The fight of the construction sector in Chile 

Entel tower construction works, 127mt height, Santiago de Chile, 1974, source:

The crisis hitting the real estate industry in Chile has marked the largest economic downturn in the country. There is an overstock of 25,000 newly finished units calculating in 2 and a half years for sale because the speed of sale is very low.

According to the Central Bank, the Monthly Economic Activity Index (Imacec) for November 2023 grew by 1.2% compared to 2022. However, the Chilean Chamber of Construction indicates that financing for new investment projects remains restrictive according to the results of the third-quarter survey on bank loans.

Investment in Construction

The outlook for the real estate sector in 2024 is not encouraging, with estimates suggesting the potential loss of around 300,000 jobs related to construction and the real estate market. 

The weakness of the demand for access to mortgage loans that further accentuates this crisis from the real estate point of view. If they can’t access a mortgage loan and the stock is increasing.

This situation is primarily due to problems in the sales process, such as excess stock in some districts and sluggishness in closing sales, exacerbated by an increase in mortgage loans, among other factors.

Pressure is being held on the government to take action in response to this crisis. The sector faces instability with negative or zero performances, reflected in an increase in unemployment in the last month of 2023 due to a shortage of new projects developed by the private sector. There was a 4% setback, with a 3.2% decline in infrastructure and a -5.6% drop in housing.

On other hand, investment in housing fell by 5.6% due to financial restrictions on granting loans to households. Private infrastructure was a 7.7% decrease, the largest drop since 2009. Furthermore, the inflation detected in 2023 complicated the situation, along with slow budget execution that delayed projects.

There is a serious problem. It is estimated that more than 40,000 jobs could be lost, underscoring the urgency of a cross-party agreement to address the crisis. A further 0.4% decline is expected in the first half of 2024, accompanied by an increase in inflation in a context of political instability. Regulatory action is necessary in response to this scenario.

In 2020, a crisis shook the Chilean economy, making it one of the most impactful in its history for Latin America and the Caribbean. The emergence of COVID-19 created a new fiscal landscape for the central government, with a 6% decline in the country’s GDP. Uncertainty about possible COVID-19 resurgences and new violent social protests has delayed investment decisions.

Some encouraging news are focusing with bank credit conditions are linked to the international economic situation, is a possibly scenario to predict that the increase in rates could begin to yield a little.

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