The Real Estate Market

May 2010, Argentina Real Estate market update

2009 proved to be a slow year in terms of real estate activity. Prices, though, as we had anticipated, did not flinch. 2010 is generating a lot more activity, mainly due to the generalized belief that real estate is the best option to guard off potential inflation in US dollar, or even Euro, terms.

In the city of Buenos Aires, where most of foreign investments are focused, the number of transactions dropped approximately 30% over the twelve month period to August 2009. October and November showed a marked recovery and although sales between December and February 2010 reflected the traditional seasonal slowdown, we have experienced a continued recovery to date. Although the 2009 drop in activity was more related to the international financial crisis, pricing did not suffer. The key reason can be attributed to the small role mortgages play in the Argentine real estate market. With only 3% of transactions having a mortgage, owners were not forced to sell and found bricks to be the best destination in a doubtful banking and international investment environment.

Argentines share the generalized belief that world wide inflation is here to stay, mainly the result of the massive liquidity that was injected into both European and US economies. These variables, once again, are leading investors, locally and internationally to seek real assets as a proven defence against inflation. Following this belief, our strong recommendation is to invest in finished product or developments with a contracted fixed pricing. Areas to take advantage of include the totally unsatisfied long-term Argentine rental accommodation market, where one can invest in new one or two bedroom apartments ranging between U$S 75,000 and U$S 110,000.

Another solid option is the non-traditional agricultural sector, such as vineyard production projects. 2010 prices for Malbec grapes increased between 60% and 90% in dollar terms relative to pricing for the 2009 harvest. This generates a great entry opportunity for small to medium size investors who could only expect a break even position until now. Although vineyards could be found as low as U$S 70,000, profitable units are available in the province of Mendoza starting at approximately U$S 200,000.

Although the Argentine real estate market looks promising, one of the key concerns of any foreign real investor is having the right property management team. At Reynolds Propiedades we have an established property management division with over 80 properties under administration. We can also assist our absentee farm and vineyard owners with professional local managers with a proven track record. Call us or come and visit us. Hasta la proxima!

Paul A.Reynolds, C.I.P.S.
Managing Director
Reynolds Propiedades S.A.
www.argentinahomes.com