Newcomer Who buys up all these expensive properties?

[Frisel]

Given the reported average monthly wage of $1000 in Argentina, coupled with the longstanding economic challenges, there's curiosity about who comprises the property buyers in the country. The seeming incongruity arises from the perception that real estate in Buenos Aires is notably expensive compared to many regions in the United States.

It prompts the question: What demographic or segment of the population is fueling the real estate market in Argentina, particularly in the context of what is generally considered a struggling economy?

 

[SerchMinm]

Right now it seems that nothing is selling but otherwise it's around 5% of the population who have enough money to buy expensive properties. Maybe another 5% in the upper middle class.

 

[earlyretirement]

Consider that there is NO functional banking system in Argentina. While it's improved quite a bit since the last crash, no one really trusts it. The ONLY safe things to invest in Argentina is land and "bricks". That probably won't change until the end of time. Further consider that most wealthy locals don't have anything else safe to put their money in besides apartments/properties. And if they are going to invest they'd rather do it in the Capital. Same goes for many other wealthy people I know that live in other cities in Argentina. They aren't buying in Bariloche, Salta, Mendoza, etc. They ALL bought in the Capital. (Mostly Recoleta and Palermo).

Just look at a HOA bill and you will see many, many same families that own many units in the same building. I'm certainly not saying prices are cheap in BA now. Quite the opposite. But you had over $100 BILLION come back into Argentina with the tax amnesty and most of it went into real estate which artificially drove up the prices.

The one lesson that can be learned from the various recessions/depressions Argentina has had is if property prices fall drastically in the Capital in good areas, buy it up.

At these prices, it's not a good investment because ROI on rentals is far lower than you can get in other places. But many people that brought back money with the amnesty didn't have a choice to put it into anything else safe.

Prices DEFINITELY will fall as the recession gets worse. But rest assured there will be investors that are ready to pick it up.

 

[PhelipCer]

The demand for high-end properties has seen a significant decline of approximately 80 percent, primarily driven by investors retaining their dollars. Argentina boasts a comparatively petite yet exceedingly affluent class, surpassing even the wealth distribution seen in Europe and Australia. It's not uncommon to encounter clients who own upwards of 20 properties, a rarity in many other regions.

Despite the wealth within this elite demographic, the real estate market faces a confidence crisis rather than a financial constraint. The prevailing sentiment is more pessimistic than ever, surpassing even the challenges posed by the "cepo cambiario" (currency controls).

Caution appears to be the watchword for the foreseeable future, as tough times seem imminent in the Argentine real estate landscape.

 

[earlyretirement]

The demand for high-end properties has seen a significant decline of approximately 80 percent, primarily driven by investors retaining their dollars. Argentina boasts a comparatively petite yet exceedingly affluent class, surpassing even the wealth distribution seen in Europe and Australia. It's not uncommon to encounter clients who own upwards of 20 properties, a rarity in many other regions.

Despite the wealth within this elite demographic, the real estate market faces a confidence crisis rather than a financial constraint. The prevailing sentiment is more pessimistic than ever, surpassing even the challenges posed by the "cepo cambiario" (currency controls).

Caution appears to be the watchword for the foreseeable future, as tough times seem imminent in the Argentine real estate landscape.

I absolutely agree with you Perry. Even those that have a lot of money during times of recession press the pause button and wait on the sidelines and see how things play out. I totally agree with you about the wealthy locals there. I have wealthy friends all over the world that are very wealthy but many of them don't hold a candle to some of my Argentine friends. Yes, several of my friends (and their family) own over 10, 15 or 20 properties in their family and just live off the income spun off from these rental properties.

Yes, no doubt about it there will be very tough times ahead for Argentina. I don't see anyway out of it. IMF bail out will only realistically carry them to the end of 2019. It's going to be tough times.

 

[bwyonsea]

Real estate is the best way to wash money. So, there you have your answer: illegal money: drugs, tax evasion, brives, etc.

 

[bwyonsea]

The demand for high-end properties has seen a significant decline of approximately 80 percent, primarily driven by investors retaining their dollars. Argentina boasts a comparatively petite yet exceedingly affluent class, surpassing even the wealth distribution seen in Europe and Australia. It's not uncommon to encounter clients who own upwards of 20 properties, a rarity in many other regions.

Despite the wealth within this elite demographic, the real estate market faces a confidence crisis rather than a financial constraint. The prevailing sentiment is more pessimistic than ever, surpassing even the challenges posed by the "cepo cambiario" (currency controls).

Caution appears to be the watchword for the foreseeable future, as tough times seem imminent in the Argentine real estate landscape.

