Real Estate Timing - Arguments For Now Vs Later?

[wongjoh]

Wanted to get the common knowledge of this community on the timing for buying property here in BA. There are other threads that talk about this but don't sufficiently cover the arguments (they are "gut feelings", "I'm hoping" and "my experience so far") so I'm hoping to condense more reasoned wisdom here.

So, for those who follow real estate or that consider buying now or buying later, what are the arguments that you weigh?

Below are some arguments I can think of. Feel free to shoot them down or add more to them.

Assumptions / Arguments for Buying Later, if you have USDs

• USD will keep rising vs ARS, faster than inflation ==> buyers could negotiate significant discount in pesos because sellers invested in pesos (not dollars) -- at worst, use the Celeste dollar (rate between blue and white). For new "emprendimientos", the blue dollar will rise higher than materials + commissions
• Since properties prices are influenced by dollars, and these go up higher than inflation and salary increases, there will be even less locals who can afford properties, which means less demand, driving supply prices down further. Now, mostly foreigners or Argentinians with USDs will be able to afford them
• Real tightening of USD inflows (e.g., if they closed down cuevas that do USD transfers) could mean that it will be harder to conduct large real state transactions in black. Foreigners will not be able to bring USDs into the country to buy property through legit means (because they'll get the official rate) so that pool is reduced mainly to transactions where the seller also has an account abroad and can receive money there, or those where the buyer can take the risk to take all that cash through Buquebus from Uruguay without declaring. So, now, mainly rich Argentinians (or expats already installed here) with USDs will be able to afford the properties. A bit doomsday scenario to be fair.
• Less sources of financing available -- this is already the case: bank financing is mainly just available to those who work in white. But a worsening of the economic situation could mean that there is no longer *any* financing available, so further dry-up of demand. A bit doomsday-ish too.

Assumptions / Arguments for Buying Now / Not Waiting

• The situation is so pessimistic about Argentina's near-term future that it is already priced into property prices, so they are at the lowest they can be already. The pessimism is higher than reality so any favorable change (policy or administration) will result in higher prices from now on
• While # of transactions has come down, the price per sqm has risen steadily. This is hard to explain but a possible reason could be that there is already a speculative rise going on that signals an early turn and this is manifested in higher prices in good areas.
• Given the 2002 experience, Argentines will not sell good properties for cheap. So while the price may come down, it will not come down much for the good areas (Recoleta, Palermo). Later may be a good investor environment, but for those looking to buy to live there (and requires less renovations) the price differential will not be much to justify the wait (and the rush to find something that you are satisfied with at that time)
• Doomsday scenarios (in the for-later arguments) means it will be very hard to buy later for most everyone (even if prices are cheap), so prices will be moot unless you have a mattress full of greenbacks already.

There are some really smart people here, so I'm hoping to read some good arguments / counter-arguments

 

[mariano-BCN]

I'm very interested in the answers to this too!

 

[Ceviche]

me too

 

[London2Baires]

Well, Don't forget the CEDIN option (which can be used to 'blanquiar' capitals from abroad in order to make a real-estate purchase). They may only be available for a short amount of time (assuming the period for issuing / creating new ones isn't renewed again). This may therefore make a difference to the calculus depending on other related variables.

Some other factors to think about:

Most countries in which the property markets have boomed and busted (EU / USA / India / Dubai etc) are to a significant degree fueled by mortgage or loan based property acquisition, with all the related benefits and risks. In Argentina this is not really the case so, in theory, the same problems of busts happening as a result of people not being able to pay back mortgages isn't quite the same.

Argentines will always say that 'after 2001 the property market in good areas didn't crash', this is usually explained by the fact that real-estate is in reality all priced at a dollar value and so therefore in some sense is insulated from peso fluctuations and other assorted governmental based madness.

On the other hand, Argentines with a long enough memory will remember what happened to the property market in the 'rodrigaso' episode. People who bought before found that the value of there properties were cut in half or more after.

Adding to this is the ongoing NY court case and potential for further sovereign debt defaults....

I know this doesn't really answer the OP question, but does add more factors to consider

 

[Somewhereinba]

The majority of properties are passed on through the family because the younger generation does not have the cash to pay for a house unless it's bought by their parents. The older generation has leftover purchasing power and savings from when the dollar and peso were pegged, even after the freeze and subsequent float. A lot of that wealth is being spent now and will eventually run out unless the family is in a lucrative business like farming or runs a successful business. The Governments recent rounds of acting as a mortgage broker and opening up land for developments on the outskirts of the major cities is proof of how much the younger generation are struggling to purchase property. The key question is when will a commercial mortgage market open up and if so what effect will it have on the price of properties.

