September 22, 2014
Property prices drop in Buenos Aires City
Some owners sell cheaper apartments and houses in order to woo potential buyersA slowdown of economic activity and the steep peso devaluation has yet to push the vast majority of Buenos Aires City residential property owners from decreasing the price in order to woo potential buyers.
Despite reports of falling prices in dollar terms, sector experts say the real estate market is largely stagnant in the City as uncertainty continues to grip potential investors. And figures about property prices are all over the map.
A recent survey by Universidad Argentina de la Empresa (UADE) concludes that property prices in the capital dropped between one and three percent over the year ending in January 2014.
For instance, in Palermo, Recoleta and Belgrano, apartments have seen an average decrease in the price per square metre of 3.1 percent, according to the report.
Another study by consultancy Reporte Inmobiliario, however, shows an average drop of 10.6 percent in the 36 City neighbourhoods it surveyed, with accentuated decreases of up to 22 percent in premium neighbourhoods such as Palermo, Belgrano and Recoleta.
Those in the sector are not surprised by the discrepancy in data.
Statistics on the sector’s condition are difficult to extrapolate due to a number of variables, says Argentine Real Estate Chamber head Roberto Arévalo.
“For example, what exchange rate is being used?” asks Arévalo, “and does the drop pertain to asking prices or settlement prices?”
Arévalo estimated that in Barrio Norte (northern Recoleta and Palermo) prices in dollars may well have dropped from an average of around US$2,900 per square metre in 2012 to US$2,600 today, but stagnation in prices last year was the norm due to the black market dollar’s sudden hike and subsequent volatility.
But statistics aside, “what matters is that supply and demand have not come together, and the market remains absolutely paralyzed with uncertainty.”
The Buenos Aires City Notaries Guild reported last week that deeds only went down 0.8 percent in January compared to the same month of 2013, which came after a whopping 53.7 percent contraction in December, a figure that indicates a constant recession in activity seen month after month last year.
Adding to the paralysis is the 54.6 percent increase in prices when measured in pesos, according to Reporte Inmobiliario’s statistics.
Arévalo says that even these statistics have problems, as many deeds are only written up after months of paying installments to acquire the property, meaning the figure does not represent the true activity for the month.
“People are not in debt, they have not signed up for credit, so they are unwilling to liquidate their assets,” he continued, noting that the general uncertainty made it difficult to predict what would happen to prices or sales in the near future.
“We’ve seen prices drop a maximum of five percent, but I don’t think they will go down any more,” said Goldstein Propiedades broker Oscar Acuña, considering the “horizon looks bleak, if things go on like this.”
Iván Achával, the president of Achával Cornejo, told the Herald that “the level of consultations is extremely high, but barely anyone follows through, which shows you the level of uncertainty people have.”
Although people do express interest they “are undecided as to whether this is the right moment,” he added.
Even if prices in dollars have declined slightly that’s not truly relevant to most buyers because “liquidity in dollars is minimal, and it’s a very small market,” adds Acuña.
As proof of this, the trend of selling new apartment buildings in pesos rather than dollars that came hand-in-hand with the restrictions to buy the US currency has continued, notes Achával.
The slight flexibilization of the restrictions on dollar purchases to allow those earning more than 7,200 pesos to exchange 20 percent of their monthly wages into dollars has brought down the volatility in the blue market, but whether that is enough to reignite the City’s real estate market remains to be seen.
For now, existing property, owners are largely refusing to compromise much on price, choosing to hold on to their real estate as a refuge for their capital.