Argentina Real Estate Market: Decline in Real Wages, Compared to Property Prices

Argentina Real Estate Market: Decline in Real Wages, Compared to Property Prices

As the international economy takes a turn for the better, so does the Argentine economy. The Buenos Aires real estate market managed to stay rather stable throughout the recent crises, especially when compared to other markets and industries.

As the economy starts to improve, wages are slowly increasing, as well. Unfortunately, they are not able to keep up with the real estate values, which, having remained stable in the past couple of years, are climbing at a faster rate.

According to an analysis done by the Institute of Economics of the College of Economic Sciences of Argentina University of Business (UADE) on the behavior of the average real wage index in relation to the value per square meter in the past year, there was a decrease of 5.5 percent.

This also reflects the purchasing power of wages. As of December 2009, wages were only able to acquire 42% of the value of a square meter of a new home in the northern zone of the city. This percentage fluctuates depending on the area of the city. In Almagro and Cabillito neighborhoods, for example, the said percentage increased to 54 percent.

The above figures can be attributed to the disconnect in wage increases compared with property value increases. The average nominal wage, measured in dollars, rose 0.5%; however, the square meter, also measured in dollars, rose by 6.4 percent.

The result came about in the second and third quarter of 2009, for the most part, when the evolution of wages showed a delay in regards to the progress on the dollar. By December 2009, the annual overall change in real wages in terms of value per square meter fell 1.7 percent, making it harder than ever for buyers to acquire property.

The basis of this report is based one figures from a period that began in 1997. The period in consideration has a purchasing power of 51.5% less than that on which the report is based. Hopefully, as the economy stabilizes, wages will begin to catch up to the Buenos Aires real estate market, allowing for a healthier market and for more homes to be bought.

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