Where and When to Invest in Argentina | Pathfinder International

Wednesday, October 21, 2009

Buenos Aires’ skyline by night

Dear Reader,

During my two months in Argentina, I’ve had a good chance to investigate the real estate market here. I’ve drawn a few conclusions from my research I’d like to share with you.

Should you buy a property in Argentina right now?

That depends on a number of factors, the most important of which is what you’d want the property for: lifestyle, a rental unit, or perhaps as an investment.

Lifestyle

I’d gladly buy in a neighborhood like San Telmo, if I found a property I loved. I like the ambiance and lifestyle here. The properties have a unique charm, and the price point is less than half that of other colonial locations, such as Casco Viejo, Panama. If you’re buying for lifestyle reasons, Buenos Aires still has plenty of excellent values.

Beachfront

I wouldn’t recommend buying beachfront property here. Argentina’s seashore towns, such as Pinamar, have a lot to offer. They can’t compete however with the equally-priced glamour of Punta del Este in Uruguay…or the year-round sunshine of more tropical locations.

Rentals

If you own a rental apartment in Buenos Aires, I’d switch to long term… and wait for the currently-low tourist numbers to pick up again. But I would not recommend buying a rental property at this time.

Investment

I would not buy in Buenos Aires right now as a pure investment, unless I found a great property at a great price, and planned on holding it longer-term. Remember too that you have to pay cash to buy in Argentina. Mortgage financing is not the norm…only about 3% of property purchases involve a mortgage. So you’d have to be comfortable tying up your cash for a long period of time.

Other Argentina investment options

Two other options offered by many investment groups are farmland and vineyards.

Projections indicate that the world population will grow from six billion to nine billion over the next forty years. That means an increasing demand for food. Dwindling oil supplies also mean more demand for biofuels. Both these factors are attracting buyers to countries with good arable land. That includes Argentina.

My take is that you need to know what you are investing in. The productivity of agricultural land determines its value, and productivity is heavily reliant on water supplies. Parts of Argentina suffered the worst drought in living memory this year, with many farmers badly affected.

Argentina has comparatively heavy taxes and export tariffs on agricultural produce, from soybeans to beef. Local farmers are unhappy with the current government. This too affects land values.

There are good agricultural investments out there. but don’t get carried away with the investment jargon—research your purchase thoroughly.

Vineyards are tricky. Yes, you can own a vineyard in Mendoza for a fraction of one in Napa valley. But you should be conscious of the many variables—from soil type, to water, to elevation—that determine the suitability of land for cultivating vines. Unless you are an expert in this area, I’d advise you to make use of professional help when buying a vineyard.

As it is, I’ve yet to meet any small vineyard owners turning a profit. Instead, it seems to be an expensive hobby…which some are looking for, but many are not.

Positioning yourself for profit

I’d advise that for now, you zone in on up-and-coming locations, figure out what type of property you want, and more importantly, what you plan on doing with it. Then closely follow economic data and market news. That way you’ll be positioned to take advantage of any dip in property prices in a timely manner.

In other words, this is the year to visit, investigate, and be ready to act quickly if Argentina’s economics take a sharp downturn. I’ll keep my ear to the ground, too, and be in touch if the situation changes.

Next week, it’s back to the beach, as I head for the warmer, sunnier shores of Brazil. I can’t wait.

Margaret Summerfield