Real estate market analysis: American continent

There is a big difference between the real estate market of USA and Canada and the rest of the countries in the American continent. In these two countries the prices, the rents and the incomes are overall higher.

There are many people from other continents, who are thinking to buy properties in American continent for investments purpose or other purpose. Buying an apartment in America is not a simple process and it is important to take in consideration the most important objective and subjective factors during the decision-making. In addition, it is necessary to analyse the real estate market, before buying an apartment in America.
In this work we are going to analyse the real estate market in the American continent and to find in which countries the market is overvalued and in which is undervalued.

If we consider the price to income ratio, the most expensive country is Argentina, where are necessary 19 years to buy an apartment. Colombia is in the second place with 18.9 years, followed by Brazil with 18.7 years, Peru with 16 years and Uruguay with 14 years.

If we consider price to rent ratio of the city centre, the real estate market is overvalued in Argentina, Brazil, Uruguay, Chile, Canada, Colombia and Peru, so in these countries is better to rent than to buy an apartment. In Ecuador, Mexico, Guatemala, Dominican Republic and Bolivia is better to rent, but not always, because under certain circumstances buying is better. The only countries where the real estate market is undervalued are Costa Rica, Panama and United States, so in these countries buying an apartment is better than renting.

If we consider price to rent ratio outside the city centre, the real estate market is overvalued in Argentina, Brazil, Chile, Uruguay and Colombia, so in these countries is better to rent than to buy an apartment. In Ecuador, Canada, Peru, Mexico and Costa Rica is better to rent, but not always, because under certain circumstances buying is better. The only countries where the real estate market is undervalued are Dominican Republic, Bolivia, Guatemala, Panama and United States, so in these countries buying an apartment is better than renting.

If we consider the mortgage as percentage of income, the most expensive country is Argentia, where the mortgage payment is about 566.2% of the incomes. Colombia is in the second place with 253.3%, followed by Brazil with 219.8%, Dominican Republic with 194.7% and Peru with 186.9%. The less expensive countries are Bolivia with 94.2%, Canada with 53.3% and United States with 26.8%.

In America continent, there are many occasions to purchase an apartment at discount price when the real estate market is overvalued, but at the same it is necessary to be careful, because there are also many apartments at expensive price despite the real estate market is undervalued.

About the data used in this work

Real estate market analysis is made considering an apartment of 90 square meters which price per square meter is the average of price in the city centre and outside of city centre. The indicators used are:

  • Price to income ratio. It is calculated by dividing apartment price to median familial disposable income for a year. Lower value is better.
  • Price to rent ratio. It is calculated by dividing the apartment price to the received rent income or the estimated rent that would be paid if renting. Lower values suggest that it is better to buy rather than rent, and higher values suggest that it is better to rent rather than buy.
  • Mortgage as percentage of income. It is calculated by dividing the monthly cost of the mortgage to take-home family income. Lower value is better.

The data used in this work are provided by Numbeo and are relating to 2019.

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