| Author | Message | ||
     Patrizio New member Username: Patrizio Post Number: 1 Registered: 2-2008 |
I know many foreigners who come to Buenos Aires, like it and see it as a place to buy a residence or make a real state investment because of it low cost compared to international prices in similar cities. Well, unless you`re willing to lose aprox. 60 percent of your investment in a two year period, i would advice against it. Here are some hard facts you might want to take into account while making an investment in real state in Buenos aires. These are indicators of overprice and an upcoming general fall in real state. For this exposition we`ll have into account that is the internal market the one that decides the price of realstate because of its dimensions. Also the fact that the general population had had a chance to save up US dollars during the 90`s while the currency exchange was 1 peso= 1 dollar. Now the currency is 3.15 pesos=1 dollar, only that the prices of real state remained in dollars, since people had their savings in dollars and were able to make transactions with them for a while after devaluation (2, 3 years after 2002 and until more recently on cheaper propperties) Now salaries varies from 350 Us Dollars up to a $ 1000, for the general population, the latter one being the exception. In the other hand, a 1 bedroom, 1 living room appartment 50 sq metter aprox, in a decent neighbourghood like palermo is worth $80.000, $90.000 US. So, now there is no way average population are able to pay a 1 bedroom appartment unless they are willing to save up their entire salary for the next 228 years . Banks even tried to make the best of the situation, by giving credits for the entire ammount of the propperty (yes, you heard right, 100% financiation, no down payment), but the catch is that the person had to make more than 1700 US dollars salary, and they only finance up to 60.000 US.Again credit is not accesible for the general population. It is a rule that people will buy a thing when its cheaper to buy than to rent it. Then... How much is rent? Rent is from 3.000 US annually to $4800 US. That`s 3,75 % to 5,3% annual return on the $80.000, $90.000. Well, any other solid investment like mortgages loans will pay up to 15% annually (at least in BA), so we`re talking about that is 3 times cheaper to rent than to buy. In other words, instead of buying the appartment, you could rent three of them with the return you get investing the money elsewhere. So people who has the money wont buy, but rather rent. People who doesnt have the money cant get access to a credit to purchase. Internal market is stalled. Thats the first and stronger sign of descalibration in the market. Add to that , there`s a building frenzy in the city. In some neighbourghoods you get to see 2, 3 new buildings per block. Building companies who have the money to build buy a piece of land and build on it, would rather buy two pieces of land, stabblish martgages over them and build in two places making almost twice as much. The thing is the market is pretty much stalled by the factors i just explained. So the credits they took over the land have started eating the building companies up, including the buildings themselves (since its a mortgage on the land). Is not uncommon to hear the building companies saying that they`ll give you the possesion of the propperty with 90% of the money, and they will make the transfer of the propperty once an X pertage of the rest of the building is sold. This means that if they go into bankruptcy people will loose what they pay and the whole building goes to action. So you have no credit, an stalled market, Increasing offer because of the building frenzy and decreased demand, building companies that will end up having to either sell very cheap to cover expenses or go to auction, and last but not least , realtors. Realtors really multiplied over past years due to this building frenzy, and where there was just a bunch renown realtors, now there is an excessive ammount. There are some who put pressure on their clients to drop prices, other are turning to an international market (this is you guys), in order to try and save their businesses from bankrupcy. So, everytime you see about thet great prices of argentina keep in mind that they are just squeezing the last profits in a market that is very close to dropping very hard and very fast, in my oppinion and looking at the indicators a little over 60 percent of their price. I know there is going to be some very angry people ready to contradict me, and its okay, i`m sure they`ll have their interests compromised by this Article. Enjoy and i hope it clear up the scenario for those who are thinking on investing here. If you already invested here, its a great time to sell with a profit (if you are in fact able to sell) and enjoy the show. PS. This article reffers to houses and appartments, i dont think this can affect country lands for harvest, since they are tied to international prices of the commodities. Also coomercial propperties will be the least affected but not excluded, since their value is tied to production and sales as well. //Patrizio | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 394 Registered: 5-2005  |
This is very simple. If you don't want to invest in Argentina, don't believe in the market or feel nervous...it's simple. Don't invest here. No need for long posts arguing with you as many people have already posted for the past years why they would disagree with your post. Just go to the "real estate in Argentina" section and you can read all the reasons why much of what you wrote is wrong. I heard and read from MANY people like "Patrizio" over the past 4 years. Real estate here is almost all cash over the table so the claims of 60% losses over a two year period are pretty comical. Banks here don't loan out 100% or 125% of the value of the properies like they did in the USA or the UK. Again, almost all are cash over the table. I've purchased hundreds of properties including apartments, houses, land and buildings. All of them were cash over the table. People aren't getting loans to purchase. They are paying with cold hard cash. So people should read the real estate in Argentina section on this website to learn a bit about real estate here. If you want to look at bubbles you can look at the USA and the reasons for the overvalued real estate with the ridiculous loans. Those don't exist here. Then you take the situation where the locals don't trust the banking system here so they don't keep their money in the bank. They buy real estate. There are no credible/safe investments in Argentina besides real estate. THAT is why prices keep going up. Remember it's not foreigners driving the prices up. (Sure, they aren't hurting) but the real estate market is still driven by LOCALS paying cash. As I've always said since I've moved to Argentina several years ago. Investing in real estate in Argentina is NOT for the majority of people out there. As I said before, public message boards are around for a long time. So let's see a year from now if Patrizio's prediction of a 60% fall is correct. I would disagree with it. Good luck to all. | ||
