After a tumultuous 2009, Argentineans look forward to a better 2010 for the housing market and the economy. The resurgence of exports and pick up in tourism are expected to push the housing market.
Argentina saw falling housing sales but stable house prices in 2009. Property sales transactions in Buenos Aires, the capital, from January to October 2009 declined to 60,767 down by 26% compared to the same period in 2008, according to Reporte Inmobiliario, an online real estate magazine.
The global economic slowdown combined with the detrimental effects of A(H1N1) flu virus on tourism led to the decline in real estate sales. The relative stability of house prices, on the other hand, was attributed to the inexistence of Argentina’s mortgage market. Almost all real estate transactions are done in cash, usually in US dollars (with some done in euro).
The use of cash in property transactions insulates the housing market from interest rate changes. Hence, there are no huge house price increases as there are also no dramatic price falls.
According to market players, with the global economy showing signs of recovery in the latter part of 2009, real estate activity in Argentina started to pick up. Optimism is high and the improved situation is expected to continue in 2010.
Although 2010 is expected to be better than 2009, double-digit price increases seen from 2005 to 2007 are highly unlikely.
There are no major restrictions on foreign ownership of property in Argentina except for Argentine land near the border which is roughly within 100 km of the Chilean border. Foreigners can only buy real estate in that area as long as the property is 1) located in an urban or suburban area, 2) less than 5,000 sq. m., and 3) not intended for commercial purposes.
Argentina saw falling housing sales but stable house prices in 2009. Property sales transactions in Buenos Aires, the capital, from January to October 2009 declined to 60,767 down by 26% compared to the same period in 2008, according to Reporte Inmobiliario, an online real estate magazine.
The global economic slowdown combined with the detrimental effects of A(H1N1) flu virus on tourism led to the decline in real estate sales. The relative stability of house prices, on the other hand, was attributed to the inexistence of Argentina’s mortgage market. Almost all real estate transactions are done in cash, usually in US dollars (with some done in euro).
The use of cash in property transactions insulates the housing market from interest rate changes. Hence, there are no huge house price increases as there are also no dramatic price falls.
According to market players, with the global economy showing signs of recovery in the latter part of 2009, real estate activity in Argentina started to pick up. Optimism is high and the improved situation is expected to continue in 2010.
Although 2010 is expected to be better than 2009, double-digit price increases seen from 2005 to 2007 are highly unlikely.
There are no major restrictions on foreign ownership of property in Argentina except for Argentine land near the border which is roughly within 100 km of the Chilean border. Foreigners can only buy real estate in that area as long as the property is 1) located in an urban or suburban area, 2) less than 5,000 sq. m., and 3) not intended for commercial purposes.
Analysis of Argentina Residential Property Market »
RENTAL YIELDS
Last Updated: Oct 31, 2011
No strong movement in residential apartment prices has taken place in Buenos Aires, Argentina, over the past 2 years. If anything, the trend is toward some upward movement (following some increase in rents). The average apartment in the centre of Buenos Aires now sells for around US$2,468 per square metre.
Rents have been rising. During 2009 they fell significantly in terms of US$, but now they are stronger again. Average apartment rental yields are around 6% to 7%.
House prices have been a little weak, and US$1,100 per square metre is a typical price now. The result is that gross rental yields of Buenos Aires houses is rather attractive from the perspective of landlords, at over 9.5%.
Rents have been rising. During 2009 they fell significantly in terms of US$, but now they are stronger again. Average apartment rental yields are around 6% to 7%.
House prices have been a little weak, and US$1,100 per square metre is a typical price now. The result is that gross rental yields of Buenos Aires houses is rather attractive from the perspective of landlords, at over 9.5%.
TAXES AND COSTS
Last Updated: Jun 02, 2011
Rental Income: Rental income is taxed as regular income. For nonresidents, the tax is 21% of the gross annual rent. In addition, rental values exceeding ARS1,500 (US$391) 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 nonresident 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. except for an inheritance tax levied on properties located in the province of Buenos Aires.
Residents: Individuals who are residents of Argentina are liable to tax on their worldwide income at progressive rates.
Non-residents also pay a tax on Personal Assets, Real Estate Tax and other charges.
Capital Gains: Capital gains earned by nonresident 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. except for an inheritance tax levied on properties located in the province of Buenos Aires.
Residents: Individuals who are residents of Argentina are liable to tax on their worldwide income at progressive rates.
BUYING GUIDE
Last Updated: Sep 25, 2007
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.
LANDLORD AND TENANT
Last Updated: Jun 27, 2007
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.
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.
ECONOMIC GROWTH
Last Updated: Feb 24, 2010
The Kirchners are falling with the economy
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 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. The economy gradually stabilized and recovered. The economy grew by an average of 8.8% annually from 2003 to 2007.
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.
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.
However, political support for the Kirchners have been waning. A controversial export tax which sparked months of protests by farmers were cancelled in July 2008. In January 2009, a state of emergency was declared due to a drought, which was the worst in decades.
The Kirchners are gaining a reputation for authoritarianism, rumours of corruption increasingly circulate. Government spending is pushing up inflation, while the official inflation figures are increasingly disbelieved. Failure to address adequately these issues led to the loss of their party’s absolute majority in both houses of the parliament. Further, Kirchner narrowly lost in his bid to gain a seat in the lower house.
Even with the possibility of minor economic recovery in 2010 and 2011, a chance of reelection for Fernandez (or Kirchner) is dim. The IMF forecasts GDP growth of 1.5% in 2010 and 2.5% in 2011.
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