The “value” of a property is made up of multiple and diverse factors, variables that are not only related to the property itself, its structure, and typology, but also to the environment in which it is located and the extra benefits it can offer.
From there, the rental price and the profitability that can be obtained for such property in case of using it for this purpose are also obtained.
Latin American capitals are the ones that show some of the highest values in the region and where location makes the difference. But pandemic, economic, and demand fluctuations impact prices in an “emotional” market that is very permeable to any variability.
Bloomberg Línea surveyed, through different actors of the sector, the current real estate market in the main cities of the region to conclude which are the ones that provide the highest profitability in rental properties as of August of this year.
When comparing the costs in the different countries, the conversion was made to the official dollar on September 22, 2022.
PROFITABILITY IN LATIN AMERICAN CAPITALS
If it were necessary to establish a ranking of the most profitable cities in the region for those who rent a property, according to the cities surveyed, the Colombian city of Bogota would be at the top of the list.
According to data provided by Houm, the real estate purchase and sale site, the annual profitability of a rental in Bogota is 8.2%.
The average apartment rental price is COP 1.6 million (US$357). Likewise, the house rental fee is COP 4.5 million (US$1,483) at the end of the second quarter of 2022.
Next on the list is the average value of a two-bedroom property in the metropolitan region of Santiago, Chile, which is CLP 502,875 (US$525), according to data provided by Houm executives.
In the Panamanian capital, the rental value of a two-bedroom apartment in August was US$767 per month, maintaining a similar level to that of 12 months ago.
Thus, the annual profitability stood at 6.48%, which means that the buyer will need 15.4 years to recover the investment, according to the Compreoalquile portal.
Considering that the rent of a two-bedroom apartment in Mexico City had a value of MXN 13,955 (US$692) per month as of August of this year, showing an increase of 3.2% in the first eight months of the year, the profitability of the rental market, in general, is around 6.34% per year.
Therefore, according to the local portal Inmuebles24, an owner needs to rent that property for 15.8 years to repay the investment in a home.
In Montevideo, Uruguay, the annual dollar return is among the highest. It is around 6%, according to Manuel Guadalupe Araujo, a RE/MAX Único team member in Pocitos, Montevideo.
“In any real estate market, the return on investment will depend on the capital gain generated by the investment,” says Araujo.
Just below is São Paulo, the economic center of that country. In the Brazilian city, renting a two-bedroom apartment costs R$3,463 (US$650) in August 2022.
If we think in terms of rental profitability, it reaches 5.59% per year on average in the total market. Therefore, it takes 17.9 years to recover the investment from purchasing the property, according to data provided by ImovelWeb.
Meanwhile, in Quito, Ecuador, the average profitability is 5.39%, equal to the previous year and the average for the whole country.
The data comes from the real estate platform Plusvalía, which reports that the rent of a two-bedroom apartment in that city was US$443 per month during August.
On average, the annual rent/price ratio maintains an upward trend. For this reason, it takes 18.6 years of renting to repay the purchase investment, according to the Plusvalía platform.
To the south, in Lima, Peru, the average rental value of a two-bedroom apartment increased 0.4% in August to PEN 2,739 (US$694) per month.
So far this year, prices in the Peruvian capital accumulated an increase of 3.4%.
According to the real estate platform Urbania, the annual return on rent is 4.66% per year, so 21.5 years of renting are needed to recover the investment of the property purchase.
In the last step is Buenos Aires, Argentina, where the rent of a two-room apartment in August was around ARS 74,557 (US$508) per month.
Until August 2022, the accumulated increase in the price of rent was 59%, a few points above inflation (55%).
In this context, the rent/price ratio decreases as a consequence of the peso depreciation, and the profitability stands at 3.69% per year, according to the real estate platform ZonaProp.
As a result, the owner of a rental property needs 27.1 years to recover his investment.
With information from Bloomberg