Pessification of real estate?

[willwright]

Many good and valid points. I agree with those that say that real estate will continue to be transacted in dollars, that's the whole point of real estate in Argentina. It's a hedge against economic uncertainty. The current government is making real estate hard to maintain as a hedge. Those who want to leave now may have to wait until a change of government or settle for bags of Pesos of questionable worth. Of course this government won't be around forever. But given the political climate in the country the long term prospects for investments or real estate would have to be considered below average.

 

[sergio]

I don't understand why some readers seem to miss the point:

Pessify real estate transactions and you take away ALL security. You can be holding a large amount in pesos and OVERNIGHT the peso can be devalued 100-200-300% The history of Argentina shows that the unpredictable happens but in this case a massive devaluation IS predictable so anyone caught with pesos on hand at the wrong moment is in trouble.

Someone said that as soon as you sell you have to buy a safe currency. Just HOW do you do that at the same time that you sell? As I said, waiting ONE DAY can make a world of difference.

If you have trouble changing pesos for dollars - even at great loss through the parallel market - but can't get the money out of Argentina, THEN WHAT?

Pessifying real estate transactions without first making serious long term structural changes leading to a stable peso and public confidence in the peso will only serve short term interests by the Cristina administration. Nothing will be gained by the public but individuals could LOSE a lot. Let's hope it doesn't happen.

 

[TERKILD]

I don't understand why some readers seem to miss the point:

Pessify real estate transactions and you take away ALL security. You can be holding a large amount in pesos and OVERNIGHT the peso can be devalued 100-200-300% The history of Argentina shows that the unpredictable happens but in this case a massive devaluation IS predictable so anyone caught with pesos on hand at the wrong moment is in trouble.

Someone said that as soon as you sell you have to buy a safe currency. Just HOW do you do that at the same time that you sell? As I said, waiting ONE DAY can make a world of difference.

If you have trouble changing pesos for dollars - even at great loss through the parallel market - but can't get the money out of Argentina, THEN WHAT?

Pessifying real estate transactions without first making serious long term structural changes leading to a stable peso and public confidence in the peso will only serve short term interests by the Cristina administration. Nothing will be gained by the public but individuals could LOSE a lot. Let's hope it doesn't happen.

Again,

Dont hold any peso over night!!!!
Any seller of real estate are not forced to sell if the conditions are not ok, (price). Legally, on the paper, you can be forced to do the transaction in pesos, but, at that same time you just need to calculate in the risk and the loweer value of the peso. And once more, I have never heard about anyone in the last several year, that have done any real estate transaction in pesos, (exept, on the paper).
You are fully right about the risk of holding the peso and the devalueation, so, you just need to work beyond it!

 

[Crema Americana]

I'm not sure I follow. Pessification of real estate wouldn't necessarily change the value of the house. Now taking those pesos and trying to get them out of the country to use elsewhere is the real matter. As others have mentioned on this forum, the peso is a bit like store credit, it's good now, but if you don't use it, you lose it... and it's not good anywhere else. Would pessifying the real estate market change that? I doubt it.

Your "investment" should be fine as long as the economy or real estate market doesn't completely tank (and in that case it doesn't matter if the price is set in dollars or pesos.) Look at cars. You buy a car today and next year it might be worth more than what you paid - USED! Nobody considers a car an investment, but depending on when you buy, it might as well be.

In any case, if you're living in your house and using it, then it's not necessarily an investment... it's your home. No matter what happens to the peso you will have your house if you own it outright. There might be an eventual hit to home values (or they may rise, since pesos are much easier to get here than dollars), but eventually prices should settle down and adjust to the market (and whatever is going on in that moment) even if they have to be updated on a monthly basis. Argentina is volatile, that won't change unless the whole economy changes.

Of course none of this would be an issue if the peso were actually trustworthy.
Fiat money has no intrinsic value; it only has value at all because all participants in an economy agree to trust the government issuing the currency.
And who can trust the Argentine goverment?



EDIT : I see the point now. Yes, cashing out here is difficult to do... especially during these times. But considering that Cristina is so antagonistic towards Europeans and North Americans, I doubt expats or foreign investers are high on her priority list. History has shown the Argentine government has no respect for savings or people on fixed incomes, either.

When you sell you need something else to put your money into or someway to get it out of the country... yes, that is a problem.

 

[Bajo_cero2]

Real state agencies who build appartments are selling them in pesos sin some time ago.

