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Real Estate in Buenos Aires
- from bust to boom in three years!
By David
Cummings
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| This article
was published in the January 2006 issue of the Offshore Real Estate Magazine
for EscapeArtist.com © Copyright 1996-
EscapeArtist Inc. All Rights Reserved |
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| If you had
come to Buenos Aires like I did three years ago you would have found a
country on its knees, a country that had just become the biggest debt defaulter
ever. A country that not only couldn’t pay its debts to the IMF
but couldn’t even pay its own municipal workers. The country was in chaos
and the people were demotivated - it was in short a truly miserable time
for Argentina.
The banks had
put steel shutters up on their ground floors and moved upstairs for the
safety of the first or even second floors. They did this to escape the
protesters who were (quite rightly in many people opinions) forcefully
demanding their money back which they maintained had been stolen due to
the devaluation (known here as Pesification).
The protests
in these times were legendary entering the Guinness Book of records for
noise. The “saucepan protests “as they were known (thousands of people
would stand outside banks and bang saucepans for hours on end) were without
doubt the noisiest demonstration ever heard on earth, they were a terrifying
strain on the ears! And why not make a big noise many would say because
for every one peso these people had put in the bank they were now being
told it was worth two thirds less overnight – it certainly seems a kind
of robbery. But then certainly Argentina needed to do something drastic
to get itself out of trouble bought on by the Menem government –
and it seems to have worked because Argentina is now making a different
type of noise – the noise of success. |
| Stunning apartment block - Puerto
Madero |
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When I first
walked the streets here in BA in April 2003, being a property person,
I naturally looked in estates agents windows and what I saw I couldn’t
believe. The prices were so low as to make you think “whats the catch”.
The truth was there was no catch. People were just desperate to sell their
property and salvage what money they could. Before the crises one peso
was equal to one dollar. After the currency was overnight devalued (Jan
2003) those that had their mortgages in dollars now had to pay 3 pesos
for every dollar borrowed. On top of that their savings
were now worth two thirds less – it was indeed a crisis.
As you can
imagine the housing market went into free fall. People just wanted out.
It was a blood bath – no one wanted to buy and many had to sell or go bankrupt.
Prices tumbled as people lowered their prices to find a buyer so they could
get into cash. At the same time there was a run on the banks of Uruguay
(a refuge for many Argentineans money) which forced the Uruguayan Government
to seek help from the IMF and America to bail it out – even Brazil got
in on the act and devalued. It looked like there would be no good times
for decades for these countries.
Fast forward
three years and what a difference 36 months has made to Argentina.
Property prices are up by as much as 34% in some areas. In some locations
prices are higher than they were before the crisis! Construction is nearly
at an all time high and property transactions have set a new record in
November 2005. The economy is growing by 8% a year and tourism is booming
and so is the property market. If you were lucky and purchased property
here last year you almost certainly will be sitting down patting yourself
on the back and counting your profits.
What’s the
prediction for 2006?
All the signs
are that the market is set for another good year particularly in the top
tourist areas such as Recoleta, Barrio Norte, Palermo and St Telmo. Whilst
highs of 30% plus are not to be excepted a report by Report Inmobiliario.com
says and I quote “investing in real estate in BA continues to be a valid
investment option”. With tourism expected to grow to 10 million (its
3 million at present) by 2010 the demand for hotels, one and two bedroom
apartments and hostels will no doubt continue to make buying and renting
property in this city a great investment. Americans are coming in their
droves and so moving the market in particular areas. They are coming to
buy one and two bed flats as investment and bolt holes to escape
amongst other things the Hurricane season. They have been spurred
on by articles such as that in the New York Times in November 2005 which
lists BA as one of the top hot spots in which to buy property.
There is no
doubt that BA offers a great place to invest in property. Rental yields
are still great although it could be that since property prices having
risen so quickly that they will need a little breathing space to catch
up on last years yields. Certainly you can still expect to buy an apartment
here and get 7-8% but it may be a little harder to achieve the 10%
that was being realised last year if you are new buyer. However all the
signs are those rentals yields will increase again due to shortage of supply
as the tourist market grows as experts are predicting.
