Pessification of real estate?

[sergio]

I did not buy at a huge discount due to the economic crisis but that is not the issue here. I paid CASH. I did not buy to make a profit but to better assimilate and to live with some comfort and stability, just like Argentines.

The US market was based on SPECULATION and bad LOANS. Not so in Argentina. The problem is NOT with any instability in the Argentine real estate market but with govt economic policy and the instability of the peso. For that reason real estate sales are in DOLLARS. Take that away and the ability to change pesos for dollars and you have absolutely NOTHING left in the way of stability.

 

[MikeMike]

in hearing from expat PROPERTY OWNERS about what they think and what plans they have and what ideas they have to sell and get the money out of Argentina before it is too late.

I'm an expat, and own property in Argentina. My plan is to wait out the current destined to fail approach of cutting access to dollars (wait, however long it takes).

 

[sergio]

Thanks, Mike. I guess it depends on your age and how much time you have. I am not a speculator as someone suggested. I just want to protect a vital asset w/o which my future will be in jeopardy,

 

[MikeMike]

In regards to your original post, my belief is that Argentina is on the down swing of its current economic cycle, and that in the near to medium term, there's likely to be a ~crisis that will result in the current model being replaced w/ something more sane. My hope/assumption is that things will return to "normal" soon enough. So, I don't consider pesification to be equivalent to a total loss (more like a temporary roadblock). I could be totally wrong though .

 

[sergio]

Ive heard 2 or 3 years max and then a massive devaluation. The problem is that the electorate is not gettibg better educated, quite the opposite. As the middleclass sinks into the working class the prospects for imprivement grow dim. This is the view of a very successful Argentine economist friend and i am inclined to agree.

 

[GS_Dirtboy]

I haven't heard a strong argument yet for keeping the Dollar as the "defacto" currency for real property, or anything for that matter, in Argentina. Having a foreign currency subplant the national currency is a disaster waiting to happen - eg current Argentina econmic events. Argentina (I believe) is one of only a few countries in the world that have this problem.

I don't think real property is ever a bad investment over time. And I can't imagine that if property were somehow denominated in $ARS that you would lose your value. The heart of the issue is that as long as Argentines don't have confidence in the government (Peso) then there will be a parallel currency and that doesn't seem to be changing anytime soon.

I'm sure someone will have a contrary, and empassioned, opinion.

 

[TERKILD]

The real estate market is already officially denominated in pesos, look at your title of deed, escritura! It shows a small peso transaction/value amount. Nothing close to the real transactonal value of the property. The only thing Keratina could do, would be to force people only to list and do the transaction in pesos. But even then the value would properly not change, since that there will always be a parallel dollar market. Most Argentinians themself only save dollars, (Under the pillow or in Uruguay, NOT in the bank!). What could cause a problem to the real estate market would be a ban on foreign ownership, which I cannot imagine anytime in the future.
So again, if the value of a house today is 100.000 USD, the peso value would be around 600.000......if the peso goes to 10, the peso amount would just adjust to 1.000.000, (All under the condition that nothing else changes).
The risk that Sergio talk about to start with, receiving pesos for a transaction and then losing the full amount, could only happen, if Keratina abandonded the peso totally in the same second or did a serious devalueation exactly at that same time.
So, therefore everybody need of course to convert the peso amount to a solid currency, gold or whatever, when they get the money.
To talk about real estate going to zero here in the country is totally nonsense, sorry to say it! (Everybody would buy long before that).

 

[expatinowncountry]

The real estate market is already officially denominated in pesos, look at your title of deed, escritura! It shows a small peso transaction/value amount. Nothing close to the real transactonal value of the property. The only thing Keratina could do, would be to force people only to list and do the transaction in pesos. But even then the value would properly not change, since that there will always be a parallel dollar market. Most Argentinians themself only save dollars, (Under the pillow or in Uruguay, NOT in the bank!). What could cause a problem to the real estate market would be a ban on foreign ownership, which I cannot imagine anytime in the future.
So again, if the value of a house today is 100.000 USD, the peso value would be around 600.000......if the peso goes to 10, the peso amount would just adjust to 1.000.000, (All under the condition that nothing else changes).
The risk that Sergio talk about to start with, receiving pesos for a transaction and then losing the full amount, could only happen, if Keratina abandonded the peso totally in the same second or did a serious devalueation exactly at that same time.
So, therefore everybody need of course to convert the peso amount to a solid currency, gold or whatever, when they get the money.
To talk about real estate going to zero here in the country is totally nonsense, sorry to say it! (Everybody would buy long before that).

