Buenos Real estate sales weak but prices keep rising?
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The average price per square meter is around USD 2,330, close to a record. The owners prefer to delay selling rather than accept a lower price.
This is not a new characteristic of the local market but reflects that few home owners have mortgagees so do not feel pressured to sell at what they see as a temporary pause.
Whether this attitude will change with a likely change of government that has in the past put capital controls on the currency and wrecked the economy will remain to be seen but the high flow of cash out the country by wire and physicals suggests it will.
Money following out from the airports may be an indication of what people in the finance markets are thinking. Here is rows of armored trucks at Buenos Aires Airport (EZE) last week exporting cash.
3,208 properties were sold in July, representing a 27.6% drop compared to the same month last year. âThe July sales are comparable with 2013 and 2014, the years of the exchange rate controls. Not even in 2002 were there so few properties sold in the city. This is beyond ugly.
In this context, the optimist owners have refused to lower prices pending what they hope will be an economic stabilization. âThose who are selling are only those who need to sell and to date there are very few people in this position.
Between February 2005 to August this year the value of square meter jumped from USD 734 to almost USD 2,400.
In the crisis of 2002, the square meter fell 50%. The pain came from convertibility (people mortgaged in USD) as the currency was pegged to the dollar then when the peg was broken a massive devaluation took place.
Today is different, the owners have no little or no debts, so are firm on price and prefer to wait.
In the last 15 years, the value of the properties continued to increase. The square meter barely fell in the crisis of 2009 (0.8% between May and August) and in 2013 and 2014, during the exchange rate crisis, with losses lower than 4.1%.
In return, during that period the increases were constant and some very pronounced, with a peak recorded between May and August 2008 (9.5%).
What do the market participants think?
After the recent Mid Term Elections (PASO) a survey of builders, real estate agents and investors of the sector were consulted on how they see the value of the used properties evolving through 2019 and 2020 if the Kirchner’s (Christina and her proxy Fernandez) return to power.
67% believe that prices will decrease, and of those who believe they will decrease the highest percentage said that between 10% and 20%.
In the end the market will decide but if I was a buyer I would be out in the streets looking for what will likely be seen as a once in a decade buying opportunity.
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