argentines buy so they do not have to hide their money under their mattress.
Finally, Buenos Aires is still developing. Even a popular place like Palermo Viejo still has space for growth. For example there is a train track between Palermo Hollywood and Palermo Soho. It is a huge abandoned space. Around these tracks were some big storage units for stores. These leases are out and the government is starting a huge project to rehabilitate the area. There will be a cultural center, a mall, movie theaters. This will bring the prices in the area even higher.
San Telmo and Monserrat also see huge development plans to recuperate the historical centre of the city.
Residential Values :
San Telmo: Funky, artistic, bohemian, charming San Telmo is one of most tourists favorite places in Buenos Aires. If you like funky sidewalk cafés, bohemian bistros and eclectic antiques — and if you don’t mind a neighborhood that’s still a little rough around the edges — you’ll love San Telmo. Residential prices in San Telmo range from $80 to $110 per square foot.
Palermo: This is a trendy neighborhood … and a tranquil and well established, hence prices are relatively higher than in other areas of the city. Current residential prices in Palermo range between $120 and $180 per square foot, with the higher values for new construction or premium location and the lower values for older properties.
Recoleta: Recoleta is one of the most-desirable areas in Buenos Aires. In the northern part of the city, it’s home to a fashionable residential area, elegant restaurants, deluxe hotels, fine museums, some of the city’s finest shops and the Recoleta Cemetery — the final resting place of the (mostly) beloved Eva Perón. Current apartment prices in Recoleta range between $160 and $190 per square foot.
If you were to compare Buenos Aires to New York City, you’d say that its Recoleta and Palermo neighborhoods are akin to Fifth Avenue and the Upper West Side … and San Telmo is its Greenwich Village.
Commercial Values :
Rents for top-quality offices in Buenos Aires rose 46 per cent last year because of the lack of new office space coming onto the market over the past five years, says Florencia Aguilar, Director of Research Services at C&W’s Buenos Aires office. “At the same time, companies are expanding and new companies entering the market, given Argentina’s strong economic growth and growing attraction as an outsourcing destination because of low labour costs, a good quality of life and the high quality of its professionals.” http://www.cushwake.com
Commerical / Office space
Iuri Izrastzoff, chief executive of Izrastzoff, a large Buenos Aires-based real estate agent, said in Feb 2006 “Very few triple A office blocks have been built in the capital in the past few years and, because it takes a couple of years for new offices to be ready, the city will soon face zero vacancy levels. This can only push up rental values.”
According to Cushman & Wakefield Semco (CWS), a major real estate consultancy in Argentina, class A office space in Buenos Aires has had an historical average rental value of US$24 per square metre, or US$258per square foot) hitting a low of about $12 during the economic crisis. Prices in 2005 were between $16 and $18 per square metre and have increased to between $20 and $24 by the middle of this year (2006).
Florencia Aguilar, head of advisory services at CWS in Buenos Aires, says: “The main companies looking for office space are either industry or services-related and they are looking for areas of between 800 and 1500 square metres. Equivalent class A office space in São Paolo, Brazil, fetches about $22 per square metre and in Caracas, Venezuela, about $24 per square metre.”
Capital gains Demand for scarce office space, growth in residential developments and a tourist boom sparked by the decoupling of the peso are all making Buenos Aires a popular destination for real estate investment.
Investing in new office space in Buenos Aires probably represents the best real estate opportunity in Argentina today. Since the countrys economic crisis of 2001-02, there has been little new build of class A offices but the expanding economy means vacancy levels have fallen to a record low of 3%. The economy has grown at about 8.5% a year for the past three years and conservatively is predicted to grow by 6.5% this year. Opportunities exist in all types of real estate throughout Argentina, but new class A office space in Buenos Aires stands out because of the expanding economy and the low vacancy rate. http://www.fdimagazine.com/news
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