Investing in Apartments: the projections for this 2021

According to the 2020 Macroeconomics and Construction Report, after the good performance of the real estate market in 2018 and the first three quarters of 2019, the commercialization of homes nationwide suffered for nine months one of the largest contractions in its history.

However, since the last week of July, when the lack of focus began, there have been increases in activity in the sector, and during the third quarter of last year, home sales registered a significant increase of 79%.

Investing in apartments: the projections for 2021 that you should know

How is the sale of apartments projected for this year? If we want to take advantage of our real estate investment, it is worth knowing the forecasts.

New tendencies

With regard to real estate demand, experts consider that one of the impacts of the pandemic is the decrease in interest in small apartments, which until the beginning of last year had a very good market share.

Units with areas of more than 100 m² increased their quarterly demand by 4.7%.

We can hope that the trend will continue, and that buyers will begin to privilege space, as well as other factors that became important after the pandemic: home office rooms, balconies, terraces, multipurpose and versatile rooms, etc.

It should be noted that the preference for large spaces (houses) began at the beginning of the pandemic. But hopefully people continue to prefer to invest in apartments because they are cheaper.

Other experts in the industry advise acquiring 1- or 2-bedroom units, in communes connected to the centre of Santiago. The decision, in the end, will depend on the in-depth analysis we can make of the market and the specific property.

Balance in housing prices, supply and demand

Although until September 2020 the sales figures were not encouraging, house prices did not budge. This is due to the lower supply that entered the market for the works paralysed during the quarantine.

In fact, the value of the square meter of the apartments went from 64.3 UF in October 2019 to 65.2 in October 2020.  However, a slowdown in price increases was also noted.

According to a report by Portal Inmobiliario, it went from growth rates of 5% at the end of last year, to 2.5% in the apartment market in the fourth quarter of 2020.

The lowest annual increase since 2017. Even so, price growth continues due to an increase in demand and supply, boosted by the accumulation of properties and the withdrawal of 10% of AFP.

This may balance the market and give investors bargaining power, making 2021 a very good year for the real estate market. That should again drive price increases to positive growth rates.

Greater increase in investment by real estate

On the other hand, real estate companies expect the industry to continue to rebound and 2021 to be a positive year.

Under this mentality, some companies plan to boost the offer by investing nearly 700 million dollars in the development of ongoing projects and new initiatives that contemplate the real estate demand of the post-covid buyer: multipurpose spaces, areas for teleworking, etc.

In general, we are beginning to see a recovery in the sector, and it is to be expected that growth dynamics will normalize during the year.

It is a good time to invest in apartments, but we must be cautious when doing so. At Rudn Enclave , we present you with a wide portfolio of options and we can advise you to make the best decision.

5 benefits of investing in Apartments

According to the MACh 55 Report, despite the crisis derived from the pandemic, the departments continue to concentrate most of the approved surface area, and since 2010, they have doubled their importance in the residential sector.

This phenomenon is linked to the growing densification of cities, but also to the demand of investors aware of the benefits of investing in properties of this type.

5 advantages of investing in apartments

But what can those who decide to invest in apartment units expect?

1. High profitability of investments in apartments in Chile

According to a recent study by Colliers International, investing in property is in our best interest because “it is a more convenient and reliable means of generating dividends”, even more than the stock market.

Although real estate profitability is similar to the IPSA of the stock market, it is much less variable and risky. That is, we can conclude that real estate investment is equal to a high probability of achieving good returns.

Speaking specifically of the departments in Chile, this indicator is usually high, especially in Santiago where, according to data from the Zoominmobiliario Price Index (IPZ), it is around 4.5%, but there are neighbourhoods that widely exceed this figure (higher than 8 %). 

2. Low probability of devaluation

It is one of the main benefits of investing in property.  These are not very vulnerable to the volatilities of the economy, and in Chile they are valued in Development Units (UF), which prevents the dynamics of inflation from affecting their value.

In fact, according to Dr. Francisco Castaneda, an economist and academic, in 10 years the price of homes rose 75%, while inflation only rose 35%.

In line with the above, it is good to invest in properties because they tend to generate capital gains over time, thus increasing their value while we use them to live or rent them to receive a fixed income.

