Properties rise in price for the third consecutive month in Montevideo

The ability to access a home in our country, decreased to the minimum in the last two years.

Taken in dollars, the prices offered for housing in the capital of the country marked a third consecutive month upward in February, but at moderate rates. In the medium term, the note continues to give stability in a market that shows few changes, but also, which presents serious difficulties "for access when comparing prices in local currency with the evolution of wages".

The Price Index for the Housing Offer in Montevideo, created by El Observador (IPOV-EO) showed that in February there was an increase in current dollars of 0.5% with respect to the previous month. The indicator takes data of all the prices to which owners and real estate agents publish apartments in the main classified portals of our market.

The survey shows that a typified apartment (65 square meters) was offered at the end of February for US $ 161,928 in the weighted average of the 17 neighborhoods surveyed by El Observador. It is the areas with the highest real estate offer in the capital. Among the neighborhoods analyzed, the price ranges between US $ 110,981 in the Union and US $ 217,165 in Carrasco.

Measured in dollars, the offer price of real estate has been increasing since December 2015, although it is very slight variations (below 1% per month).

As the newspaper El Observador continues to mention, until the first quarter of last year, the trend of prices in the real estate market in the capital had been rising sharply, with annual rates of over 5%. If you compare the prices of February 2016 with the same period last year, they are 0.6% below. Therefore, beyond the recent rises, the market trend continues to be of price stability.

If you look at the different neighborhoods and compare the prices with those of February of last year, there is an increase in nine of the 17 neighborhoods surveyed and one drop in the remaining eight.

How the ability to access continues

The previous fragment does not mean that the ability of Uruguayans to access a property has remained stable in recent times.

With practically frozen dollar prices, a sharp rise in the price of the greenback and a marked deceleration in the rate of increase in wages, the purchasing power of Uruguayans measured in bricks was considerably reduced. In fact, it is at its lowest level since at least April 2014, when the Economic Analysis Unit of El Observador initiated the survey.

In February, with an average salary, Uruguayans could access 13.5% less square meters than in the same month of last year, even though prices in dollars practically did not change. In that period, the average salary increased 11.2%, while the dollar's price climbed 29.2%.

If it is evaluated in constant pesos – discounting the effect of inflation -, at the end of February the properties were 16.6% more expensive than in the second month of 2015. This way of measuring the evolution of the price of the house allows comparison better market conditions with the purchasing power of Uruguayans and therefore, consider the impact of prices on potential demand.

Continuing with the analyzes, the newspaper El Observador also mentions that while in April 2014 an income of $ 71,165 was required, in February 2015 it jumped to $ 80,988 and a year later it stands at $ 104,068. This implies a significant reduction in the potential demand for real estate by households.

Construction promoters point out that in recent times the final occupants of homes are leaving the place to investors as recipients of new housing. While the end users of the house are limited in their ability to acquire real estate due to the increase in their price in local currency, investors still find in rents an attractive income that justifies the bet.

The indicator of The Observer
Since April 2014, at the end of each month, the Economic Analysis Unit of El Observador captures all classified ads in the main classified portals, forming monthly databases of more than 20,000 records. These data are purified, processed and organized in a synthesis of 17 neighborhoods of the capital. For the elaboration of the Montevideo indicator, each neighborhood is weighted by its weight in the total sales of 2013.

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