Regards

 

[Crema Americana]

Dollars aren't easy to get out of the country, either.


http://www.26noticias.com.ar/la-afip-secuestro-mas-de-358-mil-dolares-en-ezeiza-140051.html

El segundo decomiso tuvo lugar cuando un pasajero de nacionalidad estadounidense trató abordar un vuelo rumbo a Houston, EE.UU, con 165 mil dólares en un bolso de mano que, luego explicó, eran producto de la venta un inmueble.

Poor guy.

 

[davonz]

I thought about buying property here about 4 years ago. What worried me at the time was once i was in the country as an investor was being able to easily move to another country and to liquidate the investment.
If the price was cheap enough, that would offset some of the risk, but i didnt think it was cheap enough for the risk.
Just the hassle of having to sell a house in US$, then convert to pesos to transfer out of the country via a bank and then taking another hit on the conversion again from pesos to US$ or NZ$ or AU$ put me off - there was a 10% hit at least after all costs.
My thoughts were once i was an investor here, the chances of being a captive investor in this country was to great a risk for me to take with the lifestyle i have - moving around alot.

If i was thinking of staying here long term, for reasons like arg wife/kids etc, that is a whole different story. The value of a house will be in relationship to the cost of living and incomes.

It is like buying a property in NZ. The NZ$ is one of the 8 most traded currencies in the world, in one of the most open economies in the world, with no restrictions on buying or selling the NZ$, however we are such a small economy, just one large company wanting to buy or sell NZ$ can effect the NZ$. An example of this is in the last 2 weeks, it has gone from US$0.83 to US$0.75, now today i see its on the way back up again and now US$0.76. Next week it could be US$0.80 or US$0.70.
These are big swings in a sort space of time, so if you are an overseas investor you dont know what will happen, you could have purchased a house 2 weeks ago and now sitting on more than a 10% loss in US$ terms. But if you buy in for the long term you will probably end up with an ok return on investment.

So for everyone who has purchased here, your house maybe be worth 1/2 of todays value next year, but in 5 or 10 years it might be worth twice that. In a country like argentina there is a huge risk - if you look at the past you can pretty much get an idea of the future. But there can also be a big upside. And if you look at what investments options there are here, property is pretty much it for the average person. So there will always be demand.

I dont think there is going to be any big drop in house prices - maybe 20%, unless there is a large rise in unemployment. The downside is going to be caused by inflation and the value of the peso. So prices will be trying to keep up.

If I had property here, i would sit and wait it out. The main reason being getting the sale money into a hard currency because its anyones guess what is going to happen with the peso. We could wake up tomorrow with the news that the peso has been devalued by 30%.
However if you can sell your house in US$ and get the money out of the country, i would take it and run for the exit !!!

 

[sesamosinsal]

An example of this is in the last 2 weeks, it has gone from US$0.83 to US$0.75, now today i see its on the way back up again and now US$0.76. Next week it could be US$0.80 or US$0.70.

This decline isn't due to any one company in NZ, though. It has more to do with the situation in Europe. Most "risk" (essentially all except USD) currencies have seen steep declines over the past several days due to the situation in Greece.

 

[BienTeVeo]

I agree with Davonz. In my experience real estate in Argentina can be counted on over the long-term. We bought before the crisis in 2001, after which the place was worth a lot less than we paid for it. But we weren't going anywhere, so the harm was only on paper. Since then, the value of the place has more than doubled. But it took a while. There may be some reversals on the horizon, but overall real estate continues to be a safe haven for argentines who are worried about volatility elsewhere in the economy. Having said all that, no one should approach buying in Argentina as an investment opportunity. It's not for the faint of heart. So unless you have an organic reason to do so, stay away. Buy something in Uruguay instead.

As for pesification, I for one would not sell in pesos. Especially not now. The roller-coaster is just about to crest. Hold onto your hats and tuck in your scarves.

 

[davonz]

This decline isn't due to any one company in NZ, though. It has more to do with the situation in Europe. Most "risk" (essentially all except USD) currencies have seen steep declines over the past several days due to the situation in Greece.

Yes that is true, it is partly to do with europe, but also the fact that milk powder isnt selling like it was, and the biggest NZ dairy exporter announced a decrease in earnings/payout last week, and on top of that a decline in china - which is our 2nd or 3rd biggest market, that was when the biggest drop happened. NZ doesnt rely on europe like it once did, and generally the problems in greece/europe hasnt affected NZ to much.