| Simon Fawkes Member Username: Expatba Post Number: 59 Registered: 1-2007  |
I agree with Mike on this. Almost all real estate purchases are in cash, which reflects the true supply and demand value. Prices here have not been hyper-inflated by the availability of easy credit like in some countries. There may potentially be an issue with oversupply of new build developments - however new builds are not indicative of the whole real estate market. Some new builds have been priced "speculatively" to appeal to foreign buyers - in some areas they are marketed at double the going rate in Recoleta for the same square meterage in an older property. By global standards this appears cheap, but by local standards it's ridiculous. I know many locals who laugh at "stupid foreigners" who will pay these prices and think they are getting a bargain. When they come to sell they may well find (in the short term at least) that they can't achieve what they paid. That's not to say that all new-builds necessarily represent poor value for money. It all comes back to the old adage "buyer beware". If you choose carefully what you buy and do due diligence your investment should go up over the long term. As I said before new-builds are not representative of the market as a whole. Simon Fawkes Author, The Complete Guide To Real Estate Investment in Argentina, ISBN 1430303980, http://www.amazon.com/exec/obidos/ASIN/1430303980 | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 396 Registered: 5-2005 |
I agree with Simon and also on his comments. Also, something I forgot to mention is that I think you have to separate and look at real estate by neighborhoods as well. For instance, I do NOT buy anything in Puerto Madero and really haven't for a few years now. I did buy there several years ago and the property prices have doubled since I bought but I stay away now. There are some developments which are up to us$ 5,000 per sq. meter. I don't pay that much for real estate when you can go to areas like Recoleta and Palermo Soho and pay $2,500 per sq. meter. Again, not to say that all new builds are bad because they aren't. I'm not even saying the buildings in Puerto Madero will lose value in the next few years. I think the opposite. I think they will continue to go up in value. However, I think Recoleta and Palermo will go up in value at a much faster rate. Real estate here (and in any place in the world) should NOT be purchased as a "get rich quick" type investment. It's certainly not. However, many investors have different reasons for buying real estate in Argentina which inclue but are not limited to asset diversification, asset protection, tax reasons, estate planning reasons, getting some money outside of the USA/UK/Europe (wherever they are from), cash flow via rentals, future capital appreciation potential or some people just love the city and come over and over and they want a "home base" when they come here since 5 star hotels are charging upwards of $450/night + with the 21% tax. Many are intelligent businessmen that come over and over to the city and their companies give them up to $400 per night to spend on a hotel. Instead, I showed them that they can buy a property, stay in their own property every trip and bill their company less per night staying in their own place essentially having their company pay for their place. Everyone wins as the company is actually paying less per night than a hotel. I have some clients where their companies over the course of a few years ended up paying for their apartment because they stayed in their own property. All perfectly legal and not breaking any rules with the corporations. Also, consider that Patrizio's numbers are based on locals or property owners renting to other locals. That isn't the case with many owners now. Many owners have seen my business model that I created back in 2002 renting to foreigners instead of locals. Their returns are MUCH higher than Patrizio is claiming. In fact, many properties here the owners are making more rent than they could make in the USA or Europe on a property that costs 3 or 4 or 5 times more. Also, the expenses here are a fraction of the cost back home. Expenses here are very very low. Expenses in pesos and income in dollars. I'm talking like $5 a month water bills; $15 a month electricity bills, $5 a month gas bills. There are lots of reasons why people buy real estate here. VERY rarely is there only one reason. Cheers all. | ||
| Arial Intermediate Member Username: Arial Post Number: 159 Registered: 10-2006  |
Patrizio, my son has an Argentine friend who is renovating large buildings in San Telmo. He holds your viewpoint. So you have at least one savvy professional with a lot of Argentina experience in your camp! He fears that Argentina is getting ready to stage a repeat of past performance and does not want to be caught in it--again. I think that you could be right. No one has a crystal ball. However, one additional factor that has been added to the mix is that Argentina is a resource-rich country. Commodities are now in one of the biggest bull markets in history. This has not been the case for many years. Might this make a difference for this country? I hope that it will. Thank you again for giving us your analysis of this market. I appreciated it. | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 397 Registered: 5-2005 |
Arial, Definitely I think different viewpoints on a message board are healthy. Certainly the world would be very boring if EVERYONE thought the same way. In fact, as an investor I wouldn't like it as there wouldn't be the opportunities to get in and get out if everyone thought the same way. There have been lots of savvy professionals here that have called the real estate market wrong the past several years. In 2004 they said it topped, same in 2005, 2006 and also in 2007. Now, I don't have a crystal ball, however, I'll say since 2002 pretty much every single forecast I've made has come true in both the USA and Argentina as well as other places around the world. This includes with the economy, real estate markets, exchange rates, gold prices, etc. Now, I'm NOT advocating speculation projects. I agree with the risk there both from an inflation standpoint and a possible exchange rate change. Costs are priced in dollars and expenses are in pesos. So I don't like those plays and I don't really invest too much anyone in total speculation projects. However, when I want to build a building up. I can go out and get all the investors together and get 100% of the millions needed to fund the project. I can buy all the materials to shield the possible liability of inflation but labor is still something you have to deal with. However, on pre-existing