I would say in general a mortgage market will increase property prices because of the influx of demand. All the Argentinians I know look at property as one of the only stable investments in the country and believe the prices will continue to go up until economic conditions stabalize and other investments become more attractive. I don't see that happening in the future. My problem is how to get the money out of the country when selling- if anyone has experiences with that I would love to hear it. It is one of the main reasons I am hesitant about purchasing property here. I cannot speculate with any certainty to make a purchase based on that prediction for the price of property in 1 month, 1 year or 10 years. If it is going to be a family home then there is no real benefit to speculating on market movements in my opinion because any potential gain in market prices when selling will be offset by the need to purchase another property at the same market prices as when you sold unless you can live happily in a box.

The key is to wait until you find the right property for the right price, this includes the basics as everyone knows - location, safety, access to public transport, proximity to schools, quality of building. The thing I hate is that the majority of properties I look at especially the new builds use low quality materials and workmanship. I'm not a big fan of the older style houses (design and feel) even though it's clear they are built a lot better than those built today. It looks like if I want something I will be happy with I would have to get it built myself and that introduces a lot of headaches which I'm not prepared to have at this moment. I would say that if anyone happens to find the perfect property for them at a good price considering local market prices then buy it.

 

[ajoknoblauch]

We bought in 2002, and I regret it that we bought just one.

 

[Matiasba]

I d wait and see how this finish.
We could have another 2001 waiting, which I dont think so, but could happen. In 2001 prices went down like 75%.
When the recession begins, and Im talking probably of next government in 2015, prices will surely go down, I dont know how much, dont know how hard the recession will be, if we ll have a huge crisis, or simply a recession, but prices will get cooler.

I dont think we re having another 2001, but the economic activity have risen prices for more than 10 years unstoppably! so expect some change, some stagnation.

 

[French jurist]

I'm on the same boat (planning to buy soon).

It's so hard to predict...

As of now, I have money invested in various assets (art mainly) and my plan is to finish liquidating those during the first semester of 2015.
So I'll be able to buy a piece of land in Patagonia starting in 12/14 months to build my house.

But buying before or after the 2015 elections is indeed the big question. I'll be ready for both...

Another important thing: back in 2002, the best window of opportunity lasted for a few months (it still was very profitable to buy after but to give -maybe again- an example, a couple of Uruguayan friends bought a nice PH in january of february 2012 for 40.000 USD at Cabrera x Bonplan, this place is likely worth now around 150.000 USD).

 

[syngirl]

Not as many people have mortgages these days, but there are quite a few that do -- or that have taken out personal loans to help pay off their cuotas for emprendimientos (a personal credit that doesn't necessarily fall under the realm of hipotecas) These are the people that may start to suffer. Right now there's more room to negotiate prices with emprendimientos, but there's also more risk --- if the building isn't pretty far along I wouldn't even invest because who knows, you may end up in a juicio for years and the building never getting beyond the foundations being laid -- so personally I'd only buy an emprendimiento at the end stages.

There's big business for developers going on right now though -- they are still demanding dollars or at least part of purchase in dollars, which they then turn around and sell on the black market and then buy the building materials. However there is a ridiculously low level of workmanship going on -- we saw a building last week that wasn't yet finished and there was humidity everywhere, from the entrance hall through all the apartments. The muebles in the kitchens were awful, I would actually have requested that they discount the price and give it without the muebles at all. However the apartments needed so much work and the construction so bad that I wouldn't have bought one even if they had taken 30% off of the listed prices (3amb ranged from 120-145, and they wanted 30k USD for a parking spot in the garage that they weren't even paving, it was just filled with gravel -- and this is in Urquiza.) Usually there is not as much room to negotiate the price on the parking spot -- but I can't believe they dared ask the prices they did.

We are also thinking to buy but probably won't be ready (money wise) for another 8 mos or so, so for now we're just tracking prices and having a look so we can analyse whether we're ready to go for it or if it is best to wait another year and a half or more (though seeing how crap construction is, I said to my husband it could easily take a year and half to find a place that is decent enough we'd even consider buying it!)

 

[GS_Dirtboy]

There is no property bubble here. Prices per m2 have been steadily going up. Of all of the possibilities that could happen I put "implosion" at the bottom of the list. If you are fretting over buying or waiting for prices to retreat then you are speculating. So what if they retreat 10% over the next 2 years. Is that really going to change your mind?

There are bigger questions about buying property here at the moment than the price. If you are buying it for rental then you need to decide whether enough tourists are coming to Argentina to make the investment worthwhile. If you are buying it to live in then you need to decide based upon location, workmanship, re-sell value, etc. You need to factor in why you are in Argentina and do you have plans to stay?

The only people I ever knew who wished they had not bought property bought in a bubble. Looking back, most everyone else wished they had bought more - even if the prices at the time seemed high.