Buenos Aires real estate sales activity reached its lowest level in 35 years thanks in large part to US dollar currency controls and a failed attempt at convincing buyers and sellers to broker deals in pesos.
Real Estate Sales: The Worst Index in 35 Years is the headline of iProfesional’s analysis which says the local real estate market has always persevered despite recessions, devaluations, the 1994 Tequila Effect, ’89/’90 hyperinflation and even a war. But nothing slowed real estate sales activity quite like the currency controls.
In the first four months of 2014, a total of 8,930 real estate closings took place in Buenos Aires, the lowest number of closings since 1980. In an average year, there are 90,303 closings in Buenos Aires, but the number of closings in 2013 (60,182) was 50% below a typical year. 2014 is on pace to be even lower.
A similar patten has emerged in the Province of Buenos Aires where 17,084 closings took place in the first quarter of this year compared to 30,209 in 2011 which was eight months before the currency controls were implemented in November 2011.
As more sellers grew reluctant to accept pesos for an asset they had acquired in dollars, the supply of properties on the market fell over 50% during the last two years. While supply has fallen, average prices only fell 1.5% last year according to data released last week by the Argentina Real Estate Chamber (CIA).
“What has happened is that (the currency controls) have increased the margin of negotiation between buyers and sellers at the time of closing a deal. The relation between the offer price and the sales price varies around 10 to 15% which is about double what we are used to seeing,” said Chamber president Roberto Arevalo.
Despite the slowdown, consensus among market analysts interviewed is that the situation will change beginning in June 2015: “In the sector, they believe deep down that beyond the crisis, there is a mental issue that will reverse with the arrival of a new government.” (Full Story in Spanish)
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