Housing prices in unregulated markets: Study on verticalised dwellings in Santiago de Chile

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.