Real estate in Paraguay: low prices, high return and lower taxes attract more Argentines

RIO DE JANEIRO, BRAZIL – The Argentine real estate market is undergoing one of the worst crises in its history. The rent law, the economic crisis, the lack of mortgage loans and the pandemic have become an explosive cocktail with no solution in sight.

In this context, more and more investors are turning to foreign markets. Asunción in Paraguay is currently attracting investors with a return of up to 11%. “Even during the pandemic, the number of transactions by Argentines continued to increase,” explained the neighboring country.

The main attraction is the low prices and the return on investment achieved, especially in the most exclusive areas of Asunción.

“While the profitability in Uruguay and Miami averages 6%, in Paraguay it’s between 9% and 11% and in the case of seasonal rentals these figures may reach 14% return,” explained Alfredo Rilla, Director and Co-Founder of Petra Urbana, a real estate developer in Asunción.

The Argentine public is vital to the Paraguayan real estate market. “Some 60% of our clients are Argentines, the remaining 40% are Paraguayans,” explains the expert who has 11 buildings, 6 of which have already been completed.

Currently the value per m2 in Asunción is the lowest in South America with an average price of US$1,300 per m2. “Today we are marketing a 30 m2 studio on the 28th floor at US$54,000, a two-room apartment for US$62,000 and a three-room apartment for a price of US$110,000. In a 170-meter tower, the tallest building in the capital,” Rilla adds.

The main public focused on Paraguay is the average investor. “It’s the Argentines who are tired of paying taxes. Here in Paraguay they pay taxes, but at a lower rate. In the case of VAT, it is 10%, a similar figure in the case of Tax on Income,” he points out.

Opportunities: how to invest in properties with only US$10.000

Despite travel restrictions due to the pandemic, demand remained stable throughout last year. “Some 50% of my clients do not know Paraguay and do not even think about traveling in the short term, they decide to buy as an investment to rent the property online from home,” he points out.

The average rental term for a property is between 15 and 20 days. However, there are many who buy on plan in order to sell the property later and also make a profit.

“When the work is finished after 24 or 30 months, investors can sell the property with an immediate appreciation of 15 or 20% on the recently finished unit,” says Guillermo Giavedoni, owner of Giavedoni Propiedades with investments in Paraguay.

Why Asunción became popular among property investors in recent years

Argentines are looking for a stable market and Paraguay is macroeconomically stable, despite the political noises. Moreover, being close is also a plus. The rate of return on a low investment is another key point,” said Gonzalo Faccas, Managing Partner of Eydisa, a developer and member of the Board of Directors of the Paraguayan Chamber of Real Estate Developers (CAPADEI).

“There is great interest from Argentine investors. Today 50% of our portfolio is Argentine. As flights are reactivated and health protocols are relaxed, people are coming to the country to invest. Although we had many inquiries during the pandemic, many did not materialize because some investors want to see the product at the time of deciding to buy,” Faccas said.

Although the pandemic context has led the home-office to gain prominence almost everywhere in the world, investing in offices in Paraguay continues to be good business.

“The corporate office market has a net annual return of 7% in dollars and is the main investment we offer Argentines because it involves less interaction with the tenant with long-term contracts with low default on payments,” Faccas indicated.

“As Paraguay has a very stable economy, these contracts are fulfilled and remain for life. In addition to that there is capital gain, the value of the real estate, but there you have to take into account the lease,” he emphasizes.

In spite of the pandemic, the occupation of offices is very high in the neighboring country because many companies decided to alternate the on-site model with remote work. “The value of land has reached record levels,” he said.