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.
Highlights
In Chile, housing is legally considered a commodity and a good investment as it is a low-regulation market that is organised by real estate market agents, with housing subsidised by the state for lower-income households [1]
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 occurred for urban renewal subsidies, which were initially intended for the middle class, where the subsidy was capitalised by companies that sell housing units, obstructing direct benefits to buyers [3]
Summary
In Chile, housing is legally considered a commodity and a good investment as it is a low-regulation market that is organised by real estate market agents, with housing subsidised by the state for lower-income households [1]. There is strong evidence that demand-side subsidies for low-income housing projects have ended up increasing the price by contributing to inflation [2]. This occurred for urban renewal subsidies, which were initially intended for the middle class, where the subsidy was capitalised by companies that sell housing units, obstructing direct benefits to buyers [3]. The amount of available land would exceed the structural demand of 497,560 housing units, which is a very similar situation to the 1998 deficit of 497,012 units [6]. Since 2010, the real housing price index has risen by
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