Real estate offices: how do they work?

[Davidglen77]

From a financial standpoint, Buenos Aires real estate is not by any means over valued. You can't really use average incomes to gauge what real estate "should cost" in any major city because you don't have people making average incomes buying apartments in the center of Buenos Aires, or in Palermo, Recoleta, or Barrio Norte. If you look at what would be considered "working class" neighborhoods, (and I am not insulting anybody by saying this) such as liniers, la paternal, Villa Luro, floresta, flores, parque centenario, and several others, as well as the surrounding suburbs just outside of the Capital Federal, such as Caseros, San Martin, etc. you will find that real estate values are much more in line with local incomes. Since I am a native new yorker I will use New York City as a comparison: do you think that working class people (civil service, government, or teachers, etc.) are able to buy apartments in the prime neighborhoods of New York City? NO! They live in the surrounding areas, such as the Bronx, Brooklyn and Queens. This is kind of how it works all over the world. I don't think real estate values will fall in Buenos Aires prime neighborhoods as the people who can buy them are and will likely not be affected by downturns in the economy except if there is another explosive event such as the corralito in 2001. Unfortunately people who are affected by changes in the economy are middle, working class, and the poor. One example is luxury cars (and I am talking worldwide figures) sales per unit of mercedes, lamborghini, maserati, rolls royce and ferrari's highest end models HAVE increased 20% each year since 2000, all this even though the world is in a financial crisis. That proves that people who can access very high end goods, usually don't lose their ability to purchase them, no matter what is going on in the world.

 

[gouchobob]

From a financial standpoint, Buenos Aires real estate is not by any means over valued. You can't really use average incomes to gauge what real estate "should cost" in any major city because you don't have people making average incomes buying apartments in the center of Buenos Aires, or in Palermo, Recoleta, or Barrio Norte. If you look at what would be considered "working class" neighborhoods, (and I am not insulting anybody by saying this) such as liniers, la paternal, Villa Luro, floresta, flores, parque centenario, and several others, as well as the surrounding suburbs just outside of the Capital Federal, such as Caseros, San Martin, etc. you will find that real estate values are much more in line with local incomes. Since I am a native new yorker I will use New York City as a comparison: do you think that working class people (civil service, government, or teachers, etc.) are able to buy apartments in the prime neighborhoods of New York City? NO! They live in the surrounding areas, such as the Bronx, Brooklyn and Queens. This is kind of how it works all over the world. I don't think real estate values will fall in Buenos Aires prime neighborhoods as the people who can buy them are and will likely not be affected by downturns in the economy except if there is another explosive event such as the corralito in 2001. Unfortunately people who are affected by changes in the economy are middle, working class, and the poor. One example is luxury cars (and I am talking worldwide figures) sales per unit of mercedes, lamborghini, maserati, rolls royce and ferrari's highest end models HAVE increased 20% each year since 2000, all this even though the world is in a financial crisis. That proves that people who can access very high end goods, usually don't lose their ability to purchase them, no matter what is going on in the world.

No I think you are missing the point. The article wasn't talking about any specific area of B.A. but average cost in the city of B.A. overall versus average income overall. If people have a dollar to spend and what you have costs a dollar you will make some sales. If you raise your prices to $2 then I believe your sales will fall very low. Whether or not your product is overpriced at $2 is for you to determine, but you won't be able to sell it unless you cut the price. If incomes don't make any difference (in real estate or anything else) everybody would be driving a Ferrari or a Rolls, but the last time I checked they weren't.

 

[Davidglen77]

No I think you are missing the point. The article wasn't talking about any specific area of B.A. but average cost in the city of B.A. overall versus average income overall. If people have a dollar to spend and what you have costs a dollar you will make some sales. If you raise your prices to $2 then I believe your sales will fall very low. Whether or not your product is overpriced at $2 is for you to determine, but you won't be able to sell it unless you cut the price. If incomes don't make any difference (in real estate or anything else) everybody would be driving a Ferrari or a Rolls, but the last time I checked they weren't.

