Real estate offices: how do they work?

[igor]

If you go to the original article, the basic statement is that

To buy an average apartment in Buenos Aires, average person has to save all his salary for 8 years.

Let's compare it with USA (it is the only valid comparison, isn't it?). Average salary: 25 grand, average home price: 220 grand.

To buy an average home average american has to save all his salary for 8.8 years.

 

[steveinbsas]

Slightly off subject but affordability of real estate in B.A. is quite low. Who is buying, I know somebody is going to write back and say there is plenty of money and this is the only place to invest, that real estate is cheap compared to..., etc. etc. But really shouldn't this be a warning sign that the market is perhaps overvalued based on local incomes. At what point does the pool of potential of local buyers dry-up? Aren't local real estate markets supported by local incomes? If people can't afford real estate at current prices won't prices tend to fall over time to a level they can? Seems only common sense to me that affordability is key to a healthy market over time. Even if you believe there are a lot more people with money than I think there are in Argentina and that these are the ones supporting the market what are they doing with all these properties as few locals can even afford to rent them? I know with the high inflation a lot of people have invested in real estate but you suspect that returns must be getting awfully low or apartments are sitting empty. If the economy tanks isn't all buying frenzy going to tank as well, if sales fall don't prices as well. Any thoughts.

http://investba.com/2011/03/average-buenos-aires-salary-would-buy-10-square-foot-apartment/

In your post you used the term income and the article in your link refers to salaries. There is a big difference between the two. Also, you only refer to "real estate in BA" and that covers a lot of ground.

Occasionally, a "local" here bitches about foreigners driving up the price of real estate in BA, but they usually don't refer to specific neighborhoods, either. I sold both of my BA apartments (Recoleta and Nunez) to NATIONALS. One was a woman from Misiones buying for her daughters and the other was a BA attorney buying with his girlfriend. None of them seemed to mind that the seller was a foreigner. I had what they wanted at the price they were willing (if not happy) to pay.

My philosophy is simple: If possible, I'll give someone what they want in order to get what I want.

Yes, "if the economy tanks" real estate sales will slow, but that doesn't mean prices will fall, especially in the face of (possibly hyper) inflation. Why would anyone sell for less when the currency is (perhaps rapidly) becoming worth less?

 

[gouchobob]

If you go to the original article, the basic statement is that

To buy an average apartment in Buenos Aires, average person has to save all his salary for 8 years.

Let's compare it with USA (it is the only valid comparison, isn't it?). Average salary: 25 grand, average home price: 220 grand.

To buy an average home average american has to save all his salary for 8.8 years.

Actually your off on your numbers quite a bit. The average family median income is a little north of 50K and the average median price in 2010 was $173k. Roughly then in the states on average a house today is equal to about 3x annual income.

Most measures consider 3x annual salary affordable. 8x times annual income sounds about right for B.A. which I would say is extremely unaffordable.

 

[gouchobob]

In your post you used the term income and the article in your link refers to salaries. There is a big difference between the two. Also, you only refer to "real estate in BA" and that covers a lot of ground.

Occasionally, a "local" here bitches about foreigners driving up the price of real estate in BA, but they usually don't refer to specific neighborhoods, either. I sold both of my BA apartments (Recoleta and Nunez) to NATIONALS. One was a woman from Misiones buying for her daughters and the other was a BA attorney buying with his girlfriend. None of them seemed to mind that the seller was a foreigner. I had what they wanted at the price they were willing (if not happy) to pay.

My philosophy is simple: If possible, I'll give someone what they want in order to get what I want.

Yes, "if the economy tanks" real estate sales will slow, but that doesn't mean prices will fall, especially in the face of (possibly hyper) inflation. Why would anyone sell for less when the currency is (perhaps rapidly) becoming worth less?

I think real estate as a storehouse of wealth only works only if there is real demand and income to support the demand. Doesn't matter where it is. In Argentina prices have gotten extremely rich versus incomes which would seem at some point will reduce demand and then finally prices.

 

[steveinbsas]

I think real estate as a storehouse of wealth only works only if there is real demand and income to support the demand. Doesn't matter where it is. In Argentina prices have gotten extremely rich versus incomes which would seem at some point will reduce demand and then finally prices.

Why do you care? You have been on an anti BA real estate campaign for a long time. but prices have yet to decline.

What exactly are you trying to accomplish?