Of course, there was cepo with a strong economy while now the economy is in freefall.

 

[earlyretirement]

Real estate is the best way to wash money. So, there you have your answer: illegal money: drugs, tax evasion, brives, etc.

Hmm. It might be a way to "wash money" as you say but these days they are much more stringent. The last few properties I've bought and sold I had to fill out a lot of paperwork and they even took fingerprints. Years ago when I first started buying there wasn't too much to it.

 

[bwyonsea]

Hmm. It might be a way to "wash money" as you say but these days they are much more stringent. The last few properties I've bought and sold I had to fill out a lot of paperwork and they even took fingerprints. Years ago when I first started buying there wasn't too much to it.

Not at BA Province.

 

[earlyretirement]

Not at BA Province.

Ah, I'm not sure about the provincia. I've only purchased properties in the Capital and not the provinces so I don't know what the reporting is like there. But as mentioned, the past few purchases as well as the last few sales, I had to fill out detailed paperwork as well as they took my fingerprint.

 

[SerchMinm]

Ah, I'm not sure about the provincia. I've only purchased properties in the Capital and not the provinces so I don't know what the reporting is like there. But as mentioned, the past few purchases as well as the last few sales, I had to fill out detailed paperwork as well as they took my fingerprint.

Finger prints? Who did that? And you are a Permanent Resident or citizen?

The finger printing procedure must be a very recent thing.

 

[earlyretirement]

Finger prints? Who did that? And you are a Permanent Resident or citizen?

The finger printing procedure must be a very recent thing.

No, it's not TOO recent. As long as 2 years ago they have been doing this. It's the Escribano that does this during the Escritura signing. There is a long paper (8.5 X 14) paper with a bunch of information to answer including name of spouse, occupation, CUIT/CUIL, DNI, address, employer, etc. Then at the end the Escribano brings out an ink pad and takes your finger print on it.

I'm a Permanent Resident. I could get my citizenship but haven't figured out if there is a good enough reason to get this.

 

[Azteca]

No, it's not TOO recent. As long as 2 years ago they have been doing this. It's the Escribano that does this during the Escritura signing. There is a long paper (8.5 X 14) paper with a bunch of information to answer including name of spouse, occupation, CUIT/CUIL, DNI, address, employer, etc. Then at the end the Escribano brings out an ink pad and takes your finger print on it.

I'm a Permanent Resident. I could get my citizenship but haven't figured out if there is a good enough reason to get this.

I just bought an apartment. I didn't give fingerprints at the final signing. And I am still waiting for my DNI.

 

[CarliNeces]

Is it good to buy apartments under costruction from know builders and hope that price will increase when the aprtment is ready or its better to buy ready made apartment.

 

[earlyretirement]

I just bought an apartment. I didn't give fingerprints at the final signing. And I am still waiting for my DNI.

I'm not sure Aztangogirl. It might just be the Escribano didn't follow what is required or he/she didn't happen to require it. I am not even sure if it's a law, if it's what the Escribano requires, etc. I have had to do it on the last several but I can't say if it's a law or if all Escribano's require it. Did you buy a pre-existing property or new construction?

Is it good to buy apartments under costruction from know builders and hope that price will increase when the aprtment is ready or its better to buy ready made apartment.

Carli, well the key term you mentioned is "known builders". That's so key because there are many developers that don't know what they are doing, are new and don't have scale or good contractors, etc. I've purchased many new construction properties for myself including some at the pozo stage (hole in the ground). In every single case I made money buying early. Keep in mind however that in EVERY single case the buildings were really really late from when they said they would be done. Some as late as 2 years late. NOTHING ever finishes on time and they always take longer than they say they will.

Not to say that some weren't a real pain in the ass. One time I bought very early in the pozo stage. I paid a boleto (30% down payment), made payments for 18 months and only had the final payment left. Well, the developer who had done other projects before but wasn't super well known couldn't finish the project for what they said it would cost. Keep in mind we had contracts, did a boleto, I made payments, but at the end they just told all the owners that it would cost 20% more or they couldn't finish the building. They said we could sue them but that would just further delay things. Such is life in Argentina. The legal system is super slow there and it just wasn't a desirable situation. The owners reluctantly agreed to pay 20% more. Fortunately, all of us were up so much from the original purchase price we still did ok.

It's just that typically in Argentina the inflation is at least 30% a year and if the developer doesn't buy enough materials on the front end, manage and estimate their costs well, it can be a recipe for disaster.

But that is a good example of what can happen. Remember it's not like the USA or other first world countries where you have a working and functional judicial system. Sure we could have refused but legal matters take years to settle and expensive still dealing with legal bills. As soon as they were done, I quickly sold that unit and still made a good profit but obviously 20% less!

