There are many thermometers Argentines use to take the temperature of the local economy, and one of those is public opinion regarding the attractiveness of real estate. Now there is a new variable which interests Argentina property owners, especially those who consider renting their properties, writes Fernando Gutierrez in today’s iProfesional.
The new variable takes into consideration the dollar, exchange rates and anticipated ROI for Argentina rental properties. Property owners are increasingly taking their rental income and comparing it with the gap between the official dollar exchange rate and the unofficial rate, also known as the blue dollar. The wider that gap, the more inclined Argentine property owners are to accept lower payments for their rental properties.
Universidad Di Tella’s Juan Jose Cruces tells Gutierrez that Argentines have resigned to accept 3% net for renting their properties, while “years ago, that figure was getting close to 10%.” Despite the lower annual ROI, the author says real estate is still the preferred asset class during these times of rising uncertainty. He describes owning a rental property in Argentina as a bono ladrillo (brick bond) offering a risk/reward profile on par with US treasuries.
If average rents for properties in Argentina have settled to the 3-5% range, can we expect a simultaneous decline in property values? Don’t bet on it, says the author, pointing to the most recent real estate pullback in Argentina as proof. When Buenos Aires real estate activity fell 25% during the 2009 recession, BA property values actually rose 14%. With no mortgages to speak of, Argentine property owners have the luxury of pulling their listings, renting their properties and waiting for prices to rebound. (Full Story in Spanish)
For more information about Argentina real estate investments, complete the form below.