properties. Ask your friend if these people sold their properties, what are they going to put their money into? Most people sell their properties to buy another piece of property (either upgrading or downgrading). I mean, sure, many have off-shore bank accounts but with the Patriot Act these days it's almost impossible for a foreigner to open up a USA bank account and other countries are tough as well. So ask your savvy friend what he feels is honestly the safest investment in Argentina. Ask him if he would rather put money in the banks here in Argentina or buy a property. Ask him what he would do or what he would select? I doubt he will say putting it in the bank here. Ask him to give you a list of the top investment opportunities other than real estate (apartments, buildings or land) that are predictable and safe here in Argentina. I'd be curious to see his list. (Or you, Patrizio..... please give us the top 5 investment picks you give. Since you are predicting a 60% fall in real estate in 2 years here.... throw us out your list of your top 5 investments for Argentina that are safe... I'd be curious to see your list as well. Ask any local what the safest investment for locals has been over all the years here with the instability of Argentina... I can almost guarantee they will tell you it's "bricks/walls" that are the safest investment that has consistently been the safest. You have to factor all this in mind to realize the dynamics of why prices are what they are. Never forget that when these banks gave people that had their savings in the banks here a fraction of the actual savings they had and cut off their supply to money for several months, limiting the amount they could take out....remember where many of these locals "cashed out". That's right..they sold their properties for 100% cash over the table.... Many people don't really understand that part of the equation. And understand that point. In fact, if there is more instability here, I think it will make real estate even more attractive as it's considered a "safe investment" here for the locals. Rents prices went up 27% in 2006 and another 26% in 2007. That trend isn't likely to change. So think about all of these things when you say real estate will fall 60% over 2 years. Investigate the entire scenario here and why people buy. Good fortunes to all. | ||
| Patrizio New member Username: Patrizio Post Number: 2 Registered: 2-2008 |
Well, the price is going down, the question is when, and it is related as to how long contruction companies in debt will be able to hold to their propperties before they go out to auction, or how long till market stalls complety. A real state system can`t live exclusivly of foreign market because they aquire it as an investment, as soon as it stops paying a good return they`ll sell. Small appartments are easy to sell, but bigger appartments market has pretty much stalled. | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 398 Registered: 5-2005 |
Ok...so you went from "you will lose 60% within a 2 year period" to "the price is going down, the question is when". That is quite a drastic change in the course of a few hours. So, again, please list the other investments you feel are better than real estate in Argentina. I'm sure all these locals that are buying real estate would LOVE to know your long list so they can sell their properties and get in that investment. Also, I'm not sure where you are getting the idea of "real estate system living exclusively from the foreign market". I'm not sure how involved you are in real estate in Argentina but foreigners are NOT a "majority" of the real estate market here so you might want to check your facts. Cheers. | ||
| Gloria Melgar Estevez Member Username: Glorita Post Number: 54 Registered: 12-2007 |
Patrizzio, As an Argentine who knows alot of people in Argentina in the salary range you state (350-1000), I will cast my vote to say that these people tend to want to get into their own home/apartment. Now you state that such people would have to save their entire salary for 228 years to cover the current home prices. I know alot of people who got into their own homes with their savings in addition with savings provided by family members(such as parents and grandparents). These family members once they have secured their own home, any monies gained after that tend to use it to help their children get into a home because what are the other options?....the banks or under the mattress....and both of these are risky propositions. You as an Argentine(depending on your age) should have plenty recollection of the instability of the country in the past and how this has made "bricks/wall" the safest investment for "MOST" Argentines. Also, there are neighborhoods and there are neighborhoods. I tend to think that anyone investing in Recoleta and Palermo can rest easy as these places are not just reknown to Argentines but the world over. One more thing, how have you come up with this observation? I have been reading "La Nacion" and have not come across such information as of yet. | ||
| Arial Intermediate Member Username: Arial Post Number: 160 Registered: 10-2006 |
Interesting discussion. I would like to find a book (Spanish is okay) on the economic history of Argentina. Anybody have one to recommend? I have read in the past how wealthy Argentina was at one time. Supposedly "Rich as an Argentine" was a common expression. In the past it has apparently been a very expensive country as well and I tend to assume that what it has been before it will be again. If that is the case, real estate prices probably have a ways to go. But when did it change? And why? I donīt expect answers but would like some resources if any of you know of any. | ||
| Roberto Board Administrator Username: Admin Post Number: 1558 Registered: 12-2004 |
> Rich as an Argentine. There was a time when a few wealthy guys would walk with their cows -just like dogs on their leashes- through Florida street, one of the first streets in the city map of 1814. That was the time when argentines would *import* french architects for developing their mansions. We grew up with the belief that if you spit on the ground something will grow -anything- and that 1 crop would pay our entire debt (it was true back then... it may become a reality again!). All to our detriment as we won't be learning the important lessons. You will find many answers after studying the transition from the oligarchy of the beginning of last century to the advent of Juan Domingo Peron in 1945, an event that changed everything to this very day. We are living his legacy (minus/plus), so to speak. Two books I highly recommend are: El ejercito y la politica en la Argentina 1928-1945 (Robert Potash). This one might be in english too. And I believe he wrote the second part too. De Pellegrini a Martinez de Hoz (Mario Rapoport) There is an essay -can't find it now- called 'La Guerra de las carnes" which is critical to understand how the influence of the US increased during the 20's and led to the events of 1930, our first military coup. | ||
