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Wonder Where Argentine Real Estate Market Is Headed...

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expat0tree
  8/26/2016 07:43 EST

I noticed that the listings from greater BA areas are all been expanding for the past year or so, realtors adding more and more houses, apartments and lots for sale, I assume the same is the case elsewhere in the coutry, please correct me if i{m wrong. which begs the question of where is the market headed?

Do you guys believe it's all going to sell out and balance out in a timely manner, following classic supply demand principles, or are we entering an overblown inventory buyers marker type scenario? with unions accepting pay hike lesser than inflation, also, people aren't able to buy as many dollars now, the official rate sitting pretty much in par with the blue rate.

if you do believe we are entering oversupply territory, please tell me why is this happening now that macri is attracting a record amount of investment? and launching mega projects?

thanks

TomP
  8/26/2016 09:31 EST

Expatotree,

I am not an Economist but I do follow what International and Domestic Economist say about Argentina because I am heavily invested in vineyards in Argentina that encompasses housing, land and wages.

Candidly I do not give much credibility to what Argentine locals say or Ex-Pats living in Argentina say because their beliefs are often skewed by personal bias.

Regarding housing in Buenos Aires, I think two dynamics are unfolding. First, there are more Real Estate Agents and 3rd Party Reps hawking real estate via the Internet and Social Media because it economically reaches a large audience allowing increased sales and second, housing prices haven’t exponentially increased like food or gasoline, e.g. you don’t see a Condo for sale now for US$200,000 that was US$50,000 three or four years ago.

Interestingly I know an ex Bodega Manager who after a ten year career at a Bodega in Mendoza Province packed his bag and headed to BA. What for, to do Fix and Flips. He buys Condos that need repairs, completes them and then sells at a healthy profit (maybe there’s the making of a TV show here).

I also think that seven or eight years ago people owning houses and land were asking ridiculous prices. Back then I would preview property and often there were three different prices for the same property.

Also, as Christina’s draconian Rules and Regulations choked off foreign investment people couldn’t give their property away so they waited and hoped for a change. Just as everyone hyped the “Good Times” they quickly turned and cried about “Bad Times”. Very few people wanted to buy anything located in Argentina between 2010 – 2015 except the smart ones, foreign and domestic, who doubled and tripled down.

I know foreigners, now ex-pats, that paid US$20,000 and US$30,000 for modest 2 bed 2 bath Condos located in San Telmo back in 2007. Today these Condos are worth US$125,000+ and the Owners are considered shrewd Warren Buffet disciples.
Argentina has NO MORTGAGE INDUSTRY. Buying a home is always an “All Cash” proposition. This is why you see a 35 year-old married couple living with Mom and Dad, they don’t have the cash for a home.

If Argentina had a Mortgage Industry, even with a 50% down payment requirement, you would see an unprecedented increase in new homes that would necessitate workers in all trades, concrete, carpenters, electricians, roofers who would cash their weekly paychecks and buy cars, electronics, more clothes etc. If this was to happen, and it likely won’t until inflation is reduced from 40% to 5%, you might see overbuilding and a glut of homes for sale.

And if Argentina had a Mortgage Industry that would help finance the purchase of existing homes (not newly built homes) you would see the real estate market heat up and perhaps motivate many Argentines to sell their homes in order to trade up and or cash out for obscene profits. This dynamic would be beneficial for all; home owners, home buyers, mortgage brokers, real estate agents etc. until the housing market became super heated and imploded and then repeated the cycle all over again (just like in the USA).

Regarding Unions accepting less than inflation, what they have been offered is close, 30% v. 40%. While my vineyard worker’s wages went up 400% in six years and I witnessed them getting better cars, 2nd cars, recreational motorcycles, expensive toys for their kids and fancy appliances for Mom, most Vineyard and Orchard Owners pondered, “When will it be my turn?”.

