Why is Argentina a better place to hedge your bets compared to an increasingly unstable Europe?
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Argentina is currently looking like a good place to lay your bets for global minded real estate investors with dollars burning holes in pockets,
Why be wary of Europe?
The ‘Emerging Trends in Real Estate’ European 2015 report by PWC and the Urban land Institute, predicted that 2015 would be a busy and profitable year for real estate investors. But despite their optimism, they had clear concerns about fragile economic conditions, weak fundamentals, volatile geopolitical issues and increasing instability in the region.
Simon Hardwick, one of the authors of the report, was positive about the large amount of capital expected to flood the market, although he expected this could see prices continue to rise due to a shortage of assets.
A report by the European Investment department of Savills in August this year confirmed earlier predictions that, despite economic uncertainly, the commercial property market activity had proven resistant so far this year.
However, and this is a big however, according to the political risks consultancy, Eurasia Group, Europe’s economics may be substantially better than it was at the height of the Euro zone crisis, but the politics of the region are much worse. Ian Bremmer, the president of the Eurasia Group, ominously placed the politics of Europe as their top risk for 2015. You only have to look at the news to see his concerns are playing out as expected, with increasing risk of major destabilizing events rising daily.
The Risk Advisory Group, Aon’s May report shows that developed countries across Europe are becoming more and more vulnerable to terrorism, political attacks and uncertain power plays around the region. The same report says, “No countries in Latin America are rated at increased risk in 2015, highlighting the potential for business investment across the continent.”
Why wariness has waned in Argentina?
Consecutive Kirchner governments have made things increasingly difficult for the foreign investors over the last years, especially from 2011, when it was made clear with dollar restrictions, importing blocks and other measures, that outsiders were not welcome.
However, a positive side effect of these blocking measures is that real estate in Argentina has become affordable. Buenos Aires real estate prices are among the lowest in South America after bottoming out last year. According to a November 2014 study by the Buenos Aires College of Real Estate, the city’s average house in a middle class neighborhood sold for $1947 per square meter whereas in Rio de Janeiro averages were $3605 per square meter.
There is evidence that a recovery in some key areas has already started this year (see graphs), and this will, in all likelihood, continue following the October elections.
Damian Benavoli, a consultant with CBRE, a multinational real estate services firm with offices in Buenos Aires, said, earlier this year.“We think the market will remain stable until the elections in October. After that we are expecting a recovery.”
What foreign investors should do it follow the bets that locals are making. Argentines have a strong tendency to put their money into ‘bricks and mortar’ and when they start trusting the market, it’s prudent to follow suit. They know how to ride the wave, and they are currently sitting in their boats ready for action.
Argentina has a predicable type of instability. Its busts and booms generally have a rhythm to them. Europe’s rhythm is less known and recently too many complicating, and highly volatile, factors have been thrown into the mix.
Right now there are bargains to be had in Argentina, like these fantastic lots currently available in a stunning development in the famous Estancia Villa Maria, just outside the city of Buenos Aires.
Beautiful, Buenos Aires apartments, in optimal locations are looking like good investments in the coming years, as well as commercial farms under 1, 000 ha in the provinces of Buenos Aires and other key locations. Cattle farms are going for a USD 2,000/ha and very high quality agricultural farms for around 15,000/ha.
New York-based developer Bryan Woo said to FORBES, earlier this year, “I enjoy Buenos Aires and think there are a lot of opportunities there. When Argentina figures itself out and there is more investor confidence…you will see real estate go through a prolonged series of appreciation.
With increasingly positive feelings about a real estate recovery, a strong dollar and relative stability, Argentina, and South America in general, are looking like good places to hedge your bets in this current climate of global instability.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.
www.gatewaytosouthamerica.com
Sources:
http://www.pwc.com/im/en/publications/assets/emerging-trends-in-real-estate-europe–2015.pdf
http://www.forbes.com/sites/kenrapoza/2015/03/10/investors-getting-ready-for-argentinas-real-estate-resurrection/
http://www.savills.co.uk/
http://www.eurasiagroup.net/pages/top-risks-2015
About Gateway to South America
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If you were to ask someone who purchased at their peak in 2012 who is selling now they would say in inflation-adjusted terms prices have definitely come down in value. Nowhere in the world do prices go endlessly up, they go in cycles. Currently Argentina prices are very low in US dollars terms, due to the dollar restrictions on getting money in and out of the country plus high inflation over a long period of time has lowered the buying power of middle-class Argentines.
Prices have never gone down….since the crisis in 2002, the prices for real estate goes up!! A studio used to cost USD40.000 now its USD 90.000