| Patrizio New member Username: Patrizio Post Number: 3 Registered: 2-2008 |
I think its important to take responsability for threads (all around internet) offering B.A. as one of the hottest realstate spot. What i`m doing is not sitting idle while some people with loose morals take advantage of others unaware of the market in a comunity that is suposed to help each other achieve our goals and not to take advantage of each other. What you say since you`re getting an advantage out of it, we should all stay quiet while lots of people makes lousy investments? Its just an article for business people in a business forum making an analisys of reality. Btw, its a worldwide trend, see how the analisys done by CNN is sort of similar in this article about U.S. http://money.cnn.com/2007/11/06/real_estate/home_p rices.fortune/index.htm | ||
| Gloria Melgar Estevez Member Username: Glorita Post Number: 56 Registered: 12-2007 |
Patrizio, I think that a lot of the foreigners on this thread that bought in ARgentina, did so some years ago when the "real estate was one of the hottest" places to buy in comparison to similar placesin other parts of the world....and B.A. being one of the hottest(in certain locations). I doubt that any foreigners, at least in this website, recommend buying "NOW" at the current prices. What they are arguing about with you is the fact that you stated that in two years prices could fall 60%. Now, let's hypothetacally say that they do fall 60%.....I, as an Argentine would prefer to have my home(even at a 60% devalue rate) than to have it in a bank in ARgentina....why?....well, you do recall the "corralito", right?....with your home, you have it and live in it . And real estate fluctuates so you can see it go back up eventually. Now with the money in the bank, you can kiss that baby good-bye. Perhaps you have misread some of the posts. I don't think there is no intent to misdirect and take "advantage of others". I think perhaps you have not taken the time to read through the posts in other threads to find the facts and to also understand that we state opinions(which may be incorrect or even if correct not accepted by others). Perhaps also, a language barrier could be making you misunderstand. Sincerely, Gloria | ||
| Gloria Melgar Estevez Member Username: Glorita Post Number: 57 Registered: 12-2007 |
Patrizio, Sorry, I type at the speed of light sometimes and mistate things...I meant to say..."I don't think there is "INTENT" to misdirect and take "advantage of others". Gloria | ||
| Roberto Board Administrator Username: Admin Post Number: 1560 Registered: 12-2004 |
Patrizio, I wouldn't think of someone who tries to maximize profits as having loose morals. Perhaps shrewdness is a better word? In any case, I think you may be underestimating americans when it comes to business. As stated earlier, in the US, citizens are very familiar with the motto 'buyer beware' and in case you still have doubts, they are the founding fathers of capitalism and if they aren't, they have perfected it. Finally, I would think that someone buying real estate is probably considering it as a long term investment, not something they can flip in a year or two. Where do you see real estate prices in dollar terms 10 years from now? | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 401 Registered: 5-2005 |
Patrizio, The information provided on this board is accurate information. Take the time to read over the past few years all the information given and maybe you might learn something. The plain fact of the matter is that some of us have been spot on target about the market here. When doom and gloom type of people were talking about Argentina the past few years, they were exactly wrong. In fact, posts like yours that try to imply that foreigners are the "majority" of the buying here are totally false. It's locals driving up the prices. Supply and demand dictates prices on real estate. Especially in Argentina where it's all cash. Now, I'm probably one of the only people in Argentina that turns WILLING investors away every single day. (In fact, I know at least a few members on this board that I turned away that wanted to invest and if they choose they can confirm that). I've said many times on this forum that investing in Argentina is NOT for everyone. In fact, I've continually said it's not for most investors. The information here is accurate. No one forces anyone to buy real estate anywhere in the world. Real estate investments are VERY serious and I think you will see that there are some responsible, ethical and knowledgable players that only take on clients that they think are a good candidate for investing in Argentina. I've said it before, I believe real estate is a long-term investment not something that you buy and flip. Especially in Argentina where the buying costs are VERY high when you add in the realtor's fee, legal fees and closing costs, money transfer fees, possible stamp taxes, etc. No one can guarantee the direction in real estate. No one. And any investor realizes that. Again, information on this site has been accurate. Also, something interesting is many people that have called the real estate market here the past several years aren't just telling other investors it's a good investment. They also invested their hard earned money on real estate here. And they continue to invest here. I know. I'm one of those people. I don't just tell my clients the merits of buying. I buy real estate here every year. In fact I bought more in 2006 and 2007 than I did in 2003 and 2004. And I'm still buying in 2008. The best thing for an investor if they have doubts, don't feel comfortable, don't feel knowledgable enough is to stay away from the investment. And this doesn't just apply to real estate. It applies to corporations, stock, oil, gold or anything else. Really understand the investment before you invest in it. I'm not one of those people that say buy real estate just for the sake of it. Those that follow this board know the calls I made for people to exit the real estate market over the past several years. There are reasons why I started investing in Argentina. You really need to take a good look what is driving the prices up. So again, please enlighten us on what better investments you recommend for locals to invest their hard earned money in. This is a pretty simple question for you so not sure why you can't answer it. If you are saying real estate is such a bad play here..... do tell what you recommend? Do tell what locals would feel more comfortable investing their money in instead of an apartment or land? I think you will have a very difficult time answering and there in lies the answer why real estate prices keep going higher. Unless there is a fundamentally systematic change where people trust banks or there is something safe that is good to invest in, I feel comfortable in my real estate positions and adding to my portfolio. Cheers. PS -- Definitely I think public message boards are always a good place for people to post their opinions. As long as the information is accurate I think definitely people should post. But you posting about people with "loose morals" is just wrong. Especially considering some of us that forecasted real estate trends here have been EXACTLY 100% accurate! | ||
