With US property prices on the rise, Argentine investors are now also looking to Europe

05 Oct '22

US home valuations began a slight decline

The “real estate bubble” with property price records in the United States registered in 2022 where the $400,000 averages per unit seems to be slowing down.

Some real estate agencies in this country maintain that after a constant increase, house prices finally began to fall in some cities, especially on the west coast, in the Californian cities of San José, San Diego and Sacramento along with Seattle (state of Washington), and Las Vegas, in Nevada, according to the portal Week.

Another striking change is that the volume of mortgage applications in the United States decreased by more than 50% this year. For a few months the sale of new homes has fallen compared to the previous year.

These factors have made Argentine investors who have savingsespecially abroad, allocate their investment to properties located in Europe.

On why housing prices happen in the United States, he referred to Infobae Mariano CapellinoCEO of Inmsa Real Estate Investments: “The year 2007 is remembered as the year of the great real estate boom in this country, so much so that to name it the expression the 2007 bubble. Although these values ​​seemed unbeatable, the conjunction of certain variables made possible another extraordinary situation that began to become evident in the second half of 2021 and seemed to take hold starting in 2022, but the situation gives signs of risks.”

The graphs presented below show the value reached by the properties in the temporary cuts in September 2020 and 2021, well above the maximum value reached in the 2007 bubble. These values ​​are a clear expression of how inflated the current market is.

Source: INMSA

Commercial assets (offices, industries, retails, multifamily and hotels), have had a percentage variation of 52.8% on an annual average of 16.1%; housing, for its part, also reached a percentage variation of 16.8% in 2021 (see below).

Source: INMSASource: INMSA

“This phenomenon occurred due to the drop in rates in 2019, which resulted in a wave of investments, added to the effects of the pandemic (savings forced in some way) and the enormous currency issue (25% of the total currency), generated an extraordinary flow of capital. The purchasing power together with the low rates caused a real estate boom with assets growing annually in an unusual proportion. Just as the charts show, well above the previous bubble,” Capellino said.

Today in the United States, housing prices are located 55% above the maximum of the bubble in 2008. The commercials are located 52.8% on average compared to 2008. And, discriminated against, multi-family homes are located 118% above, logistics 60%, offices 23% and retail and hotels are located on a par and were the two most affected in the pandemic. With which, it is very difficult to find value there, they maintain from the segment.

Can this bubble burst? Given the current rate hike, it is highly likely that there will be a brake on the rise in market values ​​and even a possible fall.

In Detroit, property values ​​have not yet fully recovered, for this reason Argentine savers usually bet on this marketIn Detroit, property values ​​have not yet fully recovered, for this reason Argentine savers usually bet on this market

Capellino expanded: “Just as when rates go down, real estate goes up because there is more intention to buy because of the facilities, when rates go up, real estate goes down because a higher return is required to compete with other options, and investors can focus on other assets, such as bonds. The rise in rates is clearly a variable that corrects prices. Those of us who dedicate ourselves to analyzing market cycles are on the lookout for indicators that warn that the huge bubble could burst at any time”.

Reference prices

In Miami, a destination that Argentines choose, prices generally vary depending on quality, age, amenities, location, among other aspects. Currently apartments for the middle class sector are in a range of $2,500 a $5,000 per square meter, in high-end properties they range from $5,000 To over $10,000 the m2.

What types of properties do Argentines buy today in the United States. “Mostly they acquire residential properties in Miami (Brickell and the Beach) and Manhattan, in New York, but also in other cities such as Atlanta, Orlando, Detroit, for example. Unfortunately today is not a good time to invest in the United States, except in the city of Detroit where values ​​are still more than 30% below the boom of 2007, while in the rest on average they are 55% above 2008″, expanded Capellino.

The Old World emerges

For this reason there are more opportunities in Europe. In this continent, they warn from the sector that rates are still very low and this generates the possibility of a very attractive return not only on the capital that is invested but also on the debt that is taken. The profitability of rentals grants a 6% per year on Iberian soilfor instance.

In Spain, the last year had records in most of the indicators, surpassing the recent ones or those of 2008, in the cases that had not surpassed them. The volume of transactions exceeded the volume of 2008 by 27%. The investment volume, which had been a record last year, in the first half of 2022 was 80% higher. The volume of mortgages, 27% up, surpassing the historical maximum of 2007.

As for the type of real estate, investors are becoming very interested in commercial properties, logistics properties and commercial premises for supermarkets and hotels.

Be Lagom, a project on the Costa del Sol, in Malaga, SpainBe Lagom, a project on the Costa del Sol, in Malaga, Spain

Although also in homes, such as in Costa del Sol, near Malaga, where they invest in brand new units.

In Spain, the price of middle class units varies between $1,000 a $4,000 m2, in high-rise properties start from $4,000 and they arrive until $10,000 the m2.

In addition to Spain, they also advise investing in Italy and Greece, two markets that have also never recovered since the 2008 crisis. I mean, they lowered their prices for 10 or 12 years and they’re starting to rebound. When they were beginning to recover, the pandemic arrived.

“Thus, they are two very attractive opportunities, because they are at the ideal moment of the cycle”, concluded a specialist in the real estate sector.

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Source:  Detail Zero

 

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