In Chile, rental housing has gained prominence as a housing solution, especially in dense urban areas such as Santiago. In recent years, the residential rental market has experienced remarkable growth, driven by economic, demographic and even regulatory factors. The sustained increase in housing prices, the rise in mortgage interest rates and higher credit requirements have pushed many families to opt for renting as a housing solution.

In Santiago, the phenomenon has become especially visible. Today we see greater urban density, internal and foreign migration, and changes in lifestyles (smaller households, labor flexibility, search for central locations). All this has generated a growing demand for rental housing, particularly in multifamily formats (professionalized rental).

Source: Colliers

The shift to leasing is not only due to the impossibility of buying, but also to a cultural and priority transformation:

• Restrictions on access to creditThe higher footing requirements and shorter repayment terms have left many households out of the purchase market, although 30-year loans are already making a comeback.
• Opportunity costFor certain segments, maintaining liquidity and investing may be more attractive than tying up capital in real estate.
• Labor mobilityThe need to change city, municipality or even country for professional opportunities leads to shorter and more flexible contracts.
• Family changeIncrease in single-person households, young childless couples, and older adults seeking to reduce maintenance responsibilities.
• Location and servicesLeasing allows access to central areas or areas with better services at a lower monthly cost than a mortgage loan.
• Preference for experiencesa trend that is especially marked among young people, who prioritize travel, education or entrepreneurship over buying a home.

Although in Chile 26.2% of households rent, only around 5% of this market corresponds to projects under the multifamily model, which reflects a still incipient participation. In contrast, in the United States, the multifamily model accounts for about 47% (National Multifamily Housing Council) of leased housing, demonstrating the ample growth potential of this asset class in our country. Currently, the Chilean multifamily supply is mostly concentrated in the middle segment, so the upper-middle segment presents a relevant opportunity for its development and consolidation.

The American model is characterized by:

• The owners are institutional (funds, insurance companies, REITs).
• Professional management is in place, allowing economies of scale.
• Services and amenities as a differentiating factor.
• Belonging.
• Flexible contracts and digitized processes.

Multifamily assets in Chile, according to the latest market reports, show cap rates in the range of 5.0% to 6.0% in high demand areas, with variations according to location, occupancy level and asset quality. Compared to other real estate asset classes, multifamily offers:

• Greater resilience in adverse economic cycles, so it is preferred to purchase.
• Stable cash flows and high tenant diversification.
• Potential for capital appreciation in developing areas.

Will this trend continue to grow?

Current conditions suggest that the residential rental market will continue to expand in Chile:

• Financial factors: Difficulties in accessing mortgage credit and still high rates.
• Social factors: labor mobility, changes in household size, preference for flexibility.
• Investment factors: search for stable and defensive assets by institutional investors.
• International context: experiences such as the U.S., Germany or Australia show that rental penetration can grow substantially without implying a drop in quality of life, provided that the market is well regulated and managed.

Although Chile is still far from the leasing levels observed in developed economies, we expect that conditions will be right for continued investment.

Francisco Muñoz

Family Office Solutions