| Benco Junior Member Username: Benco Post Number: 39 Registered: 4-2007 |
Interesting discussion. I do not have a particularly negative or positive view of the market, since I am lacking the necessary experience and inside information. But there are some points that I think are important to take into account: When looking at past performance of the market, take into account the devaluation of the dollar. Rising dollar prices are in part explained by the weakness of the dollar and have nothing to do with the performance of the real estate market in Argentina. Look at your charts in Euros as well, or better use a basket of currencies. As mentioned before on this thread, real estate is not a uniform market and highly depends on the area. Recoleta is not Buenos Aires and Buenos Aires is not Argentina. Prices have been rising fast in certain areas, but not at all in others. Check if your arguments are really able to explain these differences, general observations (safest investment in Argentina, all cash on the table, etc.) are of limited value. You need to make the right picks. Investing in Argentina is risky, and real estate is no exception. I think property prices fell by 50 percent within weeks during the last crisis (others probably know better). Do not only look at the years after the crisis, look at the long term (short term you will loose anyways due to fees and taxes). Not sure if over the past decades the return on real estate investments in Argentina has justified the relatively high risk. Of course it may be different in the future. For a foreign investor there are obviously all sorts of alternatives, like stocks, bonds, currencies, commodities, and you can invest anywhere in the world. No need to invest in Argentina. But the same is also true for wealthy Argentineans, who can easily buy real estate or other assets abroad (and they do, e.g. for tax "optimization"). I wouldn't put much weight on the argument that real estate is the safest investment in Argentina and that there are no good alternatives. People know how to get their money out of this country. I do not see why a dramatic downturn in the real estate market should be about to happen, although I am not really optimistic on the general economic outlook on the long run (that is another post...). Good luck to all. --- By the way, with respect to the original post let me point out that when saving 350 USD per month it takes 228 months to save 80000 USD. Months, not years. So that is 19 years, in contrast to the quoted 228 years. Please check your maths, since a factor of 12 matters to most investors. | ||
| Arial Intermediate Member Username: Arial Post Number: 163 Registered: 10-2006 |
Question: Is there any reason that Argentines cannot invest in precious metals, foreign currencies (probably not the best since all currencies are devaluing), commodities, etc? Why would it have to be real estate? Just wondering. | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 407 Registered: 5-2005 |
Benco, I think you are making excellent points but I think much of it is common sense when you buy real estate. Certainly I am NOT saying ALL real estate is a good buy. I assumed that was understood from anyone buying real estate (it least it should be). I believe in real estate no matter in the world you are talking about the 3 most important things are 1) location, 2) location and 3) location. I'm VERY selective where I buy real estate and I assumed people understood that. I still say real estate is probably the safest investments for locals. You can try to argue with me but anyone that disagrees should explain their side objectively and explain what are some other good investments INSIDE Argentina for citizens here. Certainly at no time did I ever say real estate in Argentina is the safest and best investment for everyone in the world. In fact, again, I'll point out MANY times I've said it's NOT for the majority of the investors out there. In real estate buying in the right location is so critical but especially in Argentina. I'm very careful where I buy. For example, several years ago I bought several properties in Puerto Madero but I haven't purchased anything there for years. Some developments are between $4,500 and $5,000 per sq. meter. I do not find that to be a good value play. I still think properties can appreciate but I can still good good deals on real estate in Recoleta and Palermo and I feel those are the safest areas with the best return potential on both cash flow and capital appreciation so that is where I buy. I agree that for a foreign investor there are lots of risks if you don't know what you are doing, you don't know the areas well, you don't understand the laws well and know how it all works. Also, if you have a bad property manager you can have things go REALLY wrong. I can tell you horror stories. I literally get 7-10 calls/emails a day from both locals/foreigners that want me to manage their property. I simply don't. I don't manage anything I didn't buy for myself or my clients. For foreign investors there are LOTS of various investment options. Lots. But I think people are a bit confused. Many of the foreigners investing in BA are very savvoy investors that are well diversified and many have done well on real estate deals throughout the world. The same thing is played out all over the world....people have value plays and they move in and then move out when they don't think it can go up anymore. For the foreign market, BA is still a value play. Now, trust me. I've been all over Europe and the properties there it's Simply IMPOSSIBLE to get the yields that are possible in a town like Buenos Aires. People buy for various reasons including tax reasons, estate issues and tax planning, diversification and a hundred other reasons. For the local market, of course the really wealthy can send money abroad. There are Billions and billions of dollars from the locals abroad. But I can tell you for the middle class or upper middle class it's not so easy these days and they still believe real estate is a good play here. Lots of the buying here is NOT from just wealthy families. Quite the opposite. Lots of people have been saving for years, they are families that pool money together, parents that help out their kids buy a SMALL flat in a good area. The dream for a lot of locals is buying a property and they save up and eventually buy. Argentina is for the most part NOT an "I want it NOW" society like the USA where everthing is on