YOU completely missed the crux of my comment. 1st you can't group all products being offered for sale in the same group because they are not all geared to the same group of buyers. If that were so, then how do you explain the fact that the high end malls such as Alto Palermo, DOT and Galerias Pacifico are packed to the gills every day if the economy is so bad and NOBODY has money to buy. Apparently it's not the case. You have a small percentage of the general population that has high purchasing power and those will be the ones shopping there, buying real estate in prime neighborhoods and high end automobiles. Everybody else will be shopping on Cabildo (which is fine), Av. Córdoba at the outlets or at La Salada. These are called market sectors.

 

[gouchobob]

YOU completely missed the crux of my comment. 1st you can't group all products being offered for sale in the same group because they are not all geared to the same group of buyers. If that were so, then how do you explain the fact that the high end malls such as Alto Palermo, DOT and Galerias Pacifico are packed to the gills every day if the economy is so bad and NOBODY has money to buy. Apparently it's not the case. You have a small percentage of the general population that has high purchasing power and those will be the ones shopping there, buying real estate in prime neighborhoods and high end automobiles. Everybody else will be shopping on Cabildo (which is fine), Av. Córdoba at the outlets or at La Salada. These are called market sectors.

Even sectors effect each other. In a high end neighborhood when selling a seller must find a buyer. If I live in a less expensive area and want to move up I still have to sell my place before I can buy yours. If I can't sell mine because people can't afford it then I won't be able to buy yours. As prices get ever higher the number of potential buyers begins to fall and eventually the music stops. If you have a local real estate market where average prices have reached 8x annual income that market is likely headed for trouble at some point. Again that was what the article was talking about the city as a whole not the well to do subset.

 

[rrptownley]

Thank you all very much for this detailed discussion. I find BA property very interesting. One thing I note is that a lot of what you hear about the subject seems to be opinion rather than source quoted fact. I have not come across much data on the real estate market here, apart from this site, where I can not really credit the original source of the data.

Does anyone know of any source of data or analysis for the property prices, price per square meter, demographic of purchaser, mode of finance etc.?

 

[Davidglen77]

Thank you all very much for this detailed discussion. I find BA property very interesting. One thing I note is that a lot of what you hear about the subject seems to be opinion rather than source quoted fact. I have not come across much data on the real estate market here, apart from this site, where I can not really credit the original source of the data.

Does anyone know of any source of data or analysis for the property prices, price per square meter, demographic of purchaser, mode of finance etc.?

Forget the part about "demographic" of purchaser. This data is not collected here in Argentina. That is data that is collected in the USA at the bottom of mortgage applications, and since here there is no standard questionnaire when you buy real estate, there is no way for the inmobiliarias to transmit such data collectively. In the USA it's collected to make sure financial institutions are following the fair lending act, which they are supposed to, but usually put minorities at a disadvantage anyway giving them loans at higher interest rates, with higher fees and less favorable terms, just like what happened with the whole subprime lending disaster, the groups that were hurt the most were low and middle income african americans and latinos.

 

[gouchobob]

Forget the part about "demographic" of purchaser. This data is not collected here in Argentina. That is data that is collected in the USA at the bottom of mortgage applications, and since here there is no standard questionnaire when you buy real estate, there is no way for the inmobiliarias to transmit such data collectively. In the USA it's collected to make sure financial institutions are following the fair lending act, which they are supposed to, but usually put minorities at a disadvantage anyway giving them loans at higher interest rates, with higher fees and less favorable terms, just like what happened with the whole subprime lending disaster, the groups that were hurt the most were low and middle income african americans and latinos.

I don't think this is what he meant. When he says demographic he's talking about income level, family size, how are properties paid for, financed, etc. that would allow you to analyze the real estate market in general on a objective basis.