Buenos Aires residential rental yields at historic lows

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Due to the massive devaluation of the Argentine peso last year, the net yield received by an owner for renting a residential department in Barrio Norte sector of Buenos Aires fell sharply, going from 2.56% a year ago to 1.78% today.

Gross income yield is the lowest since 1980

An analysis is carried out on the same property that has been studying since 2001. Located in the City of Buenos Aires, in Barrio Norte. It is a two bedroom apartment of standard quality located on the 9th floor in the quiet part of the building on Calle Agüero a few meters from Las Heras Ave.

The study was carried out based on a period of four rental contracts; the hypothesis is taken that one must wait 1 month and a half in each period to be able to rent the unit again so that the total business reaches 120 months (10 years).

The drop in yields was further aggravated by the high cost of mortgage money with interest rates up to 60% per annum and the uncertainty of this years elections.

Investors are cautious due to concerns that the current market-friendly government might lose the election allowing the country to swing back to an isolationist, inwardly thinking past along with all the corruption that accompanied it.

Unlike Brazil, Argentina has failed to put the head of the serpent in jail where she belongs, ex-president Cristina Fernández de Kirchner. She and many other members of her party still have a political following from those who feed off the corruption.

GTSA does not think this will happen but they are not the ones who will decide this.

A record grain harvest this year along with an improving economy might be what tips the scales in favour of the incumbent party.

Whatever happens, what we are seeing is clearly a market bottom with a more than even chance of a very strong recovery if the current government remains.

We are seeing some evidence of a number of foreign investors in the market currently who are looking to buy distressed residential properties.

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