Capital Controls, Sky-High Rates Crush Argentine Housing Market

[garryl]

Bloomberg - Are you a robot?

www.bloomberg.com

www.bloomberg.com/news/articles/2019-10-01/capital-controls-sky-high-rates-crush-argentine-housing-market

Looks like the real estate market is starting to crack.

 

[perry]

Bloomberg - Are you a robot?

www.bloomberg.com

www.bloomberg.com/news/articles/2019-10-01/capital-controls-sky-high-rates-crush-argentine-housing-market

Looks like the real estate market is starting to crack.

Real estate sales have dropped in volume at least 60 percent since 2018 and there is now a oversupply of apartments for sale and very few buyers . What is surprising as how prices of published real estate have only gone down 10 to 15% from last year as the demand is at historical lows . I do not see any rebound in prices for a long time as the fundamentals of the argentinian economy are negative without a silver lining in sight .

The real estate market is one of the biggest drivers of the economy and without funcioning credit and little stability with the argentinian peso there will be no quick turnaround . For those who brought before 2010 they still have done very well as prices went up in us dollars over 100 percent .

 

[Ries]

The resilience of pricing in the Argentine market has a lot to do with the fact that there are virtually no mortgages. No payments to make every month means a lot more people can afford to hang on, and hope, rather than the banks having fire sales.

And it means that the people who own real estate, by and large, have more money to start with, than the average home owner in somewhere like the USA, where its not uncommon at all for people to be one mortgage payment away from being broke and losing their house.

If somebody in LA loses their job, they generally lose (or sell) the house within 3 months. In Argentina, they can hang on for decades, and even not paying taxes wont mean you lose the house.

So the ability of people to just not lower the price, and wait it out, is much higher than in places where equity is low and loans are high and snapping at your heels.

 

[garryl]

The resilience of pricing in the Argentine market has a lot to do with the fact that there are virtually no mortgages. No payments to make every month means a lot more people can afford to hang on, and hope, rather than the banks having fire sales.

And it means that the people who own real estate, by and large, have more money to start with, than the average home owner in somewhere like the USA, where its not uncommon at all for people to be one mortgage payment away from being broke and losing their house.

If somebody in LA loses their job, they generally lose (or sell) the house within 3 months. In Argentina, they can hang on for decades, and even not paying taxes wont mean you lose the house.

So the ability of people to just not lower the price, and wait it out, is much higher than in places where equity is low and loans are high and snapping at your heels.

Agree. If US market faces this kind of adversary, the market will crash. 3 months of employment means you have to sell. And good news, usually in US someone will buy it if the price is attractive.
Looks like Argentina is running out of buyers, for now. I wonder what drove the price much lower in 2001/2002 ? At that time, there was no mortgage either, but home owners sold like crazy.

 

[garryl]

There is no panic yet.

 

[perry]

The resilience of pricing in the Argentine market has a lot to do with the fact that there are virtually no mortgages. No payments to make every month means a lot more people can afford to hang on, and hope, rather than the banks having fire sales.

And it means that the people who own real estate, by and large, have more money to start with, than the average home owner in somewhere like the USA, where its not uncommon at all for people to be one mortgage payment away from being broke and losing their house.

If somebody in LA loses their job, they generally lose (or sell) the house within 3 months. In Argentina, they can hang on for decades, and even not paying taxes wont mean you lose the house.

So the ability of people to just not lower the price, and wait it out, is much higher than in places where equity is low and loans are high and snapping at your heels.

Agree. If US market faces this kind of adversary, the market will crash. 3 months of employment means you have to sell. And good news, usually in US someone will buy it if the price is attractive.
Looks like Argentina is running out of buyers, for now. I wonder what drove the price much lower in 2001/2002 ? At that time, there was no mortgage either, but home owners sold like crazy.

The reality is that the crash in 2001 was more sudden and shocking and the currency had collapsed 300% overnight . This economic crash while just as severe, this is a long protacted crash without a massive swing in the value of the peso as of yet . Many economic commentators believe that in 2020 there could be a massive devaluation of the peso that would change the landscape and create a outright buyers market .

In regards to purchase of properties even in the best of markets there are great deals out there that can be under 30% off the market value . Sucesiones in most cases offer a hefty discount on the market value .