Foreigners with property in BA

[bigbadwolf]

I own property here as well. One potential risk I see with owning property in this part of the world is that if a lot of foreign money arrives it drives up the price above what the locals can afford. For foreigners (with their imported dollars, euros, pounds, etc.) the property looks cheap. They forget that real estate prices are invariably strongly linked to income in any market. As the locals become priced-out of the market the only buyers become foreigners. Everything goes along fine as long as the foreigners continue to arrive. But what happens when the bloom comes off the local market? What if the prices get high enough and the word goes out that the local market is no longer a bargin? Sellers would then have no buyers at least at what the foreigners were willing to pay. Prices would tend to drop until the local buyers with local incomes could re-enter the market.

This is debatable. Real estate prices in world cities like London and New York have reached stratospheric heights, and you can't tell me that a salaried bloke -- no matter how handsomely compensated -- can afford a good house or apartment in good areas of these cities. Broadly speaking, global cities -- in the rich North or the poor South -- have been becoming ever more polarised between rich and poor in the last three decades. Additionally, the world is awash in liquidity, as national economies have become ever more financialised. Whatever tenuous connection there may have been between property prices and income has long gone in the better parts of major cities. This applies just as much to Recoleta and Palermo in BsAs as it does to, say, Hampstead Heath in London.

 

[Granadaiscool]

I own property here as well. One potential risk I see with owning property in this part of the world is that if a lot of foreign money arrives it drives up the price above what the locals can afford. For foreigners (with their imported dollars, euros, pounds, etc.) the property looks cheap. They forget that real estate prices are invarilbly strongly linked to income in any market. As the locals become priced-out of the market the only buyers become foreigners. Everything goes along fine as long as the foreigners continue to arrive. But what happens when the bloom comes off the local market?  What if the prices get high enough and the word goes out that the local market is no longer a bargin? Sellers would then have no buyers at least at what the foreigners were willing to pay. Prices would tend to drop until the local buyers with local incomes could re-enter the market. 

You think there are buyers now?

 

[Stanexpat]

I think the responses to my post then to support my view. From my readings when fundamentals don't support values people then to argue that the fundamentals don't apply in this or that particular market. When you start hearing arguments like that you are almost certainly headed for trouble.Real estate prices in London and New York were used to argue the point that incomes and prices aren't neccesarily related. I don't now alot about these markets, they could be an exception at least in the short term. An interesting study was done recently on a single street in Amsterdam which tracked housing appreciation over a 400 year period. The findings were that after inflation the rate of appreciation was nearly zero. Similar studies have been conducted in the U.S. with similar results. Another argument given was the strong level of tourism in the country which has created a strong demand for temporary rentals. This may be the case but this seems fairly high risk to me. If this is driving the prices up how many units can the local market absorb, when will there be to many units? What happens if tourism falls off? I suspect there are people today buying apartments as rentals today at prices that may not make sense(i.e. the rental income doesn't support the price of the property). Their purchases basically represent speculation that the prices will continue to rise. I think prices are continuing to rise rapidly which worries me. The well known investor Warren Buffet once said that the worse reason to buy anything was because it was going up in price.

 

[Granadaiscool]

Warren Buffet is not actually a poor jew
Anyway there is no way you can nowadays justify a investment as a foreigner for the short-term rental
Let´s say you buy a 60 metre appartment in Recoleta, you spend around 120.000 dollar. You get an ocupation rate of 85%. Let´s say 10 months for 900 dollar a month. You have 200 dollars a month of costs.
That would leave you with ROI of 5,5% or about the same you can get a on US dollar account in the US with no risk unless AlQueada blows up JFK

 

[bigbadwolf]

Real estate prices in London and New York were used to argue the point that incomes and prices aren't neccesarily related. I don't know a lot about these markets, they could be an exception at least in the short term. An interesting study was done recently on a single street in Amsterdam which tracked housing appreciation over a 400 year period. The findings were that after inflation the rate of appreciation was nearly zero. Similar studies have been conducted in the U.S. with similar results.

Property prices may not be rising against a basket of commodities -- that's not my contention. It's that everything -- metals, property, commodities -- is going up in price because of trillions of dollars in the global financial system. And it's not just dollars any more: the world's leading central banks are buying dollars (to prop up the global trading system a bit longer) and financing the purchase with fiat currency of their own. This is driving up prices worldwide and thus stoking inflation. Fiat currencies are buying less and less. The daft thing today is to hold cash or near-cash. My other contention is that properties in fashionable parts of BsAs are unlikely to go down in price imminently: it will take another economic collapse to do that. Prices may shortly stop moving upward and stagnate for awhile, but as long as current prices seems dirt cheap to New Yorkers, Californians, and Londoners accustomed to shelling out 7-figure sums, there will be no significant move downwards. Prices in Recoleta and Palermo are being driven by foreign purchasers (who are responsible for 35% of the action in these specific markets).

