Bloomberg Línea — The value of a property is made up of multiple and diverse factors, variables that are not only related to the property itself, but also to the environment in which it is located and the extra benefits that may offer, and which contribute to the yield in the event that the property it is bought-to-let.
Latin America’s capital cities boast some of the highest values in the region, and where location makes the difference. But the pandemic, as well as economic and demand fluctuations, have impacted prices in a market that is very open to any kind of variability.
Bloomberg Línea carried out a survey of the current real estate market in the capital cities of the region to conclude which are those that owners with the highest profitability from rents. In order to compare prices, the US dollar exchange rate of September 22 was applied.
Yields in Latin American capitals
Of the capital cities surveyed, the most profitable in the region for owners who rent is Colombia’s capital Bogotá.
According to data provided by Houm, a real estate purchase and sale site, the annual yield of a rental in Bogotá is 8.2%, while the average apartment rental price is 1.6 billion pesos ($357.27). Likewise, the average rent for a house is 4.5 billion pesos at the end of the second quarter of 2022.
Chile’s capital Santiago is next on the list, at 502,875 pesos for an average rent ($525.20), according to Houm data.
In Panama City, the average monthly rent for a two-bedroom apartment is $767, and which has remained stable over the past 12 months, with an annual yield of 6.48%, meaning a buyer would need to rent the property at that price for 15.4 years to recoup the investment, according to real estate portal Compreoalquile.
Considering the rent of a two-bedroom apartment in Mexico City at 13,955 pesos per month ($692.42) as of August of this year, an increase of 3.2% in the first eight months of the year, the yield is around 6.34% per year.
According to local real estate portal Inmuebles24, an owner would need to rent that property for 15.8 years in order to recoup the investment.
In Montevideo, the dollar yield is among the highest in the region, at 6%, according to Manuel Guadalupe Araujo of RE/MAX Único in, Pocitos, Montevideo.
“In any real estate market, ROI depends on the premium generated by that investment,” Araujo said.
Next up in terms of yield is São Paulo, Brazil’s economic and business hub, where the rental of a two-bedroom apartment costs around 3,463 reais per month ($650.06), with an average annual yield of 5.59%, meaning it would take 17.9 years of rental to to recover the investment, according to ImovelWeb.
Meanwhile, in Quito, the average yield is 5.39%, equal to the 2021 level and the average for the whole country, according to real estate platform Plusvalía, which reports that the rent for a two-bedroom apartment in the Ecuadorian capital is around $443 per month.
On average, the annual rent/price ratio maintains an upward trend, and it would require 18.6 years of renting to recoup the investment, according to the Plusvalía.
In Lima, the average rent for a two-bedroom apartment increased 0.4% in August to 2,739 sols per month ($693.68). So far this year, prices in the Peruvian capital have accumulated an increase of 3.4%.
According to real estate platform Urbania, the annual yield on a rental is 4.66%, and it would take 21.5 years of renting to recover the investment of the purchase.
Buenos Aires ranks bottom in terms of rental costs, where the rent for a two-room apartment in August was around 74,557 pesos per month ($507.69), but to August prices had increased by 59%, a few points above inflation (55%).
The rent/price ratio decreases in Argentina as a consequence of the peso depreciation, and the annual yield is 3.69%, according to real estate portal ZonaProp. As a result, the owner of a rental property needs 27.1 years to recoup their investment.