Housing Prices in Unregulated Markets: Study on Verticalised Dwellings in Santiago de Chile

Abstract

Chile faces a housing affordability crisis, given that most of the population is unable to secure a house. While housing prices between 2008 and 2019 increased by 63.96%, wages only increased by 21.85%. This article presented an analysis of the housing price configuration for the main borough in the country—Santiago. The assessment focused on verticalised housing constructed between 2015 and 2019. The article developed an exploratory study on the price of housing in Santiago to generate a diagnosis to identify the role played by expectations of profitability when configuring price. Based on the information generated, we sought to contribute to the discussion on public policies that advance the development of affordable housing in central boroughs with high urban value, as is the case for Santiago’s borough of Greater Santiago. We hypothesised that profit expectation of real estate developers plays a key role in the housing prices, and an adjustment in the profit ratios might increase the affordability while keeping the housing market above profitable rates. This research addressed the lack of data transparency in the Chilean housing market with archival research, reconstructing costs and earnings from projects based on official registrations of transactions at the borough level. In Chile, the access to investment costs, land values, yields, and house price formation are not publicly available, even though these factors imply that many households are facing severe difficulties in paying for and accessing decent housing.

Property rights and market behavior in thelow‐incomehousing sector: Evidence from Chile

“…However, there is evidence indicating that these policy changes have not necessarily led to better housing locations for vulnerable beneficiaries (Gil, 2019; Razmilic, 2010). The dramatic increase of housing prices in recent years in Santiago seem to be an important factor hindering the effectiveness of housing subsidy programs in the country (Matus et al, 2020; Vergara‐Perucich & Aguirre‐Nuñez, 2020). The rise of the number of informal settlements in Chile in the past decades described above seem to be a relevant indicator suggesting that Chile's housing policy is not being able to respond adequately to the demand for adequate and affordable housing.…”

Precios y financierización: evidencia empírica en mercado de la vivienda del Gran Santiago

“…Sobre estas representaciones financieras en el espacio construido se elaboró un estudio en la comuna de Santiago Centro para el eje de Avenida Santa Isabel, el cual muestra que los vecinos del sector difícilmente pueden pagar los precios de la vivienda y que dichos valores estarían reservados para los deciles de más altos ingresos. Esto indicaría que las viviendas en esos barrios son más rentables como inversión que otros instrumentos financieros, como las acciones de la bolsa de valores (Vergara-Perucich y Aguirre Nuñez, 2019a, 2019b.…”

Exploring the Contradiction in the Ethos of Urban Practitioners under Neoliberalism: A Case Study of Housing Production in Chile

“…However, as, under neoliberalism, the state transformed its goals to facilitate the role of real estate development and oriented urban policy to ensure the profitability of urban development businesses, both types of urban practitioners are chasing the same goals: economic efficiency and profit. This is the case in Chile, where, since 1979, the state has embraced the idea of leaving the role of shaping urban spaces to the market, dismantling urban planning, and working through a subsidiary scheme in which the provider of urban products is always a private agent for urban development (Cociña 2016; Daher 1990; Donoso and Sabatini 1980; Hidalgo Dattwyler, Bilbao, and Rivas 2016; López-Morales 2009; Smart and Burgos 2018; Vergara-Perucich and Aguirre-Nuñez 2019).…”