The Impact of the Rising Dollar on the Paraguayan Real Estate Market

The recent rise of the dollar in Paraguay, which surpassed the 8,000 pesos per dollar barrier in the first quarter of 2025, has generated significant implications for the local real estate market. This sustained appreciation of the dollar, despite interventions by the Central Bank of Paraguay (BCP), is redefining the dynamics for both local buyers and foreign investors.

According to current data, most Latin American currencies are expected to depreciate against the dollar from the beginning of 2025. The Brazilian real and Chilean peso are down 7.1%, while the Colombian peso is down 6.2%, and the Uruguayan peso is down 4.4%. The Peruvian sol and Mexican peso are also down 3.1% and 3.4%, respectively. In contrast, the Argentine peso, both in its official and CCL versions, is up 3.8% and 8.9%, respectively. Internationally, the euro and pound sterling are down 3.9% and 3.0%, while the Japanese yen and dollar index are down 4.2% and 3.6%.

The BCP has attempted to contain the exchange rate escalation by selling or injecting foreign currency totaling USD 1.549 billion in 2024, and USD 201 million in the first two months of 2025 alone. It has also announced that it will continue its presence in the foreign exchange market with daily sales of USD 15 million starting March 27, 2025. Despite these efforts, the rising dollar continues to directly impact a real estate market where most properties are priced and transacted in dollars.

The most immediate impact of the rising dollar is the increased cost of housing for local buyers, whose income and savings are denominated in guaraníes. Since most properties are priced in dollars, the cost of purchasing has skyrocketed in guaraníes, making it difficult for local buyers to access properties. This situation also directly affects those seeking financing for home purchases, as mortgage payments denominated in dollars become more expensive in guaraníes. Even when mortgage loans are granted in local currency, the exchange rate fluctuation increases the final amount payable for those who must cover commitments denominated in dollars. This situation also affects the down payments that buyers must put together to complete the purchase, as the rising exchange rate makes accumulating the capital necessary to acquire properties more expensive.

The rental market reflects this dynamic, as most residential and commercial rents are priced in dollars. This reality means that local tenants now face higher costs to maintain their leases, creating additional economic pressure for those who rely on income in guaraníes. This situation could lead to a migration to cheaper properties or to peripheral areas, which in turn could increase demand for properties with rents denominated in guaraníes, affecting profitability for owners who have chosen to maintain their contracts in local currency.

The secondary market also faces significant risks in this new context. The decline in local purchasing power and the rising price of properties in dollar terms could slow property turnover in the secondary market. This could lead to a buildup of inventory and affect resale dynamics, reducing market liquidity and lengthening time to market.

For real estate developers, the impact of the rising dollar is less drastic, given that most projects are priced and marketed in dollars. Although developers do not face a direct impact on dollar pricing, the ability of local buyers to acquire properties may significantly decrease, which could slow sales and increase the time it takes to fill available units. This situation is leading some developers to adopt more conservative approaches when launching new projects, prioritizing financial viability and risk diversification in an environment marked by currency volatility.

The Paraguayan market remains highly attractive for investors who manage capital in dollars. Since property prices remain stable in dollars, these investors do not face the same impact as local buyers and can benefit from the stability of their asset values. The ability to maintain their investments in dollars allows them to protect their capital from the depreciation of the guaraní and ensure stable income through rental contracts in dollars. Furthermore, in a regional context where several Latin American countries face high inflation rates and a constant devaluation of their currencies against the dollar, Paraguay is positioned as a safe option for safeguarding capital. The dollarized real estate market acts as a shield against loss of value, allowing investors to preserve their assets and generate attractive returns in a volatile economic environment. This combination of exchange rate stability and investment opportunities positions the Paraguayan real estate sector as a solid alternative for those seeking to protect their capital in a context of economic uncertainty.

In this context, the key to mitigating risks and maintaining profitability lies in the ability of developers, real estate agents, and investors to proactively adjust their strategies. The flexibility to offer financing in guaraníes, adapt pre-sale models, and diversify property portfolios will be critical to respond to a changing environment. At the same time, property owners will need to carefully evaluate whether to continue pricing in dollars or adjust their contracts to appeal to a broader segment of the local market.

The Paraguayan real estate market is at a crossroads. While the strong dollar represents significant obstacles for local buyers and tenants, it also offers strategic opportunities for investors seeking to position themselves in an emerging market or to safeguard capital and protect it from devaluation. Developers' ability to adapt their sales, financing, and pre-sale strategies will be key to maintaining market dynamism in this new economic context. The current outlook demands greater strategic planning and a differentiated approach to serve both local buyers and foreign investors. The balance between offering viable options in guaraníes for the local market and keeping projects attractive to dollar-denominated investors will be crucial to ensuring the stability and growth of the real estate sector in Paraguay in the coming years.