Published on 19/09/2008

In Argentina the real estate business has been less affected by world uncertainty, as the comparative value of local property is significantly lower. Even in areas of prime real estate property purchases are mainly carried out in cash transactions.

Historically, with a few exceptions, the financing of property purchase is non-existent, as a bank loan would offer only a short maturity period and high interest, making it difficult to take out a mortgage.

The latest statistics show that 96.4 per cent of property purchase transactions carried out in the year 2007, were carried out in cash and the remaining 3.6 per cent were purchased with a bank loan. This statistic reflects the general purchase modus operandi of the real estate sector.

Another characteristic of the local market is that purchase prices have always been quoted in US Dollars. Many foreign investors, mostly individuals, have bought in to the property market as comparative prices in Euros, UK pounds or Australian Dollars are lower due to the weak US Dollar. This situation is now changing, as the US dollar strengthens.

Larger developers either in buildings for offices, mid-market flats and gated communities have reacted to the lack of financing in Argentina, bypassing the local banking system where maturity and interest rates are too high, and instead have access to the International finance market. As it is getting harder to obtain finance internationally they are now accessing investment funds.

Demand for new office space is high and presently outstrips the supply. Companies are requiring larger open spaces, intelligent building design and easy access. Hotel and leisure industries are still bullish due to the increase in regional and international tourism; in many cases oriented to niche markets such as polo training, fishing, shooting, and requiring good quality hotels in the interior of the country.

In conclusion, the real estate sector is still flourishing and the financing of projects funded mainly outside the local banking system. Property values, especially premium land locations have exceeded their transferable cost, reducing the growth rate for developers. Farming and leisure land prices remain high, despite a significant reduction in world commodity prices and the excessive tax on exports of commodities, which caused farmers to carry out a 120 day lockout.

Roberto Cox,
Buenos Aires, Argentina
mailto:rcox@suarez-menendez.com