The absence of mortgages has reduced the impact of the crisis in the local market. The Argentine real estate market found its form by making a virtue out of a defect. The historical lack of mortgages which constitutes the greatest obstacle that face middle class families in accessing the market, has became the best antidote for the real estate sector to protect itself from the bubble bursting.
Local analysts and operators agree that a subprime real estate crisis like that in the United States would unlikely be repeated in a market like the Argentinean, where more than 90% of the purchases are carried out in cash and not mortgages.
There for, it is practically unheard off for situations to arise like those in the United States and other European countries where the huge increase in clients defaulting on mortgage payments has led to properties being repossessed by the banks which granted the loans to purchase them.
The reality of both markets is very different. The crisis in the United States originated from an excess of financing, whereas one of the characteristics of the Argentine real estate business is the lack of credit and the almost exclusive predominance of purchases made in cash, explained Germa'n Go'mez Picasso, director of the consulting Real estate Report.
It is acknowledged that the local market in this sector is not absolutely safe from the consequences of the crisis, which has already claimed several victims and threatens to extend to other international banks. In fact this highlights the mortgage situation that previously was only few and far between but has now become almost extinct in the very Argentine market.
The impact is going to felt in the credit markets. If up until now it were difficult to secure a mortgage, the situation is going to get worse. The banks are going to be stricter and are going to demand many more things, so as to justify not granting any credit, explained Carlos Sotelo, president of the Real estate Camera Argentina.
Refuge in bricks and mortar.
Today the local real estate market local continues being seen as a refuge for investors due to the difficulties in obtaining credit. Nevertheless, they admit that the present situation is different to that of 2002, when the lack of alternatives brought about a massive exodus of the capital towards the business of bricks and mortar.
Unlike what happened in 2002, today bricks and mortar have a strong competitor - the dollar. In the perception of many investors today is seen like a cheap product, explained Go'mez Picasso.
In this sector, all properties do not offer the same attractiveness. For experienced investors the safest options are commercial and office premises, although these demand a much greater degree of involvement which many landlords are not prepared to do. On average, the commercial and office premises offer an annual yield of between 10 or 11% - much higher than the 6% that residenctial property offers, explained Diego Cazes, vice-president of the company L.J. Ramos.
Cazes emphasizes that the most sort after properties are resale properties (or new properties which have recently been completed), because they offer the possibility of beginning to recoup the initial investment immediately. In addition, properties in construction have the disadvantage that today it is practically impossible to find a developer that offers a fixed price as the quotas are indexed by the inflation.
Jorge Toselli, of Real estate JT, also emphasizes: This month there has been a rise in the demand for two and three room apartments for less than 100,000 or 120,000 dollars due to the fact there are many small investors who prefer to leave the banks and to bet on bricks and mortar.
