Argentina: Overview

RENTAL YIELDS

Last Updated: Oct 14, 2008

Yields are very high in Buenos Aires

Landlords and investors in Buenos Aires can expect to earn spectacular gross rental yields on their apartments at around 9.73%, with 120 square metre apartments earning the highest yields, at 10.74%. Buying prices per square metre for Buenos Aires apartments range from around US$ 2,043 to US$2,400. Please remember that our figures are for used, not new apartments. Prices would be expected to be higher for new apartments, and yields lower.

For houses, gross rental yields in the Gran Buenos Aires area are also excellent, averaging 9.02%.

These yields suggest an excellent opportunity for investors. But foreign investors should be note that Argentina’s macro-economics have been seriously deteriorating in recent years, and the potential for economic instability is high due to the country’s large budget deficits and high rate of inflation.

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TAXES AND COSTS

Last Updated: Feb 18, 2009

Rental income taxes are
punitively high in Argentina

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	21%	21%	21%
Click here to see a worked example
Source: Disclaimer

Rental Income: Rental income is taxed as regular income. For non-residents, the tax is 21% of the gross annual rent. In addition, rental values exceeding ARS1,500 (US$498) per month are assessable for VAT at 21%, except for rentals of residential properties, properties rented to the Argentine State or rural properties affected to farming activities.

Non-residents also pay a tax on Personal Assets, Real Estate Tax and other charges.

Capital Gains: Capital gains earned by non-resident individuals are not considered as income, and are not taxed at the standard income tax rate. However, capital gains earned by companies are subject to corporate income tax at the rate of 35%.

Inheritance: There are no inheritance or gift taxes in Argentina.

Residents: Individuals who are residents of Argentina are liable to tax on their worldwide income at progressive rates.

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BUYING GUIDE

Last Updated: Sep 25, 2007

Low transaction costs but with several complications

The total roundtrip transaction cost is between 6% and 8.35% of the property’s value. This includes notary fees (1% - 2%) and the real estate agent’s fee (3% to 4% plus a VAT of 21%). For middle to high-end real estate, property transactions are done in US dollars with the amount paid in cash. However, getting US dollars is costly. It is possible to lose 1% to 2% of money value going through the official conversion process.

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LANDLORD AND TENANT

Last Updated: Jun 27, 2007

Pro-tenant rental market

Argentina’s rental market is pro-tenant.

Rents: Rents can be freely negotiated. Rent must be payable on a monthly schedule and cannot be indexed for inflation during the lease term.

Tenant Eviction: Amendments approved in 2002 have greatly shortened the time for landlords to recover property from non-paying tenants. Tenants can only be evicted through judicial proceedings, even at the end of the lease period.

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ECONOMIC GROWTH

Last Updated: Feb 28, 2008

Strong economic growth

Argentina faced economic disaster in 2001 when the Argentine peso was forced off the previous 1-to-1 peg with the US dollar, after a decade of excess government expenditure followed by a regional economic downturn.

The subsequent dirty float at around 3-to-1 pesos ruined many fortunes, but the economy’s performance has been impressive. From its 2002 lowest point, Argentina’s GDP per capita has grown an estimated 40.6%.

The man at the helm during this period has been left-leaning Justicialist President Nestor Kirchner (President May 2003-December 2007). Kirchner was successful in steering the country through the crisis, simultaneously reducing poverty and unemployment and, in 2005, taking the historic decision to pay off the country’s debt to the IMF.

In addition, Kirchner stood up to the military and overturned previous amnesty laws for military officers who committed abuses in the 1976-1983 ‘dirty wars’ under military rule. Kirchner’s combination of active measures for social justice, support for human rights, and budgetary restraint, has been exactly what the country needed.

A weak spot is continuing inflation. Kirchner imposed price controls to alleviate the problem, but these have not been as effective as hoped. Despite lagging behind its neighbors in fighting inflation, Argentina is still one of the richest in the region with a GDP per capita of US$6,549.

Kirchner’s attractive and popular wife Cristina Fernandez swept to victory in the first round of Argentina's presidential election in October 2007 - fighting the election largely on Mr Kirchner’s record.

Ms Fernandez is the first woman to be elected president of Argentina. She is expected to devote more attention to foreign policy, maintaining close ties with other Latin American countries such as Brazil and Venezuela, while at the same time seeking to ease the at times strained ties with Washington.

A Kirchner in the office will mean continuance of current policies. Foreign investment will still be warmly welcomed and the real estate sector will be pretty much left alone by the Government.