Argentine Real Estate market to go down 50%

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nikad

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Despite what some real estate agencies say, the local market is frozen, there is a huge offer and nobody is buying, investors who bought properties to make quick buck are trying to get rid of what they bought.

There is an extra 50% of properties up for rental ( that couldn´t be sold ).

For those expats that are planning on staying here for the long run, this is good news and a good time to buy is closer than you think ( drops of +/- 50% )

Check these articles and post your thoughts.


http://www.cronista.com/notas/171592-los-inversores-extranjeros-abandonan-el-negocio-inmobiliario-argentino

http://economia.infobaeprofesional.com/notas/76415-Efecto-crisis-propietarios-evitan-vender-departamentos-y-oferta-de-alquileres-trepo-50.html

http://economia.infobaeprofesional.com/notas/76415-Efecto-crisis-propietarios-evitan-vender-departamentos-y-oferta-de-alquileres-trepo-50.html?cookie

http://www.infobae.com/contenidos/423226-100799-0-Generalizada-baja-los-precios-las-propiedades

http://www.ambito.com/noticia.asp?id=435395

http://www.lanacion.com.ar/nota.asp?nota_id=1080106

http://www.lanacion.com.ar/nota.asp?nota_id=1068640

nik
 

Sleuth

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I agree with Steve. I have read those articles, and nothing there indicated a 50% drop in prices. Most stated that premium properties will hold their values or only see a small drop, with other properties seeing a 20-25% drop at most.

It appears that there may be some room to negotiate slightly lower prices, which from what I understand has not happened all that frequently here.
 

steveinbsas

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nikad said:
Despite what some real estate agencies say, the local market is frozen, there is a huge offer and nobody is buying, investors who bought properties to make quick buck are trying to get rid of what they bought.

There is an extra 50% of properties up for rental ( that couldn´t be sold ).

For those expats that are planning on staying here for the long run, this is good news and a good time to buy is closer than you think ( drops of +/- 50% )


nik

An increase in listings is not the same thing as a 50% decline in sales or prices. There is also a big difference between "couldn't" and "haven't" been sold.

Those who think there will be a 50% drop in prices are lost in space. (Something clearly got lost in the translation.)

The percentage of sales in ratio to the number of listings is certainly down, but this does not mean that no properties are selling. I continue to see "vendio" signs on properties in Recoleta on a weekly basis (I watch for them).

I do agree with Nikad that this is a good time to buy, but I haven't seen massive price declines in general. Prices of property may actually remain momentarily "frozen" while prices of most other goods and services continue to increase at a much faster rate.

I suspect that a few who now list their properties may build in a +/-10% "drop zone" (if you get my drift). With few mortgages here, there is far less pressure to sell in haste. Nor has there been a significant real estate "bubble" in spite of what the ex-expat thinks. Even with an inflation rate pegged as high as 30% I have not see property prices increase at anywhere that level in the past two years, including Recoleta.

PS: My post "moved" because I deleted and re-posted it so the quote would appear in a quote window, so Sleuth's reply to this post now precedes it.
 

citygirl

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Not sure if we will see that kind of drop but I will say that my friend who developed condos here has been unable to sell the remaining 5 in the building. They have been sitting there unsold for the last 6 months & he is definitely becoming more flexible on the prices...
 
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steveinbsas

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citygirl said:
Not sure if we will see that kind of drop but I will say that my friend who developed condos here has been unable to sell the remaining 5 in the building. They have been sitting there unsold for the last 6 months & he is definitely becoming more flexible on the prices...
It would be interesting to know the location. That can make a big difference.

Also, new projects are always the highest priced by the square meter. For so many units to remain unsold in a finished building might indicate that the builder overestimated his target market. Even if he just finished, weren't the apartments offered for sale well over a year ago when the market was still pretty hot?

One new building around the corner from me recently sold all but the first floor apartment, but one glance at the design tells why: Its Spiderman's dream come true.
 

jp

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I'll happily buy if the pound recovers its value and the prices drop to more realistic levels. Not buying at the moment now, seems like prices are pretty much as high as they're likely to go.
 

