Argentine Real Estate market to go down 50%

[steveinbsas]

Thanks for your views. My guess is that real estate in Bariloche has seen fairly modest price rises in recent years versus B.A. In the states those areas that saw only modest increases in prices are having only modestly impacted by the downturn. Those areas that had the biggest increases are the ones getting pounded now.
Wonder if this will be true of Argentina as well. Also areas that people said it couldn't happen to because of location like Manhattan, San Francisco are getting hit now as well.

In addition to the decrease in foreign buyers and the overall slowdown of the world economy, I think another major (perhaps short term) depressant on the BA market is the recent devaluation of the peso by over 10%. Fewer Argentines are willing to convert their pesos to dollars to buy property. Even those with dollars are obviously reluctant to part with them at the moment. I don't have a crystal ball, but I don't think the dollar is going to get much stronger and with six months to a year it will probably give up the recent gains (if not more).

Foreclosures are rare here compared to San Francisco or NYC. When there are a lot of foreclosed properties available, there is downward pressure on prices. Of course long overdue tighter lending policies in the US have also significantly reduced the number of sales, adding even further downward pressure on prices and a reduction in sales volume. As long as there is tight credit and a greater supply of homes than buyers, the market will continue on its negative path (as it should).

If I wanted to sell my B.A. apartment for what I paid two years ago, I don't think I would have any trouble. An apartment two floors below mine sold in October for exactly what I paid for mine in 2006, but that was just before the devaluation of the peso. The biggest difference is that my apartment was already fully remodeled and the one that sold recently was in "original" (50 year old) condition. I estimate the cost of remodeling at about $20,000 (it could be higher).

Frankly, I would not offer my apartment for sale today for less than 20% more than I paid in 2006. I might not get it right away, but there's little else in the neighborhood that compares favorably at the increased price, even in today's market. Some properties in Recoleta are now priced as much as 40% more than they were in 2006, so my target price would still be 20% less by the meter. Some might consider that a price "reduction" in today's market, but only if I asked 40% more than I paid in the first place. (Watch out for smoke and mirrors.)

As I posted yesterday, I have been watching the B.A. real estate market closely. While there is a stunning proliferation of for sale signs in San Telmo and other areas, there seem to be fewer than ever in Recoleta. I guess the "haves" don't "have to " sell right now.

If anyone from the forum is here and looking for property, I would be happy to meet for a coffee and tell you what I know about buying here. I don't ask for any payment. There are some things you should know, especially about transferring the money, but I cannot post them here.

I am not a real estate agent, but I do know one that I can recommend. He speaks English and is willing to work with any of the other small Argentine real estate offices (that is rare). He works for his clients to find what they want, even if it means splitting a commission with someone else. I would not be involved in any way with your purchase, but always be happy to verify any information you receive as best I can.

 

[Celia]

Celia, taxes and utilities are ridiculously cheap in Argentina, not sure what your gripe is.

It's not a comment about taxes etc...but on a sudden change in exchange rates that people may not have factored in. An unexpected 40% increase does have the habit of hitting one hard where it hurts!

Actually, my electricity, ABL, internet and cable are comparable to US prices.

 

[soulskier]

If you electric bill is the same in BA as in the USA, something is seriously wrong.

 

[steveinbsas]

If you electric bill is the same in BA as in the USA, something is seriously wrong.

Internet and cable aren't really "utilities" in the same sense as gas, water, and electricity.

I would also wonder what tax bill the ABL compares to in the US.

 

[Celia]

Yes, well unfortunately I'm a cliente T2 not T1 due to the previous owners' using the property as a company and I can't change it till the contract runs out. Until then it's $550-600 a month for me...

 

[steveinbsas]

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 good for that neighborhood. 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.

The prices are indeed very attractive, but I immediately thought of several questions. Considering that the building won't be finished for overt two years from now, with "today's" prices significantly lower than an almost finished "comparable building" in the same area, I think potential buyers would want to know the following:

Are the pre-construction prices guaranteed?

Is there a possibility of "extra" charges?

What if building costs escalate in the next two years like they have in the past two?

Can the building be finished if costs do escalate and the apartments "sold out" at the pre-construction prices?

I ask these questions remembering Tangobob's posts about buying an apartment "a estrenar" and paying more than he ever expected.

 

[steveinbsas]

Yes, well unfortunately I'm a cliente T2 not T1 due to the previous owners' using the property as a company and I can't change it till the contract runs out. Until then it's $550-600 a month for me...

Ouch! That really is unfortunate. Was the tax status revealed to you before you bought the property? I remember your posts when the ABL tripled last year. I had no idea the amount you mentioned in your post was monthly. My ABL also increased threefold last year, but only from $200 to $600 pesos per year.

I hope you don't also have bienes personales on top of that!

 

[nikad]

Ouch! That really is unfortunate. Was the tax status revealed to you before you bought the property? I remember your posts when the ABL tripled last year. I had no idea the amount you mentioned in your post was monthly. My ABL also increased threefold last year, but only from $200 to $600 pesos per year.

I hope you don't also have bienes personales on top of that!

Steve, I believe she is referring to the cable/internet or phone service ( those are the ones that use the T1, T2, etc, description ) and Celia, they are taking advantage of you! If I was you I would go ASAP to Consumer´s Defense to file a claim; they will most likely indemnify you.
nik

 

[steveinbsas]

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.

I have noticed that two year apartment leases in B.A. often include a higher rate for the second year. It looks like property owners who rent their properties are able to charge more for the second year, doing so in advance...and for one good reason: inflation.

The fact that it is fairly common doesn't seem to indicate that a decline in prices in general (including rents) is anticipated, especially as long term lease rates are often quoted in pesos.

 

[Celia]

Steve, I believe she is referring to the cable/internet or phone service ( those are the ones that use the T1, T2, etc, description )

Thanks Nik and Steve, but it's actually the electricity that I'm stuck at T2 on...we hardly use any but it's got a fixed base rate from the previous owner. Now the bill's in my name, but I have to wait till one year's up before having my consumption certified.
Sorry to bore everyone, it's not related to the thread but a big caution to buyers re. expenses. My lawyers assured me the property would cost almost nothing to run!