It is no secret that the Argentina economy is in serious trouble, the political situation is hard to predict and information provided by the authorities is sometimes difficult to believe. These are not factors which attract international investors to the Argentina real estate market. As a consequence you may automatically assume that the market has fallen dramatically but what is the case in Argentina and could it be time to look at real estate in the region?
The first thing you need to be aware of is that data emanating from Argentina is difficult to disseminate at best and very contradictory at worst. Over the last 12 months the performance of real estate in Argentina has varied between a fall of 3% and a fall of 22% – depending upon which figures you believe. So where do we stand with regard to the real estate market?
If there is one word to describe the Argentina real estate market it has to be stagnation. Property owners who may otherwise have looked to sell their properties are desperate to find somewhere to store their capital in light of the uncertain currency and economic situation. Buyers are sitting on the side lines because the economic situation is volatile, at least in the short to medium term, although perhaps more importantly, the economic and the real estate data emanating from various parties in Argentina is at best contradictory.
There is an enormous difference in real estate price performance depending whether you value assets in dollars or pesos. Indeed dollars have been seen as the preferred currency for many in the country until the Argentina government decided to crack down on the black market in dollar/peso transactions.
Quote from PropertyForum.com : “At this moment in time even the most sensible of investors are struggling to obtain finance for many property projects around the world. It is sometimes easy to forget that these are investors who have slowly but surely built up their assets, never over-extended themselves……”
The trust factor has gone
If the figures emanating from various parties in Argentina were believable and constant there is every chance that some “value investors” might look towards certain parts of Argentina for the future. The fact is that unless investment markets know the best case scenario, or indeed the worst-case scenario, they are not able to reliably value any assets. Therefore, the price quoted for a property in Argentina may in the long term look excellent value but at this moment in time investors simply do not know.
It would be wrong to suggest Argentina is the only country going through a difficult economic situation at the moment but it certainly has one of the more prolonged periods of economic instability. When you also throw in political uncertainty, constant battles with overseas adversaries and an ongoing court case in the US regarding the country’s relatively recent “default”, this does not bode well for the short to medium term.
At this moment in time, after a sharp fall in economic activity and real estate prices over the last few years, it is just too difficult to forecast the short to medium term direction of the Argentina real estate market. Figures from governments and various “trusted parties” across Argentina seem to contradict each other, there is no general consensus regarding the economy or the real estate market and in effect no way in which investors can confidently value property assets.
We may get some brave investors looking longer-term, and potentially making a significant return, but until the trust factor returns to government statistics, and the economy is on a more even keel, for many people it is just too much of a risk.