Dollar controls mean big discounts for real estate
The Argentine tax office or as it’s known officially: Administrador Federal de Ingresos Públicos (AFIP) has recently introduced some strict regulations on the buying and selling of foreign currency. This means that fewer people have access to dollars: a commodity which is essential in the vast majority of real estate purchases. The strict controls on the exchange of dollars have already impacted movement on the Buenos Aires real estate market with the market witnessing a 50% drop in the number of realtor deals closed from November 2011 (when the controls were introduced) to April 2012.
Property prices remain unchanged until now; nevertheless, desperate realtors and vendors have had to take action to encourage sales by offering discounts of up to 15%.
Before the introduction of dollar controls, discounts on properties were strictly controlled and limited with realtors only stretching to a measly 2%. This goes to show how desperate realtors and developers are if now they are willing to offer a 15% discount to property buyers.
Other measures have also been taken to ease sales. For instance, some estate agents are accepting half of the property’s value in dollars and the rest in pesos, which is something that would have been unheard of prior to the dollar restrictions taken by the government in November.
This is a difficult time for real estate developers and property owners looking to sell as buyers simply cannot get the currency to pay for property in the usual way. Further to the issues of currency, developers are also faced with rising construction costs, inflation, as well as having to offer discounts to buyers. An example of this struggle is a property developer in the Buenos Aires neighbourhood, Villa Urquiza. Here the developer is being forced to absorb the 4.3% rise in construction costs, as well as a 7.2% rise in labour costs and on top of this he has to offer buyers a 10% discount on the final price. These obstacles are whittling down the profit margins that developers and investors had carefully calculated pre-dollar control.
It has been accepted that realtors and vendors will have to become more flexible with payment methods and lowering prices to get through this difficult period. Buenos Aires Real estate developers who sell their properties through credit schemes paid in pesos seem to be benefiting from the restrictions on dollar. Nevertheless, they are still affected by the rising costs of developing a property.
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