Are you trying to dissuade foreigners from buying or do you just hope there is a downturn in prices so you can say, "See, I told you so."

If I had followed your line of thinking (not necessarily logic) I never would have invested in BA real estate (one small apartment in 2006) in the first place.

I should add that the 130 mtr2 house (on 5882 mtrs2) I live in now cost significantly less in 2010 than my 73 mtr2 apartment in Recoleta sold for in 2009.

Yes, it's all about location...and I prefer my present one!

And I didn't use a "buyer's agent" to find it!

 

[gouchobob]

Why do you care? You have been on an anti BA real estate campaign for a long time. but prices have yet to decline.

What exactly are you trying to accomplish?

Are you trying to dissuade foreigners from buying or do you just hope there is a downturn in prices so you can say, "See, I told you so."

No, just saw the article that indicates it would take a 100 paychecks for an average family to buy the average property in B.A. which indicates its very unaffordable. I think it is worth pointing this out to people that own property or plan on buying. If you don't agree that's its not affordable that's fine. This could go on for a while but these things have a tendency to self correct over time. You can argue incomes will catch-up or prices will fall. By the way an 8x salary is very high compared to world wide numbers. See the link below from about a year ago.

http://globaleconomicanalysis.blogspot.com/2010/02/least-and-most-affordable-housing-in.html

 

[igor]

Actually your off on your numbers quite a bit. The average family median income is a little north of 50K and the average median price in 2010 was $173k. Roughly then in the states on average a house today is equal to about 3x annual income.

Most measures consider 3x annual salary affordable. 8x times annual income sounds about right for B.A. which I would say is extremely unaffordable.

"...se necesitarían al menos 100 salarios promedio, más de 8 años de trabajo si una persona estuviese en condiciones de ahorrar todo el sueldo."

It looks like they are counting by person, not by household. Household - 2 grown ups.

As to 173k number, it is also questionable.

http://www.census.gov/const/uspricemon.pdf

 

[gouchobob]

"...se necesitarían al menos 100 salarios promedio, más de 8 años de trabajo si una persona estuviese en condiciones de ahorrar todo el sueldo."

It looks like they are counting by person, not by household. Household - 2 grown ups.

As to 173k number, it is also questionable.

http://www.census.gov/const/uspricemon.pdf

Well depending on who you talk to I guess but the $173k is from National Association of Realtors. Don't know what would account for the difference. You could be right that they are talking about a single person, the article in Spanish indicates that, but the article in English states they are talking about a family. Of course to get a better number you would have to get the actual median family income in B.A. and the actual price of an apartment.

Kind of curious how they stated it. However it still seems the prices are pretty rich given incomes. A 500 square foot apartment for $100k, that's $200 a square foot which is very expensive.

The numbers in the U.S. today are under 3x.

 

[perry]

I think real estate as a storehouse of wealth only works only if there is real demand and income to support the demand. Doesn't matter where it is. In Argentina prices have gotten extremely rich versus incomes which would seem at some point will reduce demand and then finally prices.

Very few property purchases are done from saved wages and the majority of purchases in Buenos Aires are actually from other sold properties with a small difference paid up or down . Most people inherit property in Argentina from family and for this reason alone they are asset rich creating the demand for better quality properties using their own property as a stepping stone to a better life.

Most people who buy have just recently sold a property or have finished a harvest or won a judgement . With this healthy pool of people you can see why there is a huge demand to purchase properties in Buenos Aires .

The market is very strong at the moment with a 20 increase in sales from 2010 figures. The driving factor is inflation and the fear of keeping a weakening american dollar .

 

[gouchobob]

Very few property purchases are done from saved wages and the majority of purchases in Buenos Aires are actually from other sold properties with a small difference paid up or down . Most people inherit property in Argentina from family and for this reason alone they are asset rich creating the demand for better quality properties using their own property as a stepping stone to a better life.

Most people who buy have just recently sold a property or have finished a harvest or won a judgement . With this healthy pool of people you can see why there is a huge demand to purchase properties in Buenos Aires .

The market is very strong at the moment with a 20 increase in sales from 2010 figures. The driving factor is inflation and the fear of keeping a weakening american dollar .

I agree fear of inflation is probably driving things now. My point is that this will eventually pass and then real demand and incomes will determine the price. Prices gets too high for incomes, demand slows, prices will eventually fall relative to incomes and eventually return to some equilibrium point probably 3x or 4x annual income.