While you must be right up to some point... remember that the vast buyers of real estate in Argentina are Argentinean and most of them have salary in pesos that are not pegged to the US dollar. So if the dollar goes from 6 to 10 tomorrow, I doubt the value of the house in dollar will be kept constant. Remember that the value of something is only given by whatever someone wants (can afford) to pay for it.
History tells you that in Argentina... the house we bought in December 2011 was bought in 2000 for USD 130K and sold in 2002 for 50K... the person who sold it to me paid 180K in 2008 and she sold it to me for way more last December...

 

[TERKILD]

While you must be right up to some point... remember that the vast buyers of real estate in Argentina are Argentinean and most of them have salary in pesos that are not pegged to the US dollar. So if the dollar goes from 6 to 10 tomorrow, I doubt the value of the house in dollar will be kept constant. Remember that the value of something is only given by whatever someone wants (can afford) to pay for it.
History tells you that in Argentina... the house we bought in December 2011 was bought in 2000 for USD 130K and sold in 2002 for 50K... the person who sold it to me paid 180K in 2008 and she sold it to me for way more last December...

I agree on some of those facts, but:
The majority of Argentinians that buy real estate here, do not finance it through a credit by the bank, or through their salaries, like in US or Europe, they buy it with savings or the money from another real estate transaction. With a mortgage rate of maybe 30% per year, I think the mortgage buyers are limited to a very few.
I agree on that the prices could adjust and go down,but again, the talk here on this post is totally nonsense....the peso is not pegged one to one with the dollar, like in 2001, at this moment its pegged at a "only" 30% premium to the blue rate! Not a 400% like back then!!!

 

[BienTeVeo]

About the same level of sympathy as for those bond holders who speculated in Argentine stock then whinge because they didnt make a profit?

health warning - any investment can go down in value as well as up

Property investment is the largest contributor to the economic and political instability of western nations. I'm currently reading David Harvey's essays - Rebel Cities

Setting aside the concerns about the current macro-economic management or likely mismanagement of the Argentine currency, the pegging of the $A to the $US by a currency board to get some stability in a hyper-inflating economy (by Domingo Carvallo under a Radical not a Peronist President) was in retrospect only ever a short term option that stayed on well beyond it's "sell-by" date and then predictably came back to haunt with a vengeance!

Carvallo went from hero to zero = and never got that Nobel prize for economics

Argentine recent economic history - at a glance! http://www.economist.com/media/globalexecutive/and_the_money_kept_rolling_in_e.pdf

Fact is many foreigners who bought Argentine property in the "knock down" years immediately after the corralito got a huge bargain at the time.

I'm sorry for anyone who is in danger of loosing their home N.B there is a lot of that about not just in Argentina

Responding to PhilinBA… You assume too much, and callously.

The apartment we own here in Buenos Aires (bought in 2001, before the crisis) is our home, our primary residence, where we have raised our children. It is the vehicle of all of our hopes, dreams, and aspirations. It is was never conceived of as investment.

When we moved here from NY in 2000, many friends and family members in the US (some argentines among them), told us we were crazy. I have always defended the decision, (perhaps a bit out of pigheadedness, but mostly because we love this country). These days, I find myself agreeing with them.

So, yes, we think about leaving. We probably won't. We rode out the crisis of 2001/2. We can ride out whatever this is about to be. But the long term is not looking good. I hope I'm wrong.

To pack up and leave would be heartbreaking, the most difficult decision of our lives, and not because we might lose some money along the way. Nevertheless, I'd rather not take a bath, thank you very much.

And by the way, its Cavallo, not Carvallo. And the one-to-one peso/dolar convertability scheme occurred during the presidency of Carlos Menem, a peronist.

Returning to the thread... supply and demand may dictate that some transactions end up being denominated in pesos. And certainly there will always be vivos who will attempt to gain advantage in any given case. But in general, the dollar will continue to be the primary currency for real-estate transactions. Just my unschooled opinion.