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Boat Centre - Tigre
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Mercedes
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Baradero
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There are
of course other reasons to buy here aside from the rental yields. As the
report quoted mentions capital appreciation is almost certain and it is
worth remembering that there is no capital gains tax here when you decide
to sell. Also apart from being a city to make money in BA is without doubt
in many peoples opinion one of best kept secrets in the world. The Washington
Post said in an article last week (Dec 2005) “forget about Europe go instead
to beautiful Buenos Aires – it is the city with everything but without
the high costs of European cities”. It is advice worth following. After
having lived here for nearly there years (I come from London) I can say
with some authority that it is indeed the city with everything. Culture,
great restaurants, green parks, friendly people and lovely hot summers
and for those with dollars, pounds or euros it’s incredibly cheap. A good
meal out for two with the best steak in the world and a bottle of Malbec
wine will set you back about 20$US . A maid will cost you 2$US per hour
and a visit to the cinema will set you back 4$US. With prices like these
no wonder many foreigners are choosing to relocate here. So although rental
yields and capital gains are important when it comes to buying property
you may just decide to own a property here because, like me, you fall in
love with the place and have a life style unobtainable in many other countries.
Because no matter how much someone tells me that Bulgaria is a great place
to invest in I am pretty sure that it can’t offer what Argentina can offer
me and I would never fall in love with the place like I have here. And
where in the world can you buy a one bed apartment in a beautiful capital
city like BA (in the Mayfair of BA) for 60000$US.
If rental yields
are your driving force for buying property and particularly if you are
looking to relocate and start a new business it may be worth considering
the back packer market here. There is a dramatic shortage of what can be
termed as “house shares”. The culture here is to stay at home until you
marry and then maybe buy or rent a property with your new wife. It’s unlike
say England where at the tender age of nineteen plus kids are starting
to look to buy a property and therefore flatmates to help pay the mortgage.
Here it is difficult to find rooms to rent because they almost don’t exist
and therefore there is a pent up demand for flat share type rental properties
such as large houses or hostels. As an example I own
a four roomed house in trendy Palermo and Nigel (an Aussie who works for
Tierra Estates) said he would rent it from me. We struck a deal and he
went about renting the rooms out to foreign back packers – he has never
had an empty room and he’s gradually putting his rents up. I purchased
the property for 85000 US$ and the return is about 1200US$ per month a
14% return and rents in this sector are rising fast. Buy in the right areas
such as the university areas (Faculdad), St Telmo (popular with the
gay market) and Palermo and you could easily be getting 20% return
on your money – add to that that you will almost certainly get a capital
gain and you are looking at a great investment for a low outlay. Certainly
there are some foreigners who are catching on to this vastly under catered
for market. They have got on a plane come out here and started to buy up
old hotels and large houses with a view to renting them out room by room
to the back packer market. On the profits they earn they can live exceptionally
well here in a country far away from hurricanes, terrorism and snow storms.
Finding renters is easy. There are a number of university web site sand
back packers sites where you can advertise for free. Response is guaranteed
and you can be as choosy as you wish because the demand is so high.
Buying property
here is easy. No need to form a company or have an Argentinean partner.
Once you have found property you like the paper work is checked that the
title is ok and you will be asked to pay 30% and then at an agreed date
you will sign the escritoire and that’s it - the property is yours.
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If
you are thinking of adding Argentina to your property portfolio,
looking to relocate or start a new life or simply interested in buying
a bolt hole in what to many is the best city in the world at the moment
to invest in give us a call on +54 11 48 16 42 31- even if you just want
to chat about the possibilities of living here – we will be more than happy
to hear from you. Or visit our website www.tierraestates.com |
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| For those
who want to know more about Argentina – its crisis and recovery and what
areas we recommend and tips on up and coming areas we have written a report
simply called The
Argentina Report – it's a must read if you at all tempted to
buy here. It’s packed with great information. |
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