Argentine paradoxes: properties are “up for auction”, but it is almost impossible to buy them

Paradoxes of a distorted Argentina: The value of real estate sales continues to decline, but it is almost impossible to “own” one. The difference which opens between wages and the value of the square meter increases and even with decades of work saved entirely is not this possible. In two years, the square meter in Buenos Aires It’s dropped to a third of its value, but it’s still prohibitive for most porteños.

The gap between wages and the value of the square meter is particularly aggravated in capitals like Buenos Aires, where the real estate market “evolves” in dollars. The latest Real Estate Report data shows one square meter at US $ 1,732.2; approximately US $ 365 less than a year ago – in the midst of a pandemic – and 26.8% less than in May 2019. Values ​​have already returned to values ​​observed towards the end of the first stocks, in May 2015.

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Two other studies explain this decline and some other paradoxes. the Financial Research Center (CIF) of the Business School of Torcuato Di Tella University With the Zonaprop portal, he published a report in which he pointed out that the square meter in Buenos Aires had fallen by 4.4% in dollars since September. Even so, Argentina’s capital is the third most expensive in the Latin American region, with a salary measured in dollars that doesn’t match its strength.

Another joint work between the University of San Andrés and Mercado Libre He explained that in May 2021, at AMBA, the dollar selling price per square meter of houses fell by 3.6% and that of apartments by 6.8% compared to the same month of 2020.

Advertising portals

During this time, and despite the fall in prices, more and more ads are seen on online sales portals. Alone in one of the portals there are already more than 110,000 cumulative announcements, and they have not stopped growing since the last quarter of 2020. But this multiplicity of offers does not necessarily coincide with a demand: “The level of operations which take place month by month, it is not enough to absorb the goods for sale and which generates an accumulation of stock in the published notices ”, explains Soledad Balayan, real estate market analyst and owner at Maure Inmobiliaria.

In addition to the lack of accessibility, there is a temporary problem. “There was movement before the second wave. People were able to visit properties, choose between different options, and close the sale with over the counter offers accepted. But now a new parate is being created, people in general have their minds set on other priorities at the moment, ”he adds.

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“The real estate market could be defined as in a “ no market ” situation, with a number of operations at historically low levels. The number of operations so far this year, although it has increased from the terrible 2020, is the worst economy recorded the previous year, since 1998, where the current weak demand is concentrated in the residential segment, it works by using own savings and does it. for replacement purposes to improve their living conditions, ”adds José Rozados, director of Real Estate Report.

Bayalan speaks of a “vicious circle” in which the exchange rate holds, the loss of purchasing power and the lack of mortgage credit end up making it difficult to satisfy supply and demand. “Today, those who already have savings or those who buy and sell because they are getting smaller or larger clearly agree: this is why there are still very few operations, ”he emphasizes.

Today, being able to save in hard currency is not only complicated by stocks, but also by increasing basic household expenses: a typical family needs at least $ 63,000 to avoid being poor. . The average wage in the formal sector is $ 75,809.13. Measured in “free” dollars (CCL), it is around US $ 459. To buy a single square meter in the city, therefore, it takes almost 3.8 average wages. For an apartment of 50 square meters, 188.6 salaries. In other words, almost 15.7 years of work.

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“Without political and economic measures that generate confidence and dispel the widespread uncertainty that is experienced, it is difficult to predict that the dynamics of the current functioning of the market can be reversed,” Rozados adds, adding: “The magnitude of the real loss in dollar income was far greater than the decline in house prices. Values ​​have fallen, but incomes have fallen more, a little more. Thus, even with the fall in prices, today is one of the most difficult times to access the purchase of housing and even more without credit ”.

What about mortgage credit?

Argentina, with its inflation extraordinary, it is not a very fertile country for the development of mortgage credit. Recently, explains Federico González Rouco, economist of the Housing Institute of the City of Buenos Aires, property prices have fallen, but “the ability of incomes to access credit has also declined”. Specific, today an average salary can only cover 12% of the UVA quota or 7% of the traditional quota, points out.

This calculation results from the estimate of a commission / income ratio of 25%, that expected in the event of a mortgage loan subscription. Based on an average salary of $ 75,000, a person could spend up to $ 18,750 of their salary to buy a house.

“In practice, to access a 50 square meter house in CABA, for example, the required payment will be close to $ 160,000 for a UVA loan or $ 280,000 for a fixed-maturity loan. With these required income levels, access to credit becomes almost zero, ”he says.

“Wages have risen below what the dollar has risen and, while the drop in square footage makes up for some of that, it’s not enough. It’s the the fall in property prices occurs because the dollar wage has fallen, then, being something cause and effect, we are still in this process of readjusting values ​​and wages, ”he says.

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Which explains the credit problem today, he says, “It is not so much inflation but the inability of wages and the mismatch between wages and fees”. This is why a possible solution to the current situation of mistrust is to move towards a scheme in which quotas are adjusted for wages, suggests the economist, “from the incorporation of a compensation fund which allows the adjustment to be replaced by UVA [es decir, por inflación] switch to one for salary ”.

Something like this is what happens in the case of Home-specific credits, which adjust in salary variation. Usually, for this to happen, a compensatory fund is needed, so that banks do not suffer losses in the event of soaring inflation and a sharp loss in the purchasing power of wages. “This will reduce uncertainty for families and, at the same time, maintain the supply of credit, as financial institutions would continue to offer loans that mean inflation-adjusted income,” González Rouco concludes.