When will property be cheap in Buenos Aires?

[HenryNisental]

When the blood runs in the streets!!

 

[garryl]

Many people that don't understand Argentina mistakenly believe because the economy is so unstable and inflation is so high that property prices would plummet. While I do agree that property prices are very high there, I don't think they will plummet. They could soften but in a country where there is NO safe investments except for bricks and land, real estate should always do ok over the LONG term.

With the instability of the peso, many, many many locals use it as a sort of bank account. The rental yields aren't too good but still will make a few percentage points per year in guaranteed cash flow. I still own several apartments but mostly have been selling my properties there in Buenos Aires the past two years as prices are high.

I didn't sell because of a fear that prices would crash. More so, that you can make a much higher yield with much better capital appreciation potential in other places. With the crazy inflation there, HOA and expenses have gotten really expensive even considering the US dollar exchange rate is so high. There has been a total explosion in the # of listings on the market which causes short-term rental prices to be capped for the most part. The only properties that I know of that are still making double digit % cash flow are larger properties that have limited competition. But the studio or 1 bedroom apartment is totally inundated and difficult to make great returns.

Plus Argentina being Argentina you have hassle factor of dealing with shady property managers, horrific utility companies, internet companies which can be problematic to deal with or constantly going down.

I'll always keep a few properties in Buenos Aires but rental yields are not good there. But it's exactly as you mentioned, "Bricks/land" are a safe haven for many locals. Also, you have to remember all of those billions of dollars that came into Argentina during the last amnesty program all went into real estate or will go into real estate. I recently sold 2 very small studio apartments in Soho and sold them within a few days of listing it. My realtor found a potential buyer but in the end I just sold them to a local friend. Their family just continues to build up their real estate portfolio.

Personally, I believe this is a good time to sell. NOT a good time to buy. Most of the buying is NOT by foreigners but by locals. I sold 7 of my properties all in the past 2 years and in each case it was a local that bought it. In each case they were locals that brought back $$ during the last amnesty program.

For foreigners there isn't really any good reason to buy unless you're planning to keep it for the long haul or retire there and you are absolutely in love with the property. Otherwise, with the plethora of properties on the rental market you can easily rent something wonderful on Airbnb vs. buying.

No one can say if property prices can keep going up. Personally I think they are very expensive now relative to rental yields but I'm not in the camp that says prices will crash. What I've noticed is that higher end bigger more expensive properties are sitting on the market longer. But my studio, one and two bedroom properties sold relatively quickly. But they were all move in ready and renovated.

Plus, to add insult to injury for reasons not to buy now...... previously there was 0% capital gains tax. But starting if you purchased a property after January 1, 2018 you have a capital gains tax when you sell your property.

Really the key and what it comes down to when you buy real estate is location, location, location. Over the LONG term I always feel comfortable buying and holding real estate in premium areas. Typically you can get a premium on rentals so you have decent to good cash flow on rentals until you sell. In times of recession, of course the values will go down but over the long term they will typically come back up.

Case in point, in many areas in the USA property prices fell 50%. I purchased properties in the USA in 2011 and 2012 at the bottom and today they appreciated over 50%. Much of the question to ask yourself is why do you want to buy? What's the motivation and what will you do with it. To many people that are buying to live, it's not really an "investment" to them but a "home" where they want to nest and settle down in. If that's the case then even now at the high prices, it can make sense to buy in Buenos Aires.

I have close friends that fall into that category and even though prices are high in Buenos Aires they are still much much cheaper for them vs. NYC or London where they live and bought insanely nice properties in Recoleta and Palermo Soho.

Looks like foreigners are doing better, they bought it when market was down, and sold to locals in the past few years when market was up.

 

[perry]

Looks like foreigners are doing better, they bought it when market was down, and sold to locals in the past few years when market was up.

Early Retirement brings up a good point about the very punitive capital gains tax of 15% on purchasers of new properties . This capital gains tax of 15% does not contemplate the sale of properties in dollars and uses the argentinian peso as its guide . For example if you purchased a 100 thousand dollar property in February of 2018 the peso value would have been 1,700,000 pesos . Now in May 2019 the value of this same 100 thousand dollar property is 4,550,000 pesos meaning that on paper there has been a ganancia of close to 3 million pesos due to the devaluation of the argentinian currency .The tax on this minus some deductions would be approximately 345 ,000 pesos or at todays exchange rate close to US$ 8,000
This means that you must pay 15% tax on this supposed ganancia that you did not earn in dollars selling the property at the exact same price that you brought it . Please also note that you have to pay iti tax and stamp duty tax as a seller meaning that your tax liability of a non profit sale in dollars will exceed over 10% of the value of the property in us dollars .

Please note that this tax is only for properties brought after 2018 and the tax is only applied when selling as a capital gains tax of 15% . For those who brought beforehand you only pay iti tax and stamp duty .

 

[lunar]

... very punitive capital gains tax of 15% on purchasers of new properties .

I guess, you mean on sellers, not on purchasers, right?

 

[perry]

I guess, you mean on sellers, not on purchasers, right?

Yes on buyers who have purchased from 2018 when they sell in the future they must pay 15% capital gains tax.
If you have brought before 2018 you are not liable for paying this tax when selling .
Sellers for properties brought in 2018 and onwards must pay a 15% capital gains tax in pesos on their appreciation of their asset . ( the law does not contemplate devaluations )