gouchobob said:
The assumption here seems to be that foreign speculators will continue to arrive by the boat load driving prices higher until properties in the toniest areas are out of reach by all but the few and that then new areas will be where the money is to be made. If this is an accurate assessment of the assumptions being made I think there is a major flaw in the thinking. Local property values and local incomes are closely tied. If locals are priced out then it's going to take a tremendous number of new foreign arrivals to keep the market propped up. If this doesn't happen (not likely in my opinion) then wouldn't prices tend to revert over time to levels where local buyers with local incomes can enter the market?[/quote Gouchobob
When I read posts like these I roll my eyes backwards as you are implying that foreigners and them alone are the reason for prices of property going up . The reality is completely different to what is the truth as foreign investment in these areas of Almagro, Belgrano, Caballito, Colegiales, Nunez etc etc is less than 1 percent .
In Argentina there is a very wealthy upper class that comprise 10 to 15 percent of the population over 5 million potential clients . Now where do they invest and what do they do with their monies Gouchobob?
Most real estate markets are completely out of the reach of the working class. This is unfortunate but the reality . Tell me why in Moscow Russia or Tehran Iran property prices per square metre in areas similar to Recoleta and Palermo sell for over US$ 15000 US dollars a metre?
In Iran and Russia the average working class wage ranges from US $ 200 to US $ 500 a month and they make up over 60 percent of the population there. If we go by your argument Gouchobob prices in most societies are incredibly overpriced and especially so in the West where a nice apartment in a World class city is easily half a million dollars.
I am afraid I will have to disagree with most of your points and believe you are misrepresenting what I am saying. All I am saying is that local real estate prices are tied to local incomes. If local prices get beyond local incomes then prices over time will look for an equilibrium point with incomes. This is just common sense. If prices get to high then the pool of potential buyers gets very small.
The last numbers I saw for Argentina were that people with monthly incomes above roughly $3,000 make up about 5% of the population, certainly not enough to support some of the prices there and I would certainly disagree that up 15% of the population is rich. There has been a big influx of foreign buyers since 2001 and while they make up a small percentage of total buyers they probably have also tended to pay top dollar, thereby driving up prices for the whole market.
Your statements on Iran and Moscow only support my points. What you have in those two places are a tiny number of people paying really high prices. Obviously the vast majority are paying a lot less for property. If this handful of very wealthy people left or their fortunes were suddenly reversed who would buy these properties. The answer is obvious, the same holds true of Argentina.
I think what you have now in B.A. are a significant number of properties that are rentals as sale prices are too high for the local incomes. The rent the owners of these properties are receiving represent little if any return today on their investments. Probably a lot of these people would like to sell and are waiting for the market to come back to where it was a couple of years ago.
I remember a until a couple of years ago people were touting purchasing apartments as investments, i.e. furnished apartments to rent to tourists. We don't hear much about this anymore. I'd like to hear from some of these people that bought the vacation rentals and how they think their investments are doing.