credit and financed. Real estate certainly it's a goal for families and they save up and they buy and it's an investment they feel safe in. They know the government is not going to come in and take that away from them like even their own money in the bank. So Benco, I'm NOT saying real estate is the only play in Argentina. But give some examples for a local that you feel are great investments for them INSIDE Argentina. I'm not talking about investing their money overseas. I'm talking INSIDE Argentina. Sure, people know how to get money outside and do but I'd like to hear some arguments from all of you that are implying there are lots of good options to invest INSIDE Argentina.... present them..... Definitely anything can happen here with the Economy. History has been a pretty good indicator that things have a history of being unstable here, but I still say that in that unstability it makes real estate is better play. Also, consider at the crash it was one of the most devasting times for Argentina and consider why real estate prices went down. You had people that did have plenty of money in the banks but remember the banks closed and didn't allow people to take out their money. Now, I'm not talking about middle class. Imagine if you are a millionaire and your money is in the banks and you can't access it. The smart money got their money out of the banks but imagine what would happen in the USA or the UK or anywhere else in the world for that matter if the banks closed overnight and you couldn't access your funds. Certainly even people with money would be in trouble as we don't keep our cash under the mattress. One of the only ways for people to access their money was selling real estate. It was desperate times for locals. Even people that HAD money couldn't access it (or only access a few hundred dollars per month). Now these people needed to access their funds that were rightfully theirs. But some of them couldn't even pay their bills so it was a desperate struggle just to get by. So they had to sell. The sales were cash on the table. THAT is why real estate took a sudden downturn. No buyers and people selling. It's supply and demand. Now, once the banking got stable again and people could access their funds the prices rebounded VERY quickly. A lot of people simply don't understand this. So you can say prices skyrocketed since the crash but what they neglect to understand is that the prices were artificially deflated in the first place. Imagine the SAME exact situation if it were to occur in the USA. Where access to funds got cut off. (Certainly I'm NOT saying this will happen). But just close your eyes and stop and imagine IF it DID happen. What would happen? You would have nuts blowing up banks, it would be chaos. Look at all the crazy right wing groups in the USA. I'm sure people are shaking their head and saying things like "oh..Americans are very civilized people....things would be more orderly". That is NOT true. Let me ask you something. Why did the nuts blow up the Oklahoma City building? Because they weren't happy with the government. That's the answer plain and simple. Now imagine a scenario where you cut off access to funds from Americans. There would be pure chaos. How unhappy with the government would these people be then? That is what you need to think about. You can argue that it will never happen in the USA (and I would tend to agree it will never happen). But nevermind that. Just for the sake of argument.....IMAGINE if it did happen and ask yourself what would happen under that scenario and it's pretty remarkable to see how civilized these citizens of Argentina are. Please don't mistake my message either. I am VERY proud to be American. I still think the USA is the best country in the world. I think the business environment is the best in the world. I think the level of ethics is better than any country in the world. I think the way Americans do business is the best. I think the education system is the best in the world. In short, I love America and maybe I'll even move back to the USA someday because my passion for the country, it's people and the way of life. It's a country that I'd be proud to raise my future children in. But I'm also a realist and I'll always tell it how it is. There ARE some "broken" things about the USA. I realize now country is perfect and living in Argentina the past 4.5 years has shown me that. But I think we need to realize the faults of each country. So, you have that situation and that is why people simply don't trust the banks here. I can tell you the banks here are HORRIBLE!! Locals simply don't trust them and opening an account in Uruguay isn't so easy anymore for locals. Many, many banks in Uruguay are asking for documentation from the locals of were the funds originated from and a good percentage of the population in Argentina evades taxes so it's not so easy. I think intelligent discussion is great and the purpose of message boards. But more times than not over the past few years, I hear or read from someone or read on some message board a random post like "investing in real estate is dangerous...it will go down 60% in 2 years...". Then when I call them out on it or ask them to explain their position, or ask them to present other good investment opportunities for locals INSIDE Argentina.... funny thing....i usually never hear from them again.... Benco made a great point which ANY investor in real estate should be a given.... location, location, location in real estate is always important. Even those in the USA have been sheltered by investing in the right places. There are some areas that haven't fallen at all (not too many). Also, being very selective and investing in the right type of real estate in the right areas....many investors are still getting great cash flow via rentals on their properties.... (some not so much). Remember, all of my posts are MY opinion. Certainly I'm not saying I know more than anyone else. But for those that have your opinions, provide OBJECTIVE arguments for your side. Cheers all. | ||
| Benco Junior Member Username: Benco Post Number: 40 Registered: 4-2007 |
