The most traditional investment worldwide yields better than property

TREASURY BOND VS. RENTAL

An article written by Mariano Gorodisch, the topic of investing in the Argentine market was deeply analyzed based on INMSA´s report

Some relevant conclusions:

  • While the American 10-year bond yields 3%, the net rental income on property is 2.5%.
  • In addition to this, keeping the property vacant entails $87,000 yearly.

“We are experiencing quite an unusual situation: rental yield is too low for the landlord and, at the same time, the price is, many times, unaffordable for the tenant. The problem is not the landlord or the tenant but the high price of the property”, Mariano Capellino, CEO of INMSA, warns.

He provides an example by saying that the square meter for a brand new apartment in Caballito district is the same or even higher than the value of an apartment in Brickell, which is today being sold at u$s 3000; while the square meter of a second-hand apartment in Caballito (u$s 2,500) is almost doubling the u$s 1300 in traditional apartments for residential use in Miami.

He mentions Caballito district as an example but, in neighborhoods such as Belgrano, Palermo or Núñez, the comparison is even worse, because the cost per square meter for construction in Argentina is twice the cost in USA and Europe.

Rental net return is currently undergoing minimum historic values, with a 2.5% rate annually, according to a report issued by Reporte Inmmobiliario every year. Also with a latent risk of maintaining a vacant apartment at $87,000 yearly, and which requires some paint coating before signing each new contract, while USA Treasury bonds, which yield 3% annually, do not require any maintenance at all. Also, this assumption made by Reporte Inmobiliario includes the fact that during the rental period, the tenant must pay taxes such as ABL (lighting, sweeping and cleaning public spaces) and water services as well.  “The incredible fact is that property rental is lower than the yield of a USA Treasury bond, which is not a good indicator at all”, as warned by Cappellino.

 

Complete article on El Cronista: http://bit.ly/2JBhgHG

Other recent articles published on El Cronista with INMSA’s opinions

https://www.cronista.com/finanzasmercados/Invertir-en-real-estate-con-okupas-un-negocio-que-crece-en-Espana-20180111-0019.html

https://www.cronista.com/finanzasmercados/Rendimiento-de-bonos-casi-duplico-al-ladrillo-dio-12-anual-en-dolares-20170830-0031.html

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