Who buys up all these expensive properties?

[Aztangogirl]

I bought an existing property. It was amazingly easy.

 

[earlyretirement]

I bought an existing property. It was amazingly easy.

I don't think anyone is saying how easy or difficult it is to purchase. I think some are saying prices now are relatively high.

 

[perry]

I don't think anyone is saying how easy or difficult it is to purchase. I think some are saying prices now are relatively high.

I certainly would not buy now as the market is on a slippery slope. Rent a property for a year and see what pans out if the economy improves (a miracle) then buy.

 

[earlyretirement]

I certainly would not buy now as the market is on a slippery slope. Rent a property for a year and see what pans out if the economy improves (a miracle) then buy.

Yes.. I'd agree with that advice. My friends that want a place in Buenos Aires, I tell them there is NO hurry to buy now. Prices certainly aren't going to go higher in the short-term. The only friends buying are people that are wealthy and buying in buildings that have units that rarely come on the market so when one comes available they are buying now which I can't fault them for.

But as I always point out to people no matter where in the world you go. Real estate prices don't go up in severe recessions. The thing you have to ask yourself is what is going to happen in Argentina that is going to cause the economy to drastically improve in the short-term? I can't think of much. The IMF emergency loan is a bandage. And even that will take you into the end of 2019/beginning of 2020. Then what?

Argentina will always have these bouts of crises because systemically the country is broken. And without a complete overhaul of their tax code, labor laws, and fiscal spending and social policies I'm not sure there is any hope of long term systemic change. So the best you can do as an investor is make sure you have cash during the crashes and pick up assets when they are lower. It's a really horrible situation for the locals but for investors it's the time to actually make money.

The best that a local can do long-term is have a paid off place that they own free and clear, watch their spending, and save up as much as you can and be prepared for these continual crises periods that will keep happening.

That's the thing I hate about real estate - the best time to buy was always in the past.

Ha, ha. So true! As far as capital appreciation, timing has a lot to do with how well you do when you eventually sell. But even if you buy at high prices just be mindful of why you're buying the property at any given time. And look at the yields on rentals. I have friends that bought when prices were high but it does well enough with rentals that they can ride out any weak periods. As long as I buy in a premier location and as long as it has good cash flow, long-term I feel fairly comfortable buying and owning real estate. But right now in many cities I'd just totally wait to buy.

Prices are very high not only in Buenos Aires but also in most parts of the USA. I picked up many properties in the USA at the bottom in 2011/2012 and watched them increase tremendously in a short amount of time.

 

[Aztangogirl]

I don't think anyone is saying how easy or difficult it is to purchase. I think some are saying prices now are relatively high.

The prices are high for peso earners I agree. But I came with dollars. And there is no city in the United States I could have bought a nice one bedroom apartment for the price I paid here. I know it is all relative. I moved here from Arizona, a state that is being flooded with people from California. You can sell your tiny house in California and buy a mansion in Arizona.

 

[earlyretirement]

The prices are high for peso earners I agree. But I came with dollars. And there is no city in the United States I could have bought a nice one bedroom apartment for the price I paid here. I know it is all relative. I moved here from Arizona, a state that is being flooded with people from California. You can sell your tiny house in California and buy a mansion in Arizona.

Exactly Aztantogirl. It's all relative. What's expensive to one person is cheap to another. What you mentioned is what I was alluding to. Prices are very high in the USA right now. You could pick up properties cheap previously in almost all of Arizona. It was really really cheap in 2011/2012 there. Even 2013 was reasonable. But then you had people from California moving but also you have a lot of companies leaving other states to move to be based in AZ and those relatively high paying jobs is pushing people to buy and it put pressure on prices so they kept going up. Now prices there are over priced. But at least there is a correlation to what people earn locally vs. real estate prices.

People that don't know Buenos Aires well don't realize it's another universe. It's NOT tied for the most part to what locals make. The truth is locals would never be able to purchase based solely on their salaries. It's another universe there that you have to tie together and remember all the bizarro factors that go on in Argentina.

Things like NO functional banking system, NO trust or faith in their own currency, NO trust or faith in the political system, NO trust or faith in the tax system. NO trust or faith in ANY other investment in Argentina. NO other investment that will give them a relatively guaranteed ROI and cashflow and is fairly stable if they plan to hold for the long term that also has really strong individual property rights, 0% capital gains tax as long as they purchased as an individual. You gotta understand all the dynamics of what is going on in that whacky country.

The alternative for a lot of people is to literally put their cash under the mattress or in a safe at home which has big inherent risks. They previously hid their cash offshore outside of Argentina but that is not so easy these days. So many wealthy people just put properties into family members names. I know several wealthy friends that have properties in the names of their kids, their siblings, their parents, etc.

 

[Ries]

I think that buying for a permanent home, buying for a part time home, and buying as an investment with the idea of renting it out, are all very different, as well. My kids are living in Seattle right now, where a condo in an average building is running between $400k and $800k for one bedrooms. There are virtually no older buildings as nice as the ones in Recoleta, but if there were, a 2 bedroom in one of those would be a million. NYC has many studio apartments going for $750.
So- if you are not earning in pesos, but retiring or have international income, there are a lot of apartments in buenos aires, particularly in older, magnificent buildings, that are half the cost of a similarly sized, new and shoddily built unit in many US cities.

If you are upper middle class argentine, with a dependable income, as the two recent buyers in my building were, paying $300k usd or so for a very nice 100 year old apartment in a good neighborhood also makes a fair amount of sense. These are people who are not planning on flipping, or worried about getting their money out of the country- they are planning on living in these units for decades, often until they cant live there any more due to old age. So they worry less about short term (3-5 year) variations in price, and are more focused on the fact that long term they will still see appreciation- they are not building any more buildings like these, a block from Santa Fe, in Recoleta.

Both of these buyers- the locals with a very long range view of ownership, and the international buyers who are comparing the cost of a second home in BA versus one in London or Paris or NYC- are going to keep buying- but only the best units, in the best locations. Neither of these is particularly interested in most of the new units (possibly excepting the really fancy ones in Puerto Madero) because the quality of these new buildings, even if they have a pool, are just crap, especially compared to the ones with 100 year old tile, hardwood, stained glass, marble, plaster molding details, and 4 or 5 meter tall ceilings.

 

[earlyretirement]

Yep. My friends that recently bought are from NYC. And they bought in a gorgeous 80 year old French style building and they bought to retire in. So as you mentioned it’s all relative.

I own several properties in Buenos Aires and will hold them for the long term. I didn’t buy them to flip. Although they have appreciated tremendously over the years, I don’t need to sell them and I already own many properties around the world that I also bought for the long term.

I love investing in real estate more than any other asset class or investments. A great property in a great neighborhood long term will always do well. I plan on passing on all the real estate to my kids someday which is pretty much what the locals also do that own a lot of real estate.

All of my wealthy friends in Argentina have a buy and hold strategy and they all own multiple properties in BA.

 

[Kdia]

The Argentines have limited places to invest for the long term, especially in an inflationary economy, and Real Estate is one of the few. Another is investing in USDs.

 

[Patagone]

What are everybody's thoughts about the current real estate market, one year later? Clearly the economy hasn't recovered, au contraire.
But it seems the prices also haven't really tanked, but the number of actual sales did.