By Jony Díaz
Inflation is a phenomenon that affects every aspect of how we live as a society today, from our consumption habits to our aspirations and ability to achieve what we want. According to El Economista, inflation is defined as the generalized and sustained increase in the prices of goods and services over a sustained period of time, usually a year. This means that what you can buy today for 50 pesos will be impossible to buy in five years due to inflation.
During the pandemic, the real estate sector has experienced significant growth. Figures show that many people are investing in real estate, and the phrase "this is the best time to invest" is all the rage. But what does inflation really tell us about what's happening and what will happen in the coming months and years?
We decided to interview the President of the Association of Real Estate Agencies and Companies (AEI), Alberto Bogaert, about what is happening, and here are 4 points to consider:
- The real estate sector, both during and after the pandemic, never slowed down and, unlike other sectors, actually became quite dynamic. This was due to factors such as virtual transactions, which triggered many sales in pre-sale projects and those under construction, unlike completed projects, which were halted because in-person visits were impossible.
- The sector most impacted by inflation is currently construction, due to rising raw material and shipping costs. This directly affects the final sale price, which has increased by up to 30%. It's important to note that sales haven't stopped or slowed down, and a key factor has been that we're in a market of investor-oriented buyers, capable of understanding the reasons for the price increases and appreciating the quality of the properties being developed.
- According to the president of the AEI (Association of Real Estate Agents), the Central Bank of the Dominican Republic reported a 23.4% increase in the construction sector last year, and that there has also been an overall increase in supply. This leaves real estate agents with the task of being prepared to address objections, provide satisfactory and convincing explanations to potential clients in order to continue breaking sales records and further position the Dominican Republic as an attractive investment destination.
- Finally, Mr. Bogaert addresses the construction sector, sending them this message: “Currently, various representatives of the construction industry are presenting proposals to the government, seeking a genuine solution to this problem. The goal is for the authorities to intervene and halt these price increases until the entire international issue is regulated.”
Certainly, the Dominican Republic is responding in the best way possible to the crisis left by global inflation, but now we would also like to look at the Mexican market:
The real estate sector in Mexico
This market has not been immune to the negative effects of the pandemic and rising production costs. Inflation led to an increase of over 20% by November 2021, leaving the first quarters of 2022 with a likely rise in final retail prices.
Some points to consider regarding the effects of inflation on this market:
- Inflation will especially affect the sale price of new homes, which will boost the used home market, leaving the sector with a good balance between the two.
- Because the Bank of Mexico is adjusting to American measures, and the US is facing its highest inflation in the last 40 years, the attractive financing rates seen until the end of 2021 are at risk, projecting rates of up to double digits for 2022.
- Sales continue to rise, particularly in markets like Guadalajara, which has distinguished itself due to tourism and the development of vertical housing projects. Today, to remain relevant even with inflation, we must focus on aspects that were previously overlooked, such as the sustainability of our properties, the safety of the surrounding area, social and recreational spaces, and the ability to connect with the outside world. People are investing in real estate, and they are doing so in various locations abroad; it is important not to ignore the new opportunities the pandemic has presented to facilitate the decision-making process for our potential clients.
Inflation is a reality; adapting is our duty. As real estate agents, we must commit to the sector's growth and continue innovating and delivering quality service.
The author is:
Content manager at AlterEstate. Passionate about digital marketing, he specializes in traffic management for attracting and generating leads across various digital channels, as well as Business Administration (BBA). He aims to create impact through the implementation of agile, creative, and innovative strategies.
