It’s no surprise that the rise in home and apartment prices has limited access to housing, and that it is becoming increasingly difficult to obtain a mortgage from financial institutions, given the larger loan amounts, interest rates, monthly payments, and minimum income requirements.

In order to measure how access to housing has been affected, we will consider a 55 m2 home and the average UF/m2 value in the metropolitan region for that size, while for the estimate of the required income, we will assume that the mortgage loan finances 80.0% of the property, over a 25-year term at the average rate at which mortgage loans have been financed, according to the Central Bank’s database. Finally, the mortgage payment should not exceed 25.0% of the minimum required income, so the salary must be at least four times the monthly mortgage payment.

First, from the first quarter of 2006 through the third quarter of 2023, the UF/m² value rose by 173.1%, from UF 27.12 to UF 74.05, which represents an increase from UF 1,492 to UF 4,073 for a 55.0 m² property.

In terms of the financial cost of mortgage loans, while the average interest rate has risen steadily from 2.17% in Q3 2019 to 4.35% in Q3 2023, it is also true that rates remained consistently above 4.0%, even exceeding 5.0%, between 2006 and Q1 2014. However, given that the impact of rising property values is greater, dividends and the minimum income required to qualify for housing have risen by 151.0%, from a dividend of UF 7.04 and minimum income of UF 28.18 in 1Q06 to a dividend of UF 17.68 and minimum income of UF 70.72 in 3Q23. When viewed in pesos, the difference is much greater, as the dividend and minimum rent were $126,265 and $505,061 in 1Q06 and $639,608 and $2,558,433 in 3Q23.

Finally, we used the INE data series showing the real increase in wages since 2016, which have risen by 10.19% from 1Q16 to 3Q23—far below the 36.07% increase in the UF/M2 value of properties and the 44.28% increase in dividends and the minimum income over the same period.

The gap between the rise in real wages and the increase in the minimum rent required gives us a clear indication of how access to housing has become more limited. Because of this, many people and families have had to choose to rent rather than buy, and in response to the increase in rental demand, markets such as the multifamily sector have experienced exponential growth in the country, expanding from fewer than 2,000 units in Q1 2016 to 23,384 apartments in 129 buildings in Q3 2023.

Ulises Hamasaki

Real Estate Portfolio Manager