Sleuth

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I have a friend who is starting a development project in Belgrano (close to the German embassy). It will be a high-end 19-story building with many Western style amenities (open kitchen, etc), gym, parking available, roof deck, security, etc. Construction is scheduled to begin May 2009 with completion scheduled for approximately 2 years from then.

The pre-construction prices are really good for that neightborhood. Units start at approximately 55 sq meters, with prices starting at around $2200/sq meter. A comparable building in that neighborhood, scheduled to open March 2009 is at $3400/sq meter. He is also offering discounts for full payment as well as 22 month payment plans without interest.

If anyone's interested, let me know and I can put you in touch with him.
 

steveinbsas

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jp said:
I'll happily buy if the pound recovers its value and the prices drop to more realistic levels. Not buying at the moment now, seems like prices are pretty much as high as they're likely to go.
Don't bet on it, especially with inflation.

That's like thinking Volkswagen Beetles will be priced "under $2000, again" (from an ad campaign from the 70's which I remember, damnit!).

Nonetheless, I do believe good values can be found if you shop very carefully.

Remember, real estate prices in Argentina are quoted in US dollars. The trillion dollar deficits projected for future US budgets may result in significant inflation in the US as well as additional upward pressure on real estate prices here (just to keep up with the inflation...just like the price of cheese).

It may not be such a bad idea to buy while you have the chance...if you've got the dinero.

Money in the brick usually beats money in the bank, at least in Argentina.
 

Stanexpat

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Nikad thanks for your post and the information you provided.

I don't think it should come as a shock that there is a slow-down in real estate there, the same thing is happening around the world. In general real estate has been overpriced and overvalued and is undergoing a much needed
correction.

In B.A. I would say prices were being supported until recently by several factors, one being a fairly large number of foreign investors, a strong rental market in part due to an increase in tourism, and an improving local economy due to the commodity price boom.

Due to the financial crisis the game has changed. Obviously foreigners are being hurt back home by falling real estate prices probably aren't going to rush out and buy more property there. The slowdown in tourism means people are having a harder time filling their temporary apartments, slower sales also means the supply of rental properties has increased creating more competition and lower prices. Purchase of property for investment purposes must now be evaluated assuming lower rents and higher vacancy rates. The end of the commodity boom for the time being means local incomes are down. Also for the locals their pesos are now worth less in dollars so affordability for the average Argentine has been definitely been affected.

How far things fall is pure guess work at this point. 50% seems like a lot but would be possible if the recession there and elsewhere is as severe as some people think it will be. In parts of the U.S. (i.e. California, Nevada, Florida, Arizona) prices are off up to 40% from their peaks 2 years ago. My guess in the most over-valued markets like California we could see values off 60-70% from the peak.

This process has been underway in the U.S. for a couple of years. In Argentina the correction is only just beginning.

Remember real estate valuations always come back to income to price ratios, and rent collected as a percent of value. By these measures prices in many parts of the world are out of whack and the process underway now will simply return them to historic relationships to income and rents.
 

steveinbsas

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Prices of real estate in California (along with the rest of the US) rose due to pressure on banks to make loans to unqualified buyers as well as mindless speculators thinking the sky was the limit. Returns as rents was not a consideration...compared to short term profit margins from "flipping" (resale) of the properties.

Nothing of the sort has happened in Buenos Aires, and I seriously doubt that it will.

Prices of apartments in BA are still very low compared to other world capitals.

To apply the "rule" that "real estate valuations always come back to income to price ratios, and rent collected as a percent of value" to real estate prices in Argentina ignores the reality of Argentine economics.

It is far safer here to invest in the brick, period.

The long term value of property here is not determined by rental income, but by the opportunity cost of owning versus renting, especially when inflation is great.

If I had rented for the past two years I would have already pissed away $24,000.

Nonetheless, my apartment has increased in value by (only) about 15% per year (at today's "lower" prices), but I am not complaining.

Do you think that the price of real estate or cheese in Argentina is going to decrease by 50% in the near future?

The point is that there never was a real estate "bubble" here like there was in the US.

In 1982 I sold a property in Park City for $400,000 and repossessed it after a "crash" of that market a few years later. I then sold it for $230,000. Twenty years later it was back on the market for $1.8 million.

"It" happens.

I'm still here and I'm still happy.
 
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