Article on ARG Economy and Real Estate

[SaraSara]

In Argentina homes are bought for cash: people carry no mortgages, so no matter what comes they hardly ever feel pressured to sell. Sellers decide on a price and wait until they get it. In the rare cases when someone has to sell property in a hurry, there's generally a close friend or relative ready to buy it.

Argentines have been through a lot and they have learned that investments come and go, but real estate perdures: they believe in putting their money in bricks and mortar. The worse the situation is, the tighter they cling to their real estate so even in difficult times, prices are likely to remain stable or even rise. There's not much sense in waiting for a "downturn" to buy property - it takes a financial debacle like the abrupt end of the "uno a uno" for prices to fall.

I can't quote "sources" for the above - it is just what I've learned over many more years than I care to count.

 

[gouchobob]

In Argentina homes are bought for cash: people carry no mortgages, so no matter what comes they hardly ever feel pressured to sell. Sellers decide on a price and wait until they get it. In the rare cases when someone has to sell property in a hurry, there's generally a close friend or relative ready to buy it.

Argentines have been through a lot and they have learned that investments come and go, but real estate perdures: they believe in putting their money in bricks and mortar. The worse the situation is, the tighter they cling to their real estate so even in difficult times, prices are likely to remain stable or even rise. There's not much sense in waiting for a "downturn" to buy property - it takes a financial debacle like the abrupt end of the "uno a uno" for prices to fall.

I can't quote "sources" for the above - it is just what I've learned over many more years than I care to count.

I agree with your comments, however even though prices don't have big swings up or down rents certainly have in the past. They might not sell them for less but if the rent drops they certainly have had a big drop on their return on investment. Also it doesn't mean anybody is willing to buy or pay the price they are asking. If the worse happens and prices fall or at least what people are willing to pay they people can sit on a property for years, I've seen this happen more than once.

In my view what a property generates in rent is the best way to determine the true value of a property. If rents fall the value of the underlining property has also fallen, the owner may be unwilling to accept this as you state, but if the price stays flat for 10 years then there has really been a real price reduction because of inflation.

I have read that rents Argentina dropped in 2009, and that yields are pretty low compared to the rest of S.A. A couple of years ago people were buying temp apartments for the tourist trade. If you go to Craig's list you can see literally hundreds for rent which tells me there is an oversupply and that people are having difficulty renting them out.

The fact that rental yields appear to have dropped would argue at best that prices will stabilize and not increase as another poster here has suggested. This same poster seemed to suggest that you should buy now before your paper money is worthless. If that were to happen I doubt Argentina would be spared the fallout from such a calamity, so I don't think I would follow this advice. If you believe something like this could actually occur I would still avoid an all cash market like Argentina. An investor would be much better off going to a market where through financing they could leverage a much larger property purchase. When the collapse occurs they could simply repay the big mortgage with the now worthless paper money.