Propietarios vendedores de Activos Inmobiliarios SV

14/12/2024

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14/08/2024

SYSTEMS THINKING FOR THE REAL ESTATE SYSTEM

Today we are continuing to start the El Salvador Real Estate Lab Laboratorio del Sistema Inmobiliario SV . On August 2nd Luis Dominguez Luis Ernesto Dominguez Magaña founder of the CCIL Creative Class & Intelligentsia Lab registered to the offering on the u-school for Transformation (by Presencing Institute Presencing Institute ) : u-lab 0x . Theory U is an awareness-based method for the transformation of self and system that blends systems thinking, innovation, and leading change--from the viewpoint of an evolving human consciousness. The short course will introduces key concepts in Theory U including:

The U framework.
The essence of systems thinking and systems change.
The choice we face between Presencing and Absencing.
How we can lead through the quality of our listening and attention.

The image is from a video where Otto Scharmer Otto Scharmer explains the Essence of Systems Thinking: In many cases, we know what needs to be done to address the crises we are facing but we don’t know how to make it happen. The video delves about how can we bridge this knowing-doing gap? Awareness-based systems change provides an approach that activates our individual and collective agency and helps us to sense and actualize the emerging future.https://youtu.be/zjeDGG1VdfE?si=5OYtFzO6hwli4l5O

We are looking at the learning module content.

Because of the new migration of expats from different parts of the world to El Salvador, we have chosen to analyze the Real Estate System and the Investmet House Market of the San Salvador Metropolitan Area, that includes the coastal region of Costa del Balsamo where many of this investments are coming to and gentrification is taking place and where a social divide is beeing created between locals and foreigners, appart from the environmental impact this growth is causing.

We have taken a couple of years to create an artificial simulator of the Real Estate System and have identified the variables of each part of the system:

A/SPACE MARKET
A1) Supply side of the Space Market: Space Landlords. Arrendantes de Espacios SV
A.1.1.Current Inventory of Physical Spaces for Lease.
A.1.2.Current Rental Prices.
A.1.3.Forecasts of supply/Inventory.
A.1.4.Forecast of Rental Prices.

A2) Demand side of the Space Market:Space Tenants. Inquilinos de Espacios SV
A.2.1.Occupancy Levels.
A.2.2.Demand for space use.
A.2.3.Forecasts of occupancy levels.

B/ASSET MARKET

B3) Supply side of the Asset Market: Real Estate Asset Sellers Propietarios vendedores de Activos Inmobiliarios SV
B.3.1.General Forecasts on Cash Flows of Real Estate Assets and their effect on future asset values or selling prices (Property Market Value)
B.3.2.Increase or decrease in operating cash flows of assets due to increases or decreases in rental prices and occupancy rates.
B.3.4.Increase or decrease in asset selling prices due to increases or decreases in capitalization rates.
B.3.5.Owners' ability to regulate the flow of financial capital into the real estate development industry.

B4) Demand side of the Asset Market: Real Estate Asset Buyers (Investors Buying). Inversionistas compradores de Activos Inmobiliarios SV
B.4.1.Information on market capitalization rates required by real estate asset buyers in the asset market.
B.4.2.Information on investors' desires and perceptions regarding the risks and returns of real estate assets and their effects on capitalization rates. (desire for returns and perceived risks)

C.DEVELOPMENT INDUSTRY
C5) Real Estate Developers: El Desarrollador Inmobiliario SV
C.5.1.Forecasts of market values - future selling prices - of assets under development (three years).
C.5.2.Current development costs and three-year forecasts, including construction costs and land costs and their opportunity value (including acquisition costs).
C.5.3.Information regarding expected profits or earnings by Developers.
C.5.4.Forecasts of future construction or ex*****on times.
C.5.5.Number of new spaces being started (construction starts).
C.5.6.Number of new spaces that have completed construction (construction completions).
C.5.7.Spaces pre-leased before completion, demolitions, conversion of old structures, construction of new buildings, and completed "net" construction.
C.5.8.Is development profitable?

EXOGENOUS SYSTEMS TO THE REAL ESTATE SYSTEM
D.NATIONAL AND LOCAL ECONOMIES El Economista Urbano SV
D6) Economy
D.6.1.Perspectives on the Salvadoran National and Local Economies/Macroeconomies.
D.6.2.Causes within the National and Local Economies that produce demand for certain quantities of use of physical spaces of various types, as a function of the cost (rental price) of such spaces, by Tenants in El Salvador, within the space market of the Real Estate System.
D.6.3.Forecasts of macroeconomic factors such as interest rates and inflation.

E.NATIONAL AND INTERNATIONAL CAPITAL MARKETS Expertos en Mercados de Capitales e Inversiones Inmobiliarias SV
E7) Capital Markets and Real Estate Investments:
E.7.1.Investors' desires and perceptions regarding risks and returns of real estate assets compared to other types of investment available in the capital market and their effect on cap rates.
E.7.2.Availability of debt or other types of liquidity.
E.7.3.Benchmarking of asset returns, long-term interest rates, or risk-free rates and their effect on cap rates.
E.7.4.Considerations on expanded national and international capital markets: Asset Market and Money Market.