3. Constant flow of money

We also want to invest in property because cash flow is one of the main sources of wealth from real estate assets. This is generated by paying rent (income) and expenses associated with the administration and maintenance costs of the property.

As we have already pointed out, in investments in apartments, these tend to have a high rental demand thanks to the benefits included in the buildings (common spaces, for example), which will generate income that is usually higher than administration costs. In this way, a positive cash flow is generated.

4. Increase in inheritable assets

As it is a fixed asset that tends to appreciate over time, it significantly increases our equity. In addition, we can inherit it to our successors, thus ensuring them a capital to improve their quality of life. 

5. The property pays for itself

If we finance the department with a mortgage loan, the profit in the real estate investment / profitability ratio will decrease. But we must bear in mind that, in practice, we can cover this debt with the same rental income.

When we finish paying the debt, we can even “divest” the asset and keep 100% of the capital gain. In Easy Investment we are sure that it is good to invest in properties, and we have a wide portfolio of excellent opportunities.

The best, we advise you throughout the process so that you participate in the real estate market with high chances of success.

Invest in Apartments for rent

There are many situations that can cause co-ownership of a home in which one of the parties wants to liquidate. When doubts arise in this regard, the best recommendation is to contact specialists in the field.

Rentalias offers the best advice on real estate, including investing in bare property and life annuities. Without a doubt, investing in apartments for rent is one of the most popular strategies when it comes to real estate investments.

In particular, renting an apartment for tourism purposes is an extremely attractive option for several reasons; for example, one of the main ones is that, despite the high supply, it is undeniable that the demand within the sector is usually abundant.

On the other hand, the fact that the demand for tourist apartments is seasonal offers certain drawbacks, which translate into significant challenges for homeowners: there is a tangible possibility that the property will be empty for several months and must be faced stiff competition to occupy the house as long as possible.

Investing in Apartments for rent: is it good business?

So is it a good idea to invest in apartments for rent? We can say that the profitability of the property will depend on various factors. We describe the most relevant below:

The first thing you should consider is that for a rental apartment to be profitable it has to be occupied for at least 60% of the year; this has been established by experts in the real estate field. So, if you meet a quota equal to or greater than this, you can say that investing in apartments for rent has been a good deal for you.

Homes for tourist use must anticipate the above and act, accordingly, doing everything possible to rent the home for as long as possible. The problem is that if we only have the holiday seasons to rent the property, it is very difficult to cover the established quota.

Therefore, one of the main recommendations that are given when you want to invest in tourist apartments is to look for a property that is located in spaces with attractive tourist activities available throughout the year.

The cultural, historical, sports, rural, urban and other spheres of a given geographical area that attract tourists not only in the summer, for example, but throughout the year should be considered.

Before buying, look at the competition.

After making the decision to invest in tourist apartments, it is essential to study in great detail the areas where the properties to be considered are located and, above all, who are the competitors that we will have to deal with.

Of course, it is a good idea to buy a property that is in a highly touristy area, but you should observe who your close neighbours are, because if you have to compete with large hotel chains or with other complexes that are deeply consolidated in the market, it is very likely that the profitability of your brand new tourist apartment is not what you would like.

And this brings us to the next very important point that must be considered: the management of the tourist apartment, because even a dream property, well located and with beautiful finishes, will be very difficult if it is not managed in the correct way.

How to manage tourist Apartments

The management of a tourist apartment can be done by the homeowner or by an outsider, and both scenarios have their pros and cons. However, it is important that you know that when a third party manages your tourist apartment they may have more or less participation, and that margin can be decided by you.

For example, there are companies that provide a more comprehensive service, through which they take care of absolutely everything related to the rental of your property: from the optimization of advertisements and the administration of dates, through the reception of the client, the delivery of keys, laundry services and claims management, until dismissal and review of the space after the client’s departure.

On the other hand, other managers will offer only the check-in service and tourist advice to clients; and others will only be in charge of managing the online presence of your vacation property.

Are you wondering how to manage tourist apartments independently? It is also a valid option, especially if you are not in high demand yet and if you have enough time to dedicate to organizing the dynamics.

In this sense, it is very important that you are aware that the most important thing for tourists is, of course, the experience you provide them; that’s what will make them come back and talk positively about you to other people.

So, if you decide to manage your own tourist apartment, never lose focus on the main objective: to generate a dream experience.