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mikelley
  8/26/2016 11:09 EST

Yes Tom I agree but I see a silver lining in the near future. Inflation has to drop to a realistic number as the market price for goods is outpacing the value of such goods. Also the exchange rate for US dollars is remaining constant, a phenomena that hasn’t been seen for years. This will have to stabilize prices as people will cease buying goods which I have seen is already happening. Movement of goods and money have slowed to a trickle already in San Rafael.

Mike

TomP
  8/26/2016 12:05 EST

Mike,

I haven't been in San Rafael for a long time but I will be there in February 2017 - April 2017.

Are you saying that people in San Rafael and cutting back and getting along with held milk, meat, bread, flour, butter because of the scarcity of the items or the prices of the items?

TomP
  8/26/2016 12:08 EST

Sorry Mike,

I typed "cutting back and getting along with held milk, meat, bread, flour, butter..." when I meant to say, "cutting back and getting along with LESS milk, meat, bread, flour, butter..."

TomP
  8/26/2016 12:08 EST

Sorry Mike,

I typed "cutting back and getting along with held milk, meat, bread, flour, butter..." when I meant to say, "cutting back and getting along with LESS milk, meat, bread, flour, butter..."

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expat0tree
  8/26/2016 13:11 EST

Tom,

That's exactly what baffles me, as there is no financial infrastructure and no mortgage plans for young families there should not be an increase in listings and yet there is, and not only that there are more apartments and houses and challets and lots listed for sale in zona sur of buenos aires greater area, but they also ask for hefty dollar amounts, ok so it's not $US200,000 but to buy a half decent house on a 400 square meter lot in an OK location that's not too far from bus stops and shops does cost a good US$100,000 and i know for fact it wasn't priced this high just a few years ago. So does that translate to some kind of market optimism? or just pure speculation and unrealistic expectation on seller's mind?

TomP
  8/26/2016 13:24 EST

expatotree,

I think it's a case of, "speculation and unrealistic expectation on seller's mind".

Many people want to unload now and convert to cash because under Christina selling was not an option. Now it is.

expat0tree
  8/26/2016 19:01 EST

Or maybe they are afraid that things are actually going to get worse and that they won't be able to sell at all?

It's amazing to what extent psychology can influence people's decisions.

Optimism versus Fear, not sure which one dominates the most.

TomP
  8/27/2016 07:58 EST

Expatotree,

Things couldn't have gotten much worse under Queen Christina. Hopefully Presidente Macri will usher in a new economic era. It will take time and of course favor business over labor but labor had its champion, the Kirchners who almost annihilated the country.

"Fear" will almost always win over "Warm and Fuzzy" that's why Politicians employ it so effectively in so many countries.

I launched an email campaign years ago to 250,000 US Realtors. The first subject line was: "The Ten Secrets a Realtor Should Know". The 2nd email campaign had a subject line: "The Ten Deadly Mistakes A Realtor Can Make".

The 1st campaign that used "Warm and Fuzzy" drew 1,100 replies, the 2nd campaign that employed "Fear" drew 3,300 replies.

Think of most advertising, beer, deodorant etc., it isn't really the positive aspects of the product that are hawked, it's the "what you can lose if you don't use it" sublime message that's inculcated into your TV brain.

expat0tree
  8/27/2016 12:15 EST

Makes sense, I guess Argentines are speculative and fearful also because there is lack of information about the real estate market in general, at least in US and Canada the realtor cannot tell complete nonsense to people knowing that anyone can check the latest stats.

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TomP
  8/27/2016 14:15 EST

Thank goodness for the local MLS Boards across the USA that do maintain real estate facts, trends etc.

As mentioned before, in Argentina you could be looking for a property only to have it shown to you by three different parties all with different prices. I encountered different reps claiming different grapes for the same vineyard. One Rep. might say it's a 25-acre Malbec vineyard for US$300,000. A day later another Rep. says it's a 20-acre Cabernet Sauvignon vineyard prices at US$450,000 while yet another claims it's a 30-acre Syrah vineyard proved at US$275,000.

I have also seen a Argentine Seller under contract with you back out for no reason just before closing. It is not unusual when this happens that another party made a higher offer to the Seller at he/she jumped at it.

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