The concept of “stand-by” refers to a status of waiting or resting, different from being on or active and also different from being completely off.
Specifically, it means being alert, expectant that something will happen to justify starting or defining its stop.
For decades, Argentinians have leaned towards “bricks” as a savings and investment alternative.
The lack of development of a solid and growing capital market simplified the offering of financial instruments in fixed terms and investment funds for the majority, those who save local currency, or the purchase of dollars to let them sleep the sleep of the innocent in safety deposit boxes and mattresses.
In pursuit of maintaining the purchasing power of savings in times of inflation, currency uncertainty, or bank runs, local investors primarily found an alternative in horizontal property units to preserve those postponed consumptions.
However, in this new stage of sincere pricing of goods and services, it is advisable to consider issues that in the past had minimal impact and that currently could have significant impacts on the value of these assets.
In the case of properties under construction or “in-the-hole” projects, there have been cost distortions that affect projects, mainly those in intermediate stages of progress.
Those who have sold apartments under construction at a fixed price in dollars face a market where costs in hard currency have increased by an average of 35%, consequently, that difference directly affects the profitability of the business, and due to the magnitude of the variation, it could even turn it deficit.
On the other hand, those who agreed on the unit prices in pesos adjusted by some cost variation index, such as the Argentine Chamber of Construction, have seen an increase in dollars, between December and April, of the same magnitude 35%, only that in this case, those who must face them are the buyers.
In both cases, selling at a third of the expected price or paying a third more for a property under construction could make the operation fall outside market prices.
For these reasons, many projects to be started are delayed waiting for the stability in the prices of materials and wages, others in early construction stages have been paralyzed, facing the same fate, while those more advanced struggle between negotiations and the acceptance by builders and buyers of paying more than expected and/or earning less.
Meanwhile, in the case of finished properties, new or used, the outlook is also complex.
The exponential increase in maintenance costs, expenses, taxes, and services makes the wait to sell or rent too expensive.
In the City of Buenos Aires, owners and tenants had to allocate, on average, $114,000 in March for building maintenance expenses, which represents a year-on-year increase of 210%, while in the province of Buenos Aires, this variation was 261%.
Regarding real estate taxes, property valuations have been updated, both in the City and in the province of Buenos Aires, increasing the amount of the taxes up to almost 300%.
The rate adjustments in water, gas, and electricity, despite the monthly inflation updates being postponed, have faced similar adjustments to those of taxes.
Regarding demand, buyers are expectant, despite the advice of real estate professionals who suggest that “prices have hit rock bottom,” understanding that economic adjustments will inevitably impact both the quantity and the purchasing power of the interested parties.
While building is increasingly expensive in dollars and maintaining a property while waiting for a real estate operation has become extremely costly, the market treads on muddy ground where buyers and sellers feel fearful of taking the step to close a deal.
Only by necessity or opportunity are businesses defined, with typical operations of a recent past where traders, industrialists, producers, or independent professionals embarked on buying real estate as a financial instrument for savings or investment becoming less frequent.
For the moment, real estate has ceased to be liquid assets, and their values are also within the brutal fight for the recomposition of relative prices.
Only once this issue is addressed, perhaps the wait for something to happen, or stand-by, can end to start a new cycle of private investment in real estate.
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