Buenos Aires Real Estate Market Continues to Grow
Who invested in Buenos Aires real estate after 2001 has already earned up to 250% in dollars.
When the housing crisis of the United States exploded in mid-2008, no one was betting that the real estate market would continue to grow in Argentina. However, just two years after the beginning of the crisis, housing and property values continue to rise throughout the country.
For example, just in the last year, prices rose on average about 10% in dollars. In 2009, a brand new apartment in Caballito cost about US$1800 per m2, and today that has risen to almost US$2000. Something similar happened in the residential neighborhoods of Almagro and Villa Crespo. But it wasn’t just the middle class zones, Las Cañitas and Puerto Madero have also seen increases, from US$2500 to US$2750, and from US$3700 to US$4070 per m2 for brand new units, all over the course of a year.
The question for most is how this market can continue to grow, when mortgage credit is still far from meeting the expectations of those with fixed salaries. In the best case, rates are no lower than 18% if fixed, and 12.75% if variable. However, access to credit today in Argentina isn’t so much based on the rate, but on two other factors. On one hand, it is tied to the fact that family income measured in dollars just doesn’t measure up, in most cases, to the requirements asked for by the financial system, as the payment cannot be above 30% of the income. This situation is strictly related to the value of the house or apartment, and if the increase in wages doesn’t match the increase of property values, then the gap with be further stretched.
On the other hand, this situation could change almost in exclusively raising the loan term, but most of the banks need shorter-term loans to continue functioning as they do. That is, the banks would need to be paying money that they don’t have today, nor have any certain expectation of being able to have in the near future.
And yet the market continues to grow, mostly for two reasons. First, the higher social classes continue to count on real estate as a solid investment over the long term, due to the small amount of interest they pay to put the money away, and the volatility of stocks. Secondly, foreign investors still see a future in Buenos Aires, and continue to invest their money in Argentina’s real estate.
The gamble seems to have some sort of logic. Just as an example, we can say that anyone who bought an apartment in Palermo in 2002 paid US$650 per m2, based on numbers from that year. At current prices, that investor has gained 250% in dollars today. However, it should also be considered that 2002 is not usually used for its statistics because the country was in the early months of the devaluation, and those who bought in the same quarter in 2003 have now seen an increase of 135%, a not-so-impressive number.
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