13/08/2024

Data Summary

The provided data analyzes the El Salvador real estate market, focusing on property sales, pricing trends, and potential future performance. In 2023, there were 121,000 property sales, a 100% increase from the 60,500 transactions recorded in 2022. This surge in activity suggests a buoyant real estate market.

An average city center apartment in 2023 had a median price per square meter of $1553.48, totaling $140,213.20 for a 90 square meter unit. Based on a 5.6% average forward price growth, the estimated price for a similar apartment in 2024 is $148,497.94. A more conservative estimate using a median forward price growth of 5% yields a projected price of $147,224.06.

Outside the city center, the average apartment price in 2023 was $92,082.60 for a 90 square meter unit priced at $1023.14 per square meter. Projections for 2024 indicate potential prices of $97,516.10 and $96,687.23 based on average and median forward price growth rates, respectively.

The data suggests a high probability (79.4%) of price growth in both city center and outside city center properties. Additionally, historical data indicates a 90.1% likelihood of price growth in similar market conditions.

The average forward price growth rate is 5.6%, while the median forward price growth is 5.0%. These figures provide insights into potential price appreciation in the coming year.

12/08/2024

12/08/2024

table showing the average Construction IVAE, median selling prices, and average capitalization rates for residential properties in the city of San Salvador from 2018 to 2023, with quarterly data.

2019: Average Construction IVAE: 26.52; Selling Prices: Stable/Slight Increase; Capitalization Rates: Stable/Slight Decrease.
2020: Average Construction IVAE: 3.99; Selling Prices: Decrease; Capitalization Rates: Increase.
2021: Average Construction IVAE: 10.80; Selling Prices: Increase; Capitalization Rates: Decrease.
2022: Average Construction IVAE: 25.40; Selling Prices: Increase; Capitalization Rates: Increase (potential for reversal).
2023: Average Construction IVAE: 47.90; Selling Prices: Increase; Capitalization Rates: Increase.
2024 (Q1): Average Construction IVAE: 16.50; Selling Prices: Potential Stabilization/Decrease; Capitalization Rates: Potential Increase.

10/08/2024

These data are based on 134 entries in the past 18 months from 20 different contributors.
Last update: July 2024
About Property Value and Investment Indexes
Note that there is no standard formula to calculate property price indexes. Our formulas differ from Case-Shiller Index, UK Housing Price Index, etc.
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General forecasts about cash flows from real estate assets and their effect on the future values of the assets or sale prices (Market Value of Property).

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Price to Income Ratio is a fundamental measure for apartment purchase affordability, where a lower ratio indicates better affordability. It is typically calculated as the ratio of MEDIAN APARTMENT PRICES to MEDIAN FAMILIAL DISPOSABLE INCOME , expressed as years of income (although variations are used also elsewhere).
Our formula assumes and uses:
net disposable family income, as defined as 1.5 * the average net salary (50% is the assumed percentage of women in the workforce)
MEDIAN APARTMENT SIZE IS 90 square meters
price per square meter (the formula uses) is the average price of square meter in the city center and outside of the city center
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Mortgage as Percentage of Income is a ratio of the actual monthly cost of the mortgage to take-home family income (lower is better). The average monthly salary is used to estimate family income. It assumes a 100% mortgage is taken on 20 years for the house(or apt) of 90 square meters which price per square meter is the average of prices in the city center and outside of the city center.
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Loan Affordability Index is an inverse of mortgage as percentage of income. The used formula is : (100 / mortgage as percentage of income) (higher is better).
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Price to Rent Ratio-City Centre: 11.48

Price to Rent Ratio-Outside of Centre: 8.99

Price to Rent Ratio is the average cost of ownership divided by the received rent income (if buying to let) or the estimated rent that would be paid if renting (if buying to reside). 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. Our formula to estimate rent per square meter assumes 1 bedroom apt has 50 square meters and 3 bedroom apartment has 110 square meters. It doesn't take into account taxes or maintenance fees.

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Gross Rental Yield (City Centre): 8.71%
Gross Rental Yield (Outside of Centre): 11.13%

Gross Rental Yield is the total yearly gross rent divided by the house price (expressed in percentages). Higher is better.
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10/08/2024

General forecasts about cash flows from real estate assets and their effect on the future values of the assets or sale prices (Market Value of Property).

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These data are based on 134 entries in the past 18 months from 20 different contributors.
Last update: July 2024

Property Prices in El Salvador

median apartment size is 90 square meters

1 bedroom apt has 50 square meters and 3 bedroom apartment has 110 square meters

RENT PER MONTH

1 bedroom in city centre $690.47 per month/ $13.80 per sq mt p month

1 bedroom outside of centre $579.39 per month/$11.58 per sq mt p month

3 bedroom in city centre $962.31 per month/$8.74 per sq mt p month

3 bedroom outside of centre $812.87 per month/$7.38 per sq mt p month

08/08/2024

Pronósticos Generales sobre Flujos de Efectivo de Activos Inmobiliarios y su efecto en los valores futuros de los activos o precios de venta (Valor de Mercado de Propiedad).

