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New Formula Could Boost Home Ownership in Argentina

On September 24, 2010, In real estate, visionaries, by InvestBA
AEV Home Ownership Plan

A new formula could make home ownership a reality for 1.2 million Buenos Aires families.

An important event took place yesterday at the BA Stock Exchange with the goals of lowering borrowing costs and making home ownership a reality for more middle-class residents in Buenos Aires. With current mortgages terms at fifteen years and high double-digit interest rates, it’s little wonder 90% of all real estate closings are all cash transactions.

Yesterday’s proposal by the Association of Housing Professionals (AEV in Spanish) has the potential to lower the average borrowing cost by two-thirds and, according to La Nacion, grow the pool of potential homeowners from 140,000 families to 1.2 million families.

“There’s no magic behind the AEV proposal, just a mathematical formula,” says Daniel Macru, the actuary who devised it. That formula takes into account the borrower’s salary, adjusts the loan amount based on that salary and would effectively lower annual interest rates to a fixed number between 4-6%. Loan amounts would be 70% of the purchase price of the property and the borrower’s monthly income would need to be US$1,250.

To illustrate the plan’s effectiveness, AEV says the formula would lower the monthly payments on a US$68,000 apartment from $1,010 to $380. Now that the feel-good presser is out of the way, the heavy lifting begins. If AEV can get buy-in from the local banks, home ownership could become a reality for over a million Buenos Aires families. (Full Story in Spanish)

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Santander Sees the Future in Argentina, Brazil, Latin America

On July 19, 2010, In a-bric, foreign investment, franchises, visionaries, by InvestBA
Santander Branch in Buenos Aires

With 37 million clients and 5,800 branches, Santander is the leading bank franchise in Latin America.

If you had any doubts about where the smart money is moving globally, you might want to take a look at Grupo Santander, the largest bank in the Euro-zone and one of the largest banks in the world.

In recent interviews with everyone from Bloomberg to El Pai­s, Santander officials are understandably bullish on Argentina, Brazil and Latin America in general…so much so bank executives feel the region will outperform Asia in the coming years.

Santander’s Director for the region Francisco Luzon sees the XXI century as Latin America’s inflection point: “In this century, Latin America will move beyond being a ‘developing’ region. Latin America has talent and structural competitive advantages that will make it a winner in the XXI century.” Luzon believes Latin America is the region best positioned to benefit from the process of globalization, while banks like Santander are well positioned to capitalize on the continued bancarizacion of LatAm.

Santander estimates the financial systems of the seven core Latin countries, Brasil, Mexico, Argentina, Chile, Peru, Colombia y Uruguay, have a current valuation of US$500 billion and could reach $1 trillion by 2015. If full-year projections for 2010 are any indication of what’s to come, it’s easy to understand why a bank like Santander sees the future in Latin America. According to Bloomberg, the region will account for 45% of the bank’s profit this year, up from 39% in 2009.

For more information about investment opportunities in Argentina and Uruguay, download IncomeBA and the new issue of InvestBA Privada.

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Buenos Aires Real Estate Survey: Line Up The Usual Suspects

On May 4, 2010, In foreign investment, real estate, by InvestBA
usual-suspects

Recoleta, Palermo and Belgrano remain the Top 3 BA neighborhoods in terms of median price/SF.

A new survey of 465 players in the Buenos Aires real estate sector sheds new light on the market’s strengths, weaknesses and median price levels by neighborhood. LaNacion shares the results of the “Real Estate Scene 2010″ survey led by Mercado and Reporte Inmobiliario.

There was general consensus among the respondents that prices are relatively high in BA, and 57% believe prices will continue to rise during the course of 2010. 30% feel prices will stay flat, while 13% think prices could actually fall over the next eight months. Even greater than rising prices, 60% of those surveyed feel the biggest obstacle to home ownership for buyers in BA is, what else, the lack of financing.

The affordability outlook is similar for renters, as 64% of those surveyed believe rents will increase this year and 24% predicting the average rent increase will be greater than 10%. Despite the obstacles, the majority of respondents are bullish on the sector’s overall outlook including the prospects that new residential projects will be introduced over the next 12 months.

The general mistrust of banks means real estate is still viewed as a tangible, safe harbor asset class for buyers, while the scarcity of mortgages ensures a steady stream of future renters for those looking for investment properties in BA. In terms of median prices by neighborhood, the usual suspects remain the most expensive and desirable destinations: Recoleta, Palermo and Belgrano. Villa Devoto, Nunez and Barracas occupy the second-tier in terms of affordability while Villa Urquiza, as noted previously on InvestBA, is growing in popularity and moving up the rankings in all categories.

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Foreign Banks Rethink Buenos Aires Branch Strategy

On April 28, 2010, In competitiveness, foreign investment, franchises, us companies, by InvestBA
Banks in Buenos Aires Argentina

Next window please: Foreign banks are shifting operations, employees to Miami & Montevideo.

“In Puerto Maderero and Recoleta these days, the executive suits are everywhere. Suddenly, we are seeing more limos and formally-dressed men entering and leaving meetings in cafes and luxury hotels,” says Argentine daily Clari­n.

And while these meetings between wealthy Argentines with investments abroad and their financial advisors used to take place in local offices, new Argentine Central Bank regulations are forcing 14 foreign banks to reconsider their BA presence.

In addition to limiting consumer choice and stifling competition, the measures offer a glimpse of what could happen in the U.S. if the federal government succeeds in creating what the Wall Street Journal calls a new “Super Regulator.”

The measure in question, A4981/09, began changing the rules of the game for foreign banks providing wealth management services to clients in BuenosAires. In essence, it makes it more difficult for these banks to take new deposits locally and invest them abroad. If they maintained a physical presence with local branches, these foreign banks would only be able to offer financial advisory services to clients who had previously shifted their funds abroad.

The subsequent decision by several banks including Wells Fargo, HSBC, Merrill Lynch and Credit Suisse to move employees and operations to Miami and Montevideo should not, however, be viewed as a defeat or even a retreat. On the contrary, videoconferencing and Internet-enabled money transfers will allow the banks equal or better interaction with their clientes bonaerenses, hence a happy ending: creativity and technology trump bloated bureaucracy every time. (Full Story)

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