It appears that a substantial number of loans were extended in the past few years to stimulate property demand. However, in the face of recent austerity measures, anticipated unemployment, and a general decrease in wages when measured in dollars, there arises a pertinent question: When can we expect a decline in housing prices? Are there potential risks of defaults leading to forced sales?
As economic conditions evolve, predictions become crucial. The real estate market's resilience in the wake of these challenges is uncertain, and the potential consequences on property values, default rates, and forced sales are areas of concern that merit careful consideration.
Having spent a decade working as a realtor in Buenos Aires, I am now in a semi-retired phase. I've observed a notable shift in property prices, witnessing a minimum decline of 15% from their peak in January 2018. While some realtors may paint a rosy picture of market stability, my extensive contacts within the real estate community reveal a stark reality – sales have plummeted by a staggering 80% since January.
The preceding years experienced a real estate bubble, fueled by unfavorable economic fundamentals. Despite this, the availability of cheap credit and an overvalued peso made taking out home loans an enticing proposition. In January, nearly 40% of all sales involved credit, with 60% of transactions for properties below 150 thousand, artificially inflating prices across the board. Now, regret looms for those who didn't sell during the peak, as the market has ground to a complete standstill, with only exclusive or reasonably priced properties finding buyers.
Through my market studies and analysis of supply and demand dynamics, I discern a perfect storm brewing. The market is flooded with rental properties hitting the sales market due to meager returns, with most properties yielding less than 2% annually. Notably, popular property portal Zonaprop has witnessed a twofold increase in listings compared to last year, indicating an imbalance with high supply and low demand. This situation is likely to worsen, paving the way for substantial price adjustments in US dollars for Buenos Aires properties.
Examining global parallels, cities in crisis have witnessed significant property value declines, such as Athens, Greece, which lost over 50% of its value since 2006. Argentina, grappling with the world's worst-performing currency (excluding the Venezuelan bolivar), faces predictions of the peso hitting 70 by June 2019. This scenario, fueled by recent massive devaluations, could lead to a cascade of desperate sellers eager to secure dollars. While fear currently prevails in the market, the next stage, marked by desperation, may be imminent.
Considering the prevailing circumstances, my personal recommendation leans toward caution. I would advise against purchasing property in Buenos Aires unless an exceptionally favorable deal presents itself. A prudent approach would be to wait for a year and observe how the market unfolds before making any significant investment decisions.