Is BA real estate selling? If so, where and how much?

[steveinbsas]

Whaddayamean IF, Pericles?

 

[HotYogaTeacher]

It's always interesting to me when people talk about the value of the dollar in terms of sales of property here. There is a connection but it isn't very meaningful. The value of homes here is listed in US dollars in order to keep consistency of property values in a place that once used the dollar to value it's currency. Period.

Real estate in a volatile economy is NOT a sound investment. That doesn't mean you can't make massive cash, but you have to wait until the market drops and buy then. The market here, though cash based, will experience a correction if things have risen too fast. What is too fast? The median value of property can not increase incrementally higher than median income or it will have to correct. It has begun to here. It won't correct in the same way it did in the states because most people here don't have mortgages but it will correct. No matter what the dollar does or how many expats move here the people who determine prices over all will be Argentines. There are more of them and there always will be.

I sold professionally, and made money in personally, Real estate in the states and it is interesting to me how people choose to buy. If you are an investor, the market is only beginning it's correction now. How much it goes down NO ONE can guess. When markets are high is when people belatedly get interested. They hear stories of people saying they made huge money or bought low and now it's worth blah blah blah. A house that isn't for sale is worth nothing. Look at the value of the home, ask if you can hold it 12 years (the global average for real estate cycles) without making money on it (you never know what's going to happen to impact tourism) and then make your choice based on your best belief about what will happen.

Investing in real estate is a gamble, but if you are going to do it in SA, buying in the regions largest city is the closest you'll get to a guaranty because people will always need to have a home in the city, no matter what else is happening.
Suerte

 

[steveinbsas]

It's always interesting to me when people talk about the value of the dollar in terms of sales of property here. There is a connection but it isn't very meaningful. The value of homes here is listed in US dollars in order to keep consistency of property values in a place that once used the dollar to value it's currency. Period.

That's an interesting point, but I do think there's more to it. As you know, most real estate transactions in Argentina are not only listed in dollars but are also executed in dollars...real US dollars. In most cases, if you don't have dollars, you actually need to buy them in order to complete a sale. This has far more to do with the current strength and stability of the dollar versus the peso than "keeping the consistency of values" (prices?) in a place (country) whose government once pegged its currency at parity with the dollar and the dollar was accepted for payment of everything along with the peso at the exact same value. Change in stores was often made in a mixture of pesos and dollars. Since the devaluation in 2002, Argentines don't want to be caught holding large amounts of pesos for any length of time if they can help it. Just look what has happened to the exchange rate in the past four months...or days.

An excellent example where prices are still quoted in two currencies to provide "consistency of values" is France. There are still instances in France where prices are quoted in both French Francs and Euros. I asked a Parisian friend about this and his reply was that it helped the French (especially the elderly) know how much prices have changed since the inception of the Euro, but no one pays in Francs anymore.

Many Argentine businesses (even grocery stores) accept dollars in payment today. Try to pay with dollars in Paris and you probably won't get a favorable response. I don't think Francs are accepted at all anymore. They certainly aren't being printed.

 

[syngirl]

Argentines have to buy their dollars in order to get the apartments, they're not like Americans that were already earning in dollars. They earn in pesos. So an apartment for US$80k last year was about $240,000 pesos. US$80k today is closer to $280,000 pesos. A $40,000 peso difference, a years salary for many people. This means anyone that was getting ready to buy something in that price range now needs an extra 40k pesos to be able to purchase. Impossible to achieve, especially as the banks are no longer lending (well, technically they are but last I heard it was at 26% interest). Anything above that and the difference just gets greater obviously. US$2000 per sq meter does not mean the same thing this year as it did last year. When you look at it in those terms you have to see that there is going to be a slow down in the market -- most Argentines do not have a lot of extra cash lying around and $40 or $50k in pesos is a huge difference.

 

[7andfive]

Will Cash still be king ( american dollar ) if it loses its value due to the mass overprinting atm ?

Well nothing last forever but cash will be king at least until the end of the year. Despite the US massive debt, inflation just won't be possible this year for a number of reasons. And the dollar still looks good because although the US financial market is in depression like trouble, the government still has the ability to raise cash. Everyone is too spooked to put their money elsewhere for the moment and the cash still seems safe- I'm talking hard currency not pesos etc. China is buying massive amounts of commodities at cheap prices because they're still flushed with cash. If you have cash (and prepared to invest in commodities) you're in the driver's seat for the recovery in 2010, 2011 & 2012. Commodities will never be as cheap as they are now (and for the next 6 months).

 

[perry]

There are very few people who keep such huge amounts of pesos to purchase property. Most sales are done by people who already have property and sell in dollars to purchase another in dollars. This has been the system for many years in Argentina . Do I believe that it will change in the future I do as I am not predicting the long term viability of the American dollar. You cannot print trillions and trillions of dollars and have no affect on the inherent value of the currency.

People go on about how much the American dollar has gone up lately against the Peso and other currencies but this will play out its course and then a huge correction will be in order. Look at History and all your answers will be there.

 

[perry]

I ask all members to tell me what they rather have in 2010 a nice two bedroom apartment in Recoleta or US 150000 . Which option feels safer to you.

The cash or the property?

 

[steveinbsas]

Agentines with wealth will continue to be in the best position to buy, and they will continue to buy in the best areas. They probably won't buy an apartment in areas like Congresso or Constitution if they can afford to buy in Recoleta or the better areas of Palermo. Can you imagine a wealthy Argentine family living in a neighborhood where there isn't a good selection of upscale beauty salons, bakeries, restaurants, grocery stores, specialty shops, private schools, etc?

A young couple recently moved into the apartment directly below mine. They could not afford to buy anything. It was a wedding present. I doubt their parents had to sell other property to buy this one. They said that they didn't even look for an apartment outside of Recoleta. They wanted to be close to their families as well as their hairdresser, doctors and vet. The current state of the economy apparently wasn't an issue, either.

The "haves" don't have to sell in order to buy, and it looks like they can have just about whatever they want.

 

[reiver]

I ask all members to tell me what they rather have in 2010 a nice two bedroom apartment in Recoleta or US 150000 . Which option feels safer to you.

The cash or the property?

I think I'd rather have gold or silver or some other precious metal.

 

[syngirl]

There are very few people who keep such huge amounts of pesos to purchase property. Most sales are done by people who already have property and sell in dollars to purchase another in dollars. .

Yes they don't have a lot "lying around in pesos" because they get paid in pesos and then they have to go BUY dollars. People here do not get paid in USD, and they certainly aren't making a lot of money on foreign stock markets these days. The change in the exchange rate is going to kill a lot of people's possibilities of buying, they need that many more months of salary to be able to get the cash together. People here do not invest in the stock market, they make their money from properties, businesses, or their own salary -- almost all of which comes in in pesos, not USD.
Furthermore people rarely move houses just to buy another place of equal value, they usually buy something larger and more expensive, and they have to compensate for that margin with their own money.