Solid Economic Activity, Expanding Credit and Lower Inflationary Pressure: The Scenario Framing the Paraguay Real Estate Market at the Start of 2026

Indicators of activity, credit, inflation and monetary policy create a framework of growth and greater predictability for the Paraguayan real estate sector.

The end of 2025 presents a macroeconomic picture that confirms the continuation of an expansionary phase in the Paraguayan economy, with indicators of activity, consumption, and credit showing performance above the recent historical average. This context is particularly relevant for the real estate sector, which depends directly on both the economic cycle and the financial conditions and confidence of market participants.

Paraguay's Monthly Indicator of Economic Activity (IMAEP) registered a year-on-year expansion of 4.0% in November, a figure that remains positive even when excluding agriculture and binational entities, which saw growth of 2.9%. This growth was primarily driven by the services sector, the electricity and water component, and agricultural and livestock activity, while the manufacturing industry showed a slight slowdown. In cumulative terms, the IMAEP closed the year with a variation of 5.8%, consistent with an economy projected to end 2025 growing at around 6.0%.

For the real estate market, this dynamic has a clear interpretation: the sustained growth of the services sector, which concentrates urban employment, middle and upper incomes, and business activity, reinforces the structural demand for housing, offices, and commercial spaces, especially in Asunción and its metropolitan area. Economic expansion is not driven by a single engine, but rather by a diversified base, which reduces cyclical volatility and provides greater predictability for medium- and long-term investment decisions.

Meanwhile, the Business Turnover Estimator (BTE) showed a year-on-year increase of 6.3%, driven by strong sales of clothing, vehicles, chemical-pharmaceutical products, and household goods, among other sectors. With this result, the cumulative growth of the BTE reached 6.1% in 2025. This indicator, closely linked to private consumption and retail turnover, typically anticipates changes in the occupancy of retail spaces, warehouses, and logistics facilities, as well as a greater propensity among households to take on longer-term financial commitments, such as home purchases.

The evolution of the Consumer Confidence Index, which stood at 51.7 points in December, reinforces this interpretation. While not an exceptionally high level, it remains within a zone of moderate optimism, sufficient to support durable goods consumption and household investment decisions. For the real estate sector, confidence is a key input: it not only determines the rate of absorption of residential units, but also the depth of financing options and the acceptance of projects in the pre-construction phase.

One of the most relevant factors in the current scenario is the evolution of credit. In November, the outstanding balance of loans to the private sector grew 15.5% year-on-year, excluding exchange rate effects, driven by both loans in local currency, which increased 13.9%, and those granted in foreign currency, which grew 18.8%. This credit expansion is occurring in a context of active interest rates in local currency averaging 16.0%, while passive rates are around 6.3%.

From a real estate perspective, this credit growth has multiple implications. On the one hand, it improves access to mortgage financing for end buyers, especially in the middle and upper-middle segments. On the other, it expands the funding capacity of developers and builders, allowing them to structure larger-scale projects with longer terms and less reliance on equity. The combination of expanding credit and macroeconomic stability reduces the sector's systemic risk and fosters greater professionalization of investment strategies.

In terms of prices, inflation showed particularly benign behavior toward the end of the year. The Consumer Price Index registered a negative monthly variation of -0.3% in December, mainly influenced by the drop in prices for food, fuel, and durable goods. Year-on-year, headline inflation closed 2025 at 3.1%, while core inflation, excluding food and energy, stood at 2.3%. Inflation expectations remain anchored around 3.5% for both the next twelve months and the monetary policy horizon.

This environment of controlled inflation is especially relevant for the real estate sector. On the one hand, it helps preserve the purchasing power of incomes and households' ability to pay. On the other, it reduces uncertainty in construction costs, a critical factor in the financial viability of developments. While certain services continue to show upward adjustments, the moderation of goods inflation allows for more stable margin projections and longer-term contracts with less risk of mismatch.

Looking ahead to 2026, projections point to GDP growth of 4.2%, primarily driven by the expected strong performance of the service and manufacturing sectors. In this context, the Central Bank of Paraguay, through its Monetary Policy Committee, decided to reduce the monetary policy rate by 25 basis points, from 6.00% to 5.75% annually, maintaining a neutral stance.

This decision provides an additional incentive for financing without compromising price stability. For the real estate market, the reduction in the benchmark interest rate tends to gradually translate into higher lending rates, improving access to mortgage credit and lowering the financial cost of new projects. In a context of anchored inflation expectations and sustained growth, this adjustment reinforces a favorable scenario for real estate investment, although persistent challenges remain related to construction efficiency, the actual absorption of demand, and the quality of the product offered.

In summary, the Paraguayan real estate market begins 2026 operating within a consistent macroeconomic framework: expanding economic activity, dynamic credit, contained inflation, and a slightly expansionary monetary policy. While the external environment and sector-specific costs will continue to be variables to monitor, the overall picture remains favorable for the development, investment, and consolidation of projects, especially those aligned with effective demand and a realistic assessment of the economic cycle.