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General forecasts about cash flows from real estate assets and their effect on the future values of the assets or sale prices (Market Value of Property).

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Property Prices in El Salvador

These data are based on 134 entries in the past 18 months from 20 different contributors.
Last update: July 2024

median apartment size is 90 square meters

1 bedroom apartment size is 50 square meters

3 bedroom apartment has 110 square meters

Price per square meter to buy apartment in city centre $1553.48

Price per square meter to buy apatment oustside of centre $1023.14

07/07/2024

Transaction volume

Junio julio 2024

Solo en 2023 el centro nacional de registro cnr reporto 121,000 registros de compraventa de inmuebles,tanto usados como nuevos,un dato que según el titular de la institución,Camilo trigueros,representa el doble de las transacciones que se hacian en 2022. Significa que hay mucha plata transandose en el mercado. Eso hace sentido con un boom de bienes raices. También hay una revalorización de la vivienda dijo a el economista.

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June July 2024

Just in 2023, the National Registry Center (CNR) reported 121,000 property sales records, both used and new, a figure that according to the head of the institution, Camilo Trigueros, represents double the transactions that were made in 2022. This means that there is a lot of money being transacted in the market. That makes sense with a real estate boom. There is also a revaluation of housing, he told El Economista.

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Transaction Volume Doubled: Real estate transactions in El Salvador doubled from 2022 to 2023 (121,000 in 2023 vs. 60,500 in 2022). This translates to a 100% increase in transaction volume.
Looking at Exhibit 7: Since the transaction volume increased (100%), we can reference the section for "Volume Rising."

Here's what the Exhibit Suggests:

Average Forward Price Growth: 5.6%
Median Forward Price Growth: 5.0%
Probability of Price Growth Over Following Year: 79.4%
Percent of Time with Price Growth Over Following Year: 90.1%
Important Caveats:

Exhibit Limitations: The exhibit provides historical data and potential future trends based on that data. It's not a guaranteed prediction.
Market Specificity: The exhibit might not perfectly reflect the specific market dynamics of El Salvador.
Other Factors: Price changes can be influenced by various factors beyond transaction volume, such as interest rates, economic conditions, and local supply and demand.
Practical Example - Apartment Price Changes:

Scenario:

City Center Apartment (2023): Median price per square meter = $1553.48, Area = 90 sq m. = $140,213.20

Transaction volume doubled in 2023 compared to 2022.
Possible Price Changes in 2024 (Based on Exhibit 7):

Average Forward Price Growth (5.6%): New Price = $1553.48 * (1 + 0.056) = $1638.24= $148,497.94

Median Forward Price Growth (5%): New Price = $1553.48 * (1 + 0.05) = $1631.21 = $147,224.06

Based on the given data and the insights from Exhibit 7, we can estimate the potential price of a city center apartment in 2024:

2023 Price: $140,213.20
2024 Price (Average Forward Price Growth): $148,497.94
2024 Price (Median Forward Price Growth): $147,224.06

Calculating Apartment Price for Outside the City Center
Given Data:

Median apartment size outside the city center: 90 square meters
Price per square meter outside the city center: $1023.14
Transaction volume doubled in 2023 compared to 2022
Calculations:

Calculate 2023 Apartment Price:

Price = Square Meters * Price per Square Meter
Price = 90 sq m * $1023.14/sq m = $92,082.60
Calculate 2024 Apartment Price (Average Forward Price Growth):

Price Growth = 5.6% (from Exhibit 7)
2024 Price = 2023 Price * (1 + Price Growth)
2024 Price = $92,082.60 * (1 + 0.056) = $97,516.10
Calculate 2024 Apartment Price (Median Forward Price Growth):

Price Growth = 5% (from Exhibit 7)
2024 Price = 2023 Price * (1 + Price Growth)
2024 Price = $92,082.60 * (1 + 0.05) = $96,687.23
Summary:

2023 Apartment Price: $92,082.60
2024 Apartment Price (Average Forward Price Growth): $97,516.10
2024 Apartment Price (Median Forward Price Growth): $96,687.23

Probability and Percent of Time:

Probability of Price Growth (79.4%): This suggests there's a high chance (almost 8 out of 10) that property prices in the city center will increase in 2024.
Percent of Time with Price Growth (90.1%): Historically, based on the data used in the exhibit, there's a 90.1% chance that property prices in similar situations (doubling of transaction volume) have experienced price growth in the following year.

17/06/2024

Aqui podemos ver como a actuado la disponibilidad de capital en el mercado de activos, a favor de los propietarios que quieren vender o que venden sus activos. Les han pagado mayores precios, osea que les ha disminuido su tasa de capitalizacion, a pesar que los los ingresos brutos por alquileres no han aumentado. Esto es totalmente a favor del propietario de activo que quiere vender o vende. Pero no es favorable para el comprador.

En terminos simples la tasa de capitalizacion a tenido grandes aumentos debido a la disponibilidad de capital para la compra de activos, esto no creo que venga del lado de la deuda de parte de Bancos sino es mas bien equity de parte de extranjeros y salvadorenos que viven en EUA..

Pero ha sido favorable para los propietarios de inmuebles que venden.