Before the rise of the dollar, real estate accelerated prices

During the month of April, an increase of 2.2% of its value in pesos was obtained, this being the most pronounced since 2014.

Because of this rise, the price of real estate in that month accelerated, culminating with a stage in which the foreign currency seemed stagnant and therefore, increasing the cost of rents. Whether it will continue to increase or not, is an issue that generates uncertainty.

The data created by the newspaper El Observador (Real Property Price Index, whose acronym is: IPOI-EO) shows us that the increase of 2.2% led to the total increase in the last 12 months , 9%. What is the evaluation of the IPOI-EO? It is an indicator that gives an account of the price of the square meter -measured in dollars- requested by the homeowners in the Department of Montevideo.

On the other hand, the year-on-year increase rate also reached a maximum in the last month. During March it was 4.9% and in April last year, it reached 4.3%. The IPOI-EO indicator is formed by processing all the active classified ads in the main specialized pages at the end of each month. These data are then cleaned up to avoid duplicates and also filter those notices that have incomplete or inconsistent information.

The note also mentions that the rise in dollars of the price of real estate, is consistent with the evolution of the exchange rate and the rents, which as we saw, have been increasing their cost.

In the case of the Indexed Units (UI) in the price of real estate, there was a rise in the last month of 1.9%, but it comes from accumulating a fall of 0.8% in the last 12 months.

Although real estate prices are generally expressed in dollars, it is worth talking about the data taking into account a currency more linked to these transactions, such as the indexed unit, so El Observador emphasizes the importance of it if analysis is desired. more accurate.

The references provided by the sales and rentals

According to data from the National Institute of Statistics (INE) in the last 12 months (taking into account the period from April 2017 to April 2018) they have presented a decrease of 0.9% in UI. The same rate of fall that also occurred in the prices of supply of real estate, as stressed by the Observer.

This mismatch between prices (those in dollars and Indexed Units) can be explained by the exchange rate lag that reached its critical moment in April, before the dollar presented the most outstanding rises.

The consequences of this fact generated that although more dollars were needed to access a home, the capacity to buy bricks was increased. In the last period April 2017-2018, this increase was 2.5%, which in turn, had received a previous increase of 16.2% in April 2017. Thanks to this increase in purchasing power, There was a reactivation of the sector after a year not as good as it was in 2016.

With the dollar at 28.3 on average in interbank operations in April, the increase in prices measured in that currency was justified. However, this picture changed completely in May. The dollar closed a few days ago at $ 31.15 and that implies that if the real estate offer price is maintained (in relation to the month of April) there will be a 9% drop in its purchasing power.

Market operators, for example, are already seeing a greater "caution" in the purchase of real estate and in more extreme cases, cancellations have been filed. In addition, the historical evidence also shows that the owners often have problems to lower the offer prices of real estate and in case of a "sharp appreciation of the dollar", choose to withdraw the properties from the market rather than "lose equity measured in dollars "

Construction has lost thousands of jobs

The information provided by the Social Security Bank (BPS) in February of this 2018, shows that the number of people employed in construction (direct workforce) amounted to 42,451 members. This data shows that almost 1,300 workers were employed more than in January 2018, but about 3,300 workers less than those registered in February 2017.

In addition, the data published in May by the Chamber of Construction, shows that the "trajectory of the number of employed" directly continues to decline. Moreover, if one considers only the month of February, with the data of 2018, it is revealed that it is the fifth consecutive year-on-year fall.

In 2013, the peak of workers was registered, reaching 67,993 in February. Five years later, the jobs are 25,500 less, that is, 42,493.

Material generated from the information in the newspaper

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