Arial, I suppose you just open an account with a broker and then get access to the assets traded on the various exchange houses. Personally I haven't done it but I think it is similar to opening a bank account. I suppose it is straightforward to buy foreign assets as well, what I do not know is how safe your titles/certificates really are when the argentine government tries to steal them. To some degree you will always depend on the integrity of financial institutions and the local judicial system. ApBA, you are certainly making valid points and yes, what I wrote was just what I think is common sense. Nevertheless it is often overlooked, e.g. people say "wow, the dollar price of this property went up 40 percent over the past years" without acknowledging the decline of the value of the dollar by the same amount. And you are right, I can not present a list of good investment opportunities inside Argentina, my point was that few people are restricted to invest inside Argentina. An interesting case are the private pension funds (AFJP) who were recently forced to sell their foreign assets, mostly in Brazil, and invest in Argentina. Now what did they buy? Apparently they have no good ideas either. A large part of their money is sitting on bank accounts, driving down the interest on fixed term deposits. Rates are below 10 percent, with inflation around 20 percent. In other words, real rates are negative and this is a clear sign of missing investment opportunities. My personal solution is to keep my money at home where it is not eaten away by inflation, and only bringing in what I need to develop my own business activities. So at least I know what I am buying... Happy investing to all. | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 408 Registered: 5-2005 |
Hi Benco, Yes, I think you are right about many people not using common sense. It's ironic and really strange to me that some foreigners buy property here yet they rush into it. I literally get phone calls on a DAILY basis from foreigners that bought real estate here but then they had MAJOR problems after because some mistake was made or they didn't due proper due diligence. For example, many foreigners buy here without having an architect's inspection or an engineers report. Now, back in the USA they would never dream about buying a house without a proper inspection. But here in Argentina where there is more risk, it's 100% cash over the table, they don't speak the language, they rush into deals that they know little about. That can very often be a receipe for disaster. Certainly I'm not saying there is no risk here in real estate. Quite the opposite. There is a LOT of risk if you are buying in the wrong areas, you are buying the wrong types of real estate and you are buying "defective" properties. Common sense always prevails so that should go without saying. I think that is an obvious point that no one is saying ALL real estate will go up wherever you buy in Argentina. That isn't true. Be very selective where you buy. The plain fact of the matter here in Argentina is people simply trust cash or bricks. I've never seen a country quite like it. For the most part, the locals here don't trust in the stock market, they don't typically invest in start ups or their friends businesses or any other simple investments that are common in the USA. Here they are so distrustful (for Good reason!!) of the government and the banks. Investing in real estate all comes down to a "flight to simplicity" for them. They can easily understand it. They understand you save up, buy X apartment for $x and you will have that apartment until you sell it in the future for $X. You can have $X each month in rentals if you rent to a local or you can make $X each week renting to a foreigner (tourist). Another thing I have looked at over the years in my travels to many countries around the world. I typically take a good look at the investment portfolio (if possible) of politicians. Politicians I don't care in what country typically have an inside edge as they know many influential businessmen and they in fact regulate certain laws determining the fate of those industries. In Argentina I noticed that MANY politicians own pretty extensive real estate portfolios. Look at the Kirshners alone. They own something like 25 properties (apartments/houses/storefronts/buildings) and they are generating millions of pesos per year in rental income. Do you really think they are going to pass some law that is going to punish real estate holders? Very doubtful. Why? They would be shooting themselves in the foot. They would be punishing their colleagues, their friends, their family and their constituents. Not going to happen, IMHO. Look at the example of the former Economic Minister in the "toilet gate scandal". She was found with u$s 100,000 cash in her bathroom. Her response? "My brother loaned it to me to buy an apartment". That was her answer. Some of you just don't see the real dynamics of why real estate is going up here. Another thing. Keep in mind I've purchased literally HUNDREDS of properties in Buenos Aires over the past 4 years. I've purchased from several politicians including some high level city politicians. Now, it was interesting in several of the purchases I had to keep the politicians honest. What do I mean by that? I mean that in several purchases it looks like the politicians picked up these properties VERY cheap at some public auction and unexplicably they never paid any taxes on the property. Now, maybe a local wouldn't force them to pay but I told them they must pay all the back taxes before we would buy and we would have an obligation to inform AFIP (local IRS - taxing authority) if they didn't. Of course they paid all the back taxes. One case took 10 months to solve but we finally get our client through it. It's interesting all the ways these politicians are picking up real estate here. Now, I've always maintained that it's difficult here if you don't know what you are doing. Take this example I just gave you. I was retained by an American ex-pat living here for the past 5 years. His wife was a local and they didn't have any clue how they can solve this problem. They already paid a 30% boleto down payment which the politician didn't want to give back. Definitely you take this situation with some foreigner that has no clue and there is a LOT of risk. I completed the deal for him and he bought with all the back taxes eventually paid before the closing. I refused to close until the politician paid all the back taxes. It literally took 10 months to keep this deal on track. I agree with you Benco. I advise people that live in Argentina if they are foreigners to keep all their money offshore outside of Argentina. There is no advantage to having a bank account here in Argentina. NONE. As I mentioned before, the banking system here is horrible. It's quite amazing to think about but banks here have a debit and a credit tax. They charge you 0.6% every time you deposit a check and they charge you 0.6% every time you write a check. Benco is spot on target about keeping funds off shore. Also, there are plenty of other investments out there as well around the world. As I mentioned before over and over again. Investing in real estate in Argentina is NOT for most investors. It's for a certain type of investor that has the finances for it. Most investors around the world and the majority of the population doesn't have hundreds of thousands of dollars of CASH sitting in their accounts that they can easily access without leveraging. This isn't for everyone.... | ||
| Gloria Melgar Estevez Member Username: Glorita Post Number: 60 Registered: 12-2007 |
