Cash buyers dominate the argentinean property market

Sebastian and Doti Sosa, Regional Owners of RE/MAX Argentina, recently visited South Africa and attended the RE/MAX of Southern Africa Stars Convention 2013 held at Sun City in February.

Speaking to the South African audience about their real estate journey with RE/MAX, which began in March 2005, Sebastian noted that more than a quarter of all real estate transactions in Argentina take place in Buenos Aires. “There are about 320 000 property transactions that take place in Argentina per year, 86 000 of which come about in Buenos Aires.”

Added to this, he says that only 6%-8% of the population in Argentina can afford to buy a home, the average value of which typically ranges between US$70 000 and  US$100 000. The property market in Argentina operates in a very different landscape to South Africa, as is evident in the fact that 95% of the home sales are cash based as there are very limited mortgage finance options available.

“Argentina is a large country,” says Sosa, “there are 40 million people, but it is only a few of these people who have the means to afford to buy a home. Wealthier Argentines do not use the bank for their savings or retirement plans but rather invest in property.”

Sosa says that in Argentina, the small part of the population that can afford to buy property, tends to invest in a portfolio of buy-to-let properties, as these perform exceptionally due to the fact that the majority of the population have to rent as they cannot afford to buy property.

“There is a huge demand for rental properties,” he says, “and as with any other country or city in the world, the price varies depending on where the property is situated.” He says that in a very upmarket part of Buenos Aires, the capital of Argentina, a two-bedroom, two-bathroom 100m2 unit will rent from around US$2000 upwards per month, whereas an the same apartment in an average area would rent for around US$1000 per month.

Sosa says that Argentines don’t really trust the banking system, so don’t use the banks to save or invest their money. He says that this perpetuates the problem, as the banks need money to loan money. “If the people don’t put their money in the banks for saving, then the bank does not have any money to lend. Therefore, there needs to be stability, credibility and trust before mortgage finance will become a reality in Argentina, and that is going to take quite a bit of time.”

Due to the costly nature of property, Sosa says that it’s in the lower price range, between US$80 000 and US$120 000, where the majority of property movement is happening around country. Location, he says, is also a very important factor, as it is worldwide.

According to Sosa, inflation is the most important factor influencing the Argentine property market, as it is currently between 30% and 35%. “The lack of financing and high interest rates of around 28%, as well as an informal and unpredictable market, means there is not much stability.”

Adrian Goslett, CEO of RE/MAX of Southern Africa, says that in comparison, property is generally more affordable and within reach for a great many more South Africans. “Locally we currently have the lowest interest rates we have had in many years that is expected to remain in single digits for the foreseeable future, targeted inflation that is well below 10% and a much more structured real estate market and stable, reliable financial institutions that encourage saving and investment.” Goslett says that more and more South Africans are taking the step towards homeownership, with nearly a quarter of all buyers over the past two years being first time property purchasers.

Sosa says that while it is more of a buyer’s market in Argentina right now, the property prices are very high and are continuing to climb - a situation which he says will need to be re-evaluated in the near future. “The average salary in Argentina is about US$1 500 per month. The average square meter price, if you want to buy something in the worst part of town, is equivalent to one month’s salary. In a very nice part of town it is about US$6 000 per square meter which is very expensive for most people. You will never be able to get a reasonable property in a nice part of Buenos Aires for less than US$80 000, so it is very difficult for an average household to afford an apartment, especially when there is no finance available.”

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About RE/MAX Argentina
As the region’s largest real estate organisation, and as the only international real estate company, RE/MAX has a presence in 18 cities with 54 offices in Argentina and Uruguay. There are over 850 agents ready to assist with the purchase and sale of property and 350 in an internship programme for new agents.

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