As the New Year begins, Argentina is seeking to put outcomes behind them in the real estate industry last year. According to a recent study, real estate activity fell by about 40% in 2012, making it one of the country's poorest performances in the previous decade. Transactions involving assets already on the market decreased by over 80 percent. estate agents
Economic growth in Argentina has decreased, one cause for the decline. Following an accelerated growth rate of about 9% in 2011, economic growth is estimated to be less than half that in 2012. Although domestic demand, industry developments and export possibilities are all attractive, Argentina is unlikely to gain more than 3.5% in 2013. This has put downward pressure on investment return rates, the capacity of home purchasers to pay down payments, and the willingness of banks to lend.
More significant, real estate sellers are always requesting that they get dollars at a time when it is becoming increasingly difficult to acquire in the largely dollarized immobilier market in Argentina. Argentina has taken a number of actions to maintain dollars in the nation, which need foreign currency debt obligations to be served and peso value protected. These constraints have basically made it extremely difficult, if not impossible, to get US dollars on the open market in order to make dollar-denominated real estate deals.
The fast erosion of Argentine inflation in the purchasing power of pesos exacerbates the consequences of currency restrictions. While Argentina's accurate rate of inflation is contested, inflation destroys economic wealth faster than most peso-referred ventures can create. Consequently, property investors, particularly those who have purchased cash and are under no hurry to sell, either choose to wait for the stabilization of the Argentina economy or for the sellers to pay in dollars.
In parallel currency markets, the growing disparity between Argentina's official dollar/peso exchange rate and dollar prices makes sellers reluctant to hold local money. Even if the official one-dollar exchange rate stood at 4,325 pesos in January 2012, the blue dollar traded on a parallel market at 4,745 pesos. The official dollar exchange rate was 4.95 pesos a year later, and the blue dollar traded at 7.25 pesos. Although some of the recent spike in parallel value may be ascribed to the fact that Argentina is now a summer holiday season, and that Argentine visitors require dollars for foreign excursions, it also reflects the notion that pesos are over-evaluated.
Given the present market attitude, low economic growth prospects and a poor foreign investor confidence, it is difficult to expect a major increase in real estate business in the first quarter. In addition to policy changes, the major concern will be if inflation rates are falling, which would ease upward dollar pressure and room for growth on the market of peso-based real estate.