 

[Granadaiscool]

What´s your source for the 35% number?
P.S. Construction is down 9 straight months, the real estate market is more then construction offcourse but the market has been slowing down some time

 

[Granadaiscool]

In August 2006, the Buenos Aires bureau of records recorded 5,583 deeds involved in real estate purchases worth a total of about 240 million euros. That figure was 1.9% higher than for the same month in 2005.

I would like to know if in so called similar cities like Madrid, Paris, NY, London or LA only180 real estate transactions a day are completed

 

[SimNYC]

Hello all: for me, a former new yorker, the prices on real estate here are excellent. Granted, BA is a far cry from NYC in some ways, but there is still a lot of culture, theater, incredibly cheap prices for dinner, shows, clothes, household goods, etc. and overall, it is a lovely place to stay. The entire price of an apartment here can literally be the cost of a down payment in NYC. I am semi-retired and am (or I should say, was) in the process of buying an apt to use as a home base while I travel (not as an investment property for rental, for ex) because I can buy it in cash (US$87k) and then just pay monthly expenses. The problem that I have run into is that Tizado, the real estate agency, and the owner are requiring that I register the apt with the notary for only US$60k. Obviously, this is tax evasion for the owner and illegal, only benefits the seller and provides risk for me in regards to breaking Argentine and US laws and also in having to pay capital gains tax in the US when I later sell the apt of much more than I actually made. For ex, if I later sell for US$90k, I would be liable for $30k instead of the $3k that I actually made. It is incredible to me that an agency and owner can basically say "either break the law for our benefit or we will not honor our contract with you". Can you imagine such a scenario in the US?? I have gone to other agencies but the story always seems to be the same. Does anyone have any advice or know of reputable law-abiding agency? So far, the answer is the usual "it's the custom" or "when you sell, the next buyer will do the same for you", but of course, even putting aside the illegality of the action, there is no guarantee of that. I was considering filing a complaint with the local consumer protection agency, but I suspect that that will do little good. All input is appreciated and thanks in advance.

 

[Granadaiscool]

Hello all: for me, a former new yorker, the prices on real estate here are excellent. Granted, BA is a far cry from NYC in some ways, but there is still a lot of culture, theater, incredibly cheap prices for dinner, shows, clothes, household goods, etc. and overall, it is a lovely place to stay. The entire price of an apartment here can literally be the cost of a down payment in NYC. I am semi-retired and am (or I should say, was) in the process of buying an apt to use as a home base while I travel (not as an investment property for rental, for ex) because I can buy it in cash (US$87k) and then just pay monthly expenses. The problem that I have run into is that Tizado, the real estate agency, and the owner are requiring that I register the apt with the notary for only US$60k. Obviously, this is tax evasion for the owner and illegal, only benefits the seller and provides risk for me in regards to breaking Argentine and US laws and also in having to pay capital gains tax in the US when I later sell the apt of much more than I actually made. For ex, if I later sell for US$90k, I would be liable for $30k instead of the $3k that I actually made. It is incredible to me that an agency and owner can basically say "either break the law for our benefit or we will not honor our contract with you". Can you imagine such a scenario in the US?? I have gone to other agencies but the story always seems to be the same. Does anyone have any advice or know of reputable law-abiding agency? So far, the answer is the usual "it's the custom" or "when you sell, the next buyer will do the same for you", but of course, even putting aside the illegality of the action, there is no guarantee of that. I was considering filing a complaint with the local consumer protection agency, but I suspect that that will do little good. All input is appreciated and thanks in advance.

Why don´t you want to go along with it?

 

[SimNYC]

It is because of all the reasons that I stated above in my post...but to reiterate: it's breaking the laws of two countries and being forced to falsify docuements which to most people would be a moral dilemma; it's putting myself at risk for no personal benefit at all; it is potentially a huge detriment to me in terms of having to pay taxes upon reselling of possibly 10 times the actual profit that I might make. The IRS is a little less understanding and, shall we say, less "flexible" than the Argentine gov't when interpreting and prosecuting violations of tax laws. Of course people break the laws in the US also, but I can only control my own actions and prefer to keep things "above board". If a real estate agent or owner in the US were to try something like this, they would have a lawsuit slapped on them so fast it would make their head spin. The majority of Argentines I have asked about this tell me that I am correct not to want to participate and the gov't is clamping down on illegal activities like this, so hopefully things will be handled more professionally in the future. I must admit that, although I have been lucky enough to have travelled all over the world (70 + countries), this is my first real case of culture shock.