Mike, you are so on target on your analysis on how "Things work in Argentina"...it makes me question the fact that you are an American....are you sure you don't have any Argentine blood in you? Let me add something to the above post....in terms of houses that go to auction and in particular high end homes in good neiborhoods, the "average Joe" can forget on trying to obtain such property...the auctioneer is bought off even before the auction begins(la famosa "coima" Argentina). | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 409 Registered: 5-2005 |
Ha, ha. Funny Gloria. Now, if I got a dollar for every time a local told me the same exact thing..I'd be a very wealthy guy. Yes, I've heard the same thing over and over here from locals. Before I moved here I studied the market VERY closely and since living here that has given me incredible insight on how things work in Argentina. You are also 10000000% correct about those public auctions. In the beginning I was convinced I would pick up properties cheap this way. Well, I quickly gave up as I determined EXACTLY what you mentioned. It's impossible. Coincidentally various politicians have picked up properties in these types of auctions. I tried in the beginning and then gave up as it wasn't worth the time. I came to the SAME exact conclusion as you mentioned. | ||
| Benco Junior Member Username: Benco Post Number: 41 Registered: 4-2007 |
Hmm, I am wondering how exactly they are cheating in a public auction. Is the buyer placing an artificially high bid and later pays much less (plus a bribe) in the actual transaction? Like registering a high value on the title with much less cash on the table? Sometimes there is not even an auction, as in the privatizations under Menem... what a corrupt country. | ||
| Gloria Melgar Estevez Member Username: Glorita Post Number: 61 Registered: 12-2007 |
Benco, yes as you say....a previous arrangement is made, coupled with a bribe. Bribes are very common in Argentina and you can find them in many business dealings. Business ethics is an oxymoron to many Argentines. Distrust of the government has led to years of disrepect of the law and consequently to such things as tax evasion for example. Many Argentines structure their business dealings in such a way to avoid taxation. Many business owners will prefer to pay a bribe then to pay a tax. This mentality is so ingrained in the citizenry that I can't see Argentina becoming a successful and respected country unless/until this is addressed. | ||
| Benco Junior Member Username: Benco Post Number: 42 Registered: 4-2007 |
Gloria, I agree on the mentality problem, and it is unlikely to change anytime soon. There are obvious things that need to be done to address corruption, e.g. the "Oficina Anticorrupcion" should be independent rather than depending on the government, as it is now. Are they going to examine the extraordinary income of the Kirchners? Certainly not. (I am not saying they are corrupt, but I would still love to see an independent investigation of their income sources. There must be more than rentals, and they should disclose it.) What I still donīt get is how an arrangement in a public auction would work. I mean you have the banks and other creditors who will check that the highest bid wins and that the corresponding amount is paid. They are the ones losing money after all, so they will check. Maybe I am missing something... | ||
| Apartmentsba.com Advanced Member Username: Saint Post Number: 410 Registered: 5-2005 |
Benco, Obviously you have NOT lived in Argentina long enough. The fact that you seem surprised by how this all could happen shows me you probably don't really know how corrupt this country truly is. Argentina ranks as more corrupt than many African nations for example. Almost daily you can read about some story in the paper about some corruption scandal here. Mayors bribing business owners (just happened again the other day I believe in Pinamar). I agree with Gloria. It's all a mentality and state of mind. Argentina can NEVER become a first world country without a systematic change. Many locals I'm sure don't like my company. I get 7-10 emails per day of people wanting me to manage their properties and I never work with the locals anymore. I stopped even trying almost 2 years ago. Why? I think my firm is the only apartment rental company in town that actually forces our clients to pay taxes on their rental income. When I told locals this a few years ago that they MUST declare the rental income they looked at me like I was crazy. That is when I knew I couldn't work with the locals. Even at some business seminars that I've attended there have been round-table discussions and I talk about all the high taxes for having employees and they all say I'm crazy as I have all the salaries in "white" and the payroll taxes here are extremely high. Also, paying all the required taxes and insurance makes them look at me as if I'm the one doing something wrong. I have hope that someday that will change but I'm not holding my breath. As I've always mentioned, it's a very tough place to do business in. Fortunately, real estate is a good field to be in as you don't have governmental officials trying to get bribes, etc. If you are paying the required taxes then you are fine. It's not like owning a bar or some club or some other seedy business where you might have to pay off cops or government official. That's what I truly like about real estate. It's a fairly "clean" business and I believe that's why locals like it so much as well. It's easy to understand and as long as the property is legitimate and the Escribano makes sure the title deed is not cloudy, as long as you pay your taxes you are fine (albeit most locals do NOT report any rental income on that property). Benco - I doubt you will get anyone to explain the ins/outs of how corruption works. Many Argentines don't know all the details but like Gloria mentioned, they know it goes on. Your mistake is trying to figure out how they can cheat you in a "public auction". That isn't the right way to look at it. The right way to look at it is more "how NOT can you get cheated". Yes, you are missing something. Same way that I'm sure there are commercial projects that probably have a bidding process but some how bids seem to always go to certain companies or contractors, etc. Don't think for a minute that there might not be some kick back arrangement. In fact, there have been scandals in the past and for every one that becomes public there are probably another 100 examples out there you never here about. Now, I love Argentina just like I love the USA but as I mentioned before, I believe in being honest and pointing out flaws in the system here. Benco - remember a better way to think and honestly I believe the question an Argentine would ask is NOT "how in the world could they cheat". They would ask, "How will they NOT cheat!!" | ||
| Gloria Melgar Estevez Member Username: Glorita Post Number: 62 Registered: 12-2007 |
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