The further the development is from being done the bigger the discount but also the bigger risk. So obviously it's much cheaper in the beginning. Remember for the most part these are just speculation projects so the developer buys the land and doesn't have the money to build and they build with the pre-sales and keep using the funds from the sales of the units. The closer the building is to getting finish the more expensive it is because the risk level goes down. If sales stall, and the developer doesn't have reserve funds, the project can stall. You get the point.

I can't say one way or another if they are good to buy a new development. Me personally I never buy anymore new development in the pozo stage because I personally am not comfortable with the risk. I saw what happened with that one property and I'll never buy that early again. At the same time some of the biggest gains I've had were buying in the pozo stage. This was many, many years ago but I bought up studio apartments in Palermo before for as little as $50,000 in the early pozo stages and then the value of them now is about $150,000. But those kind of scores are non existent these days and prices are high.

No one can tell you if it's better to buy earlier or not. It's a matter of personal risk and how patient you are. Still, you have to know that even experienced developers have problems. The new construction these days are pretty shitty and not of high quality. There are exceptions to the rule but mostly it's just put up quickly as you can probably see if you visit any of these projects. You have experienced developers that put up buildings in Palermo back in 2007 that are still dealing with lawsuits because things weren't done right. (leaks, elevator problems, windows weren't installed properly and leaking, etc).

Also much just depends how much of a discount you are getting buying early. Property prices in Buenos Aires are always comprised of cost per sq. meter. So just always be mindful of what they are charging per m2. There is no official MLS there are no official costs per sq. meter so you just have to educate yourself at any given time what properties are actually going for. You can go to websites like https://www.zonaprop.com.ar and it will always show you the cost per sq. meter of the property. Just be aware how any sq. meters are uncovered and how many are covered because it doesn't cost the developer as much for the uncovered sq. meters.

New construction or high rises are typically always the most expensive properties vs. pre-existing properties. Buildings with more amenities (pool, gym, spa, SUM, etc) are typically more desirable and more expensive vs. buildings that don't have them. For future long term resale value (as well as short and long term rentals) it's all about Location, Location, and Location.

I own a vast portfolio of residential real estate in many different cities and countries around the world and I always buy in the best areas and I typically always buy for the long term. I'm happy to report although though there are periods of recessions in many of these areas, over the long term my properties in these good locations has steadily gone up and do pretty well with rentals.

I do think about capital appreciation but cash flow is more important to me because it's the rentals (cash flow) that allow you to just ride out the recessions. Typically when I buy for the long term I don't really care what prices are doing in the short-term. Still, I don't want to buy too high in any given city. Property prices are really high right now. I'm personally not buying at these price points. I've been selling my properties in Buenos Aires. I'll still always keep several no matter what prices do because they provide enough cash flow to easily pay off the bills and still manage to make some ROI.

 

[PhelipCer]

To buy a property now is very risky and I would only consider very good deals . The best time of course was 2004 when prices in Palermo Soho were US$ 700 a metre or less . Now it seems inspite of a dollar at 40 pesos prices are US$ 3,000 per metre asking price. The market is unstainable and I would highly recommend that if you have investment properties that you sell now as this has the hallmarks of a very long crash and will not be like 2001 when Argentina recovered in two years.

 

[earlyretirement]

To buy a property now is very risky and I would only consider very good deals . The best time of course was 2004 when prices in Palermo Soho were US$ 700 a metre or less . Now it seems inspite of a dollar at 40 pesos prices are US$ 3,000 per metre asking price. The market is unstainable and I would highly recommend that if you have investment properties that you sell now as this has the hallmarks of a very long crash and will not be like 2001 when Argentina recovered in two years.

I’m NOT buying now and wouldn’t recommend buying now. I’d wait. But I’m not selling more properties as they are in premium buildings and I enjoy them and stay in them while I’m in BA. I bought them many years ago for much lower prices. I bought them to hold for the long term.

 

[bwyonsea]

Ah, I'm not sure about the provincia. I've only purchased properties in the Capital and not the provinces so I don't know what the reporting is like there. But as mentioned, the past few purchases as well as the last few sales, I had to fill out detailed paperwork as well as they took my fingerprint.

No reporting.

 

[earlyretirement]

Thanks Bajo. That's good to know. I have some Escribano friends and they told me they purposely have their office outside of the Capital (even though they conduct almost all their business in the Capital) just because they said reporting requirements can be different based on where their office is. Not sure what specifically they were referring to but sounds like things are more easy going and lax in the Provincia.

 

[Azteca]

I bought an existing property. It was amazingly easy.