Non-fiction / Buenos Aires Investment Property

 Buenos Aires Real Estate Investment.

The last orderly real estate sector in the world?

Apartment Rental yields in Buenos Aires are extremely good!  In the main, they are driven up by foreign visitors. You can expect to buy an apartment in Buenos Aires and achieve a 7 % to 8% net return annually.  Better than low bank interest rates, which will make life tough for those forced to live on 0% to 3% interest from ‘safe’ cash investments whilst the world spins anti-clockwise-out-of-control. 

Even when our property sectors at home are on their knees, it is strange how it still feels very close to saturation and our aspirations to buy cheap property, refurbish, and rent property is hampered by both cost and of course competition.  Even in a buyers’ market, our colleagues in Europe and the United States of America who are cash rich and property investment specialists only find one to three projects each year.  Buenos Aires is still the ‘new world’ for property investment and Buenos Aires City remains one of the most desirable and affordable cities to purchase real estate, even in the most exclusive neighbourhoods of Recoleta and Palermo. 

There is heaps of statistical data on the internet about Argentine property investment, and in particular, the Buenos Aires real estate sector, so complete your own research.  Check out the facts, reach your own conclusions based on your own knowledge, and if you decide to buy real estate in Buenos Aires get yourself a professional outfit that can make the experience both trouble free and profitable.  Our advice is not to go it alone!

Real estate in Buenos Aires is approximately one eighth of the cost of property in London or New York.  We know all about ‘apples and apples’ but the huge difference does make you feel that Buenos Aires is somewhat undervalued when you consider the main points in this article written by Buenos Aires Stay LUXURY. 

From parity with the United States dollar in 2001, the peso devalued by an average three to one creating a wonderful climate for investment - Argentina became cheap.

With its Old World charm, Buenos Aires is one of those places that people just love.  Believe us when we say you will love the city.  Visitors come in increasing numbers every year and many return live or invest in property. 

We must point out a dichotomy that might astound you.  Although for some time investors found Argentina less appealing, property, land and latterly tourism are cornerstones of Argentine investment and for a few canny international investors (us).  This article means you are now one of the lucky few in the know.  The city, known as the Queen of the Plata (Queen of Silver, referring to the Rio del la Plata) and the Paris of the South, must be one of the best cities in the world in which to invest in real estate.

In August of 2006, the Buenos Aires bureau of records recorded 5,583 deeds involved in real estate purchases worth a total of about 330.7 million US dollars.  Argentina is one of the world's fastest growing economies and Buenos Aires is one of the world's fastest growing cities.

Estimates put Argentina's economic growth at over 8% annually for the last 5 years and although nobody trusts what the government ‘spins’ the media, we kid you not that property investment in Buenos Aires is by far the surest property investment opportunity you will find in a world full of uncertainty.  We expect Argentina will suffer from the world’s dire economic depression, and not least, the fall in world consumption with knock on falls in commodity prices that recently boosted the economy.   It is going to be tough and the country faces near zero growth or recession.  However, there are factors in the micro-economy of Buenos Aires City that make property investment safer and better insulated than either London or New York.

Are you are sceptical?  So were we until fully understanding the Buenos Aires real estate sector, its realities, and its peculiarities that make it so very different from many other real estate sectors throughout the world.  We start by saying, ‘what credit crunch’ and ‘what no credit?’  The country as a whole operates without credit (national average approximately 10%).  Residential property investment is largely cash, mortgages as we know them do not exist, and funding is never more than 50% of the property value supported by assets and over terms as short as 3 to 15 years.  We also point out that we restrict our advice to a number of key investment districts (barrios) in Capital Federal and greater Buenos Aires.  Read more about Buenos Aires>go.  Read more about Buenos Aires best and safest barrios>go

Unlike the burst real estate bubbles of the Northern Hemisphere, most specialists believe growth in property values is sustainable in the long term in certain parts of Argentina and in particular Capital Federal, why?  "It is not a bubble, cash is king and underpins the growth in the sector – supply and demand dictate property prices and outlandish supplies of credit neither fuels nor sustains the Argentine property sector, it is an orderly market.  The capital used for construction, buying and refurbishment is real, and there is practically no bank financing [of construction projects]," says Andrew McCance, of Mainline Security Ltd, an investor in Buenos Aires real estate.  “I am no financial or property guru, it is common sense.  Investors need to complete their own research, but no doubt they will find that bricks have always been a relatively stable investment in Buenos Aires. That will continue, as Argentines learnt long before the rest of the world that banks and government are not to be trusted.”  Therefore, the reality and peculiarity of the Argentine property investment sector today, is that it offers one of the few orderly markets left in the world.  Andrew is fond of pointing out that there is the first world, the third world, Japan, China, and then there is Argentina.  He also points out that Buenos Aires is the jewel of Argentina’s tilted crown.

Recently, even when the rest of the world was falling apart, demand was exerting upward pressure on Buenos Aires property prices, which in turn stimulated growth in the supply – we think prices reached their plateau last Summer when first writing this article, but we are pleased to see property prices holding their value because Argentine’s will not sell cheap and larger businesses who might invest in construction have tightened their belts and wait to see how Government deals with the impending economic downward trend.  We most certainly expect to see some bargains as foreign investors seek liquidity, but do not expect the domino effect knocking down the locals – they will wait for better times and supply may drop helping to sustain Buenos Aires property prices.   

However, we do not believe that will affect smaller-unsophisticated investors, quite the reverse, Argentines use both property investment and the United States Dollar to protect their wealth; traditionally the dollar is the currency of choice when the Argentine peso fights devaluation.  Money is already moving out of the peso into the dollar and worryingly for the government billions in cash went abroad or into the United State Dollar during the last 7 months.  The Central Bank avoids greater devaluation by selling dollars on the cheap – but for how long can they apply first aid and avoid dealing with the real problems? 

Astonishingly, the government imposed ‘de facto exchange control’ last year and appropriated private pensions to state control sending even more tremors through ‘Argentina’s economic bones’ as the people remember 2001.  We feel reasonably confident, we will say it, bullish, that many dollars will find their way into property, as Argentines are now even more suspicious of banks.  We think that the Buenos Aires real estate sector, in the key barrios we advise on, will hold its value.  However, in our opinion, tourism is a key economic factor in sustaining property values and tourist numbers must be sustained.

Tourism is fast becoming a ‘powerhouse’ in the Argentine economy and it is important to throw some figures at you:

·         Tourism grew an amazing 52% between 2003 and 2007

·         Various government and independent agencies outside of Argentina predict 47% growth over the next six years.

·         That means 6,500,000 visitors to Buenos Aires in 2012 - where are we going to put them.

·         Tourist expenditure grew in Argentina 180% between 1990 and 2006

Apartments and hotel accommodation in the traditional tourist barrios is running scarce as tourism grows, and demand pushes both apartment rental rates and hotel room rates upwards. Also, both cost and supply pushes tourists into less traditional barrios.  As a result, other barrios have and are gentrifying to meet that demand. Palermo Soho and Las Cañitas are two great success stories.  We have some great ideas on where you might find the next Palermo.  Given the pressure on the peso, we might safely assume further devaluation to around the 4 pesos to the United States Dollar making Buenos Aires even cheaper to tourists thus counteracting the recent downward trend in international travel. 

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