Housing market situation

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Re: Housing market situation

Post by admin » Fri May 31, 2019 8:56 am

To get an idea of the construction sector, look at the results of these builders:

https://www.df.cl/noticias/empresas/con ... 22258.html

most builders are way up.

besalco, 113% over 2018. on the other hand, socovesa was down 4%

my explanation for that is socovesa read the tea leaves wrong, and was focusing on houses. they are now moving to mostly building apartments.

also besalco is not a pure play housing builder. think they also do hospitals, mining, and other infrastructure projects as I recall.

that article also is pretty thin on companies in the housing sector. waiting to see what for instance PAZ announces, as they are more focused on apartments.
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Re: Housing market situation

Post by snobrd4life » Sun Jun 02, 2019 2:45 pm

There were a few posts on this thread a few weeks ago that were really intriguing regarding the existence of bubble and appreciation/depreciation. Admin posted an interesting comment regarding age:
admin wrote:
Wed May 08, 2019 10:29 am
you also need to look at how older buildings and apartments depreciate in chile. they depreciate more like cars, than residential property. crappy old ugly buildings vs. new shiny better built buildings simply dont hold the value in the market place anymore.

you pretty much draw a line at say anything 2001 and earlier is simply not worth what a newer apartment might go for. so there is some replacement going on in the market.
This one from at46 made me smile (see my story below):
at46 wrote:
Thu Apr 11, 2019 11:40 pm
Santiago is actually pretty easy. Buy anything within 5 min walk of a metro station and you're golden. The Metro people have done all the research for you.
Looking for some advice from the real estate landlords with multiple properties in Chile on the forum. Everybody's got opinions and I'd love to read them :)

Background: Back in 2012, we bought an 4 year old 2/2b apartment in Nunoa. Top floor of an 18 story building with a great eastern view of the cordillera. This was before the announcement of construction of Line 3 of the Metro. It's now only a 5 minute walk to the closest station ( :D at46). We financed it with an unsecured 20 year loan, so it's not technically tied to a mortgage. We lived there for about a year before moving and have had it rented out ever since as an investment property in the hopes that it would pay for itself and continue to appreciate in value. It's not really generating any positive income after loan, taxes and insurance, but the appreciation has been significant. Portal Inmobiliario shows similar apartments in the same building and neighborhood are going for about $130+ palos which is more than double what we paid for it back in 2012.

Besides replacing all of the floating floors and trim a few years ago (thank you insurance policy) due to a water leak that affected the entire floor of the building, we haven't had to make any other improvements. Apartment is now 11 years old with original fixtures and cabinets in the bathrooms and kitchen. Solid construction, but I'm sure things are starting show their age with nicks, especially in the kitchen.

Fast forward to today, we are on our latest (3rd) tenant who is about to complete 2 years with us and just asked if we would be interested in selling the apartment to him.

We no longer live in Chile and wouldn't ever live in that apartment ever again considering we've done our bit of procreating in the past few years. Apartment is desirable, but we have zero sentimental value for it. This would be purely an investment play. So what to do?

Considering the following:
  • we have a serious interested buyer willing to pay fair market price
  • no agents
  • we can continue making relatively low payments on an unsecured loan for another 12 years
Would you:
  • sell and buy new or newer somewhere else in Santiago or elsewhere considering we have the unsecured loan to play with?
  • Rent same apartment to new tenant without making improvements?
  • Make improvements?
  • Take the cash and invest something else?

Converting to USD to put to use in our current living situation in the US seems asinine given the CLP to USD rate above 700 right now.

Whoa, that was a long post.
ese ruido blanco es una alarma en mis oídos
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tiagoabner
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Re: Housing market situation

Post by tiagoabner » Sun Jun 02, 2019 3:03 pm

On the peso value, that's a 10.4% appreciation over 7 years. But when you consider the dollar, the apartment used to cost USD $130,000 and now it's worth roughly USD $185,000, roughly 5.2%. I'm assuming no closing costs at both ends of the operation and negligible maintenance costs. For the sake of comparison, S&P500's annualized return for the same period was 8.2%.

That said, gaming the exchange market is a fool's errand. If you have no plans to ever live in Chile again, you might as well sell it and reinvest it. There's no reason to keep such a large investment if you don't have plans to come back. And even then, you can always buy another place.

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Re: Housing market situation

Post by at46 » Sun Jun 02, 2019 4:18 pm

tiagoabner wrote:
Sun Jun 02, 2019 3:03 pm
On the peso value, that's a 10.4% appreciation over 7 years. But when you consider the dollar, the apartment used to cost USD $130,000 and now it's worth roughly USD $185,000, roughly 5.2%. I'm assuming no closing costs at both ends of the operation and negligible maintenance costs. For the sake of comparison, S&P500's annualized return for the same period was 8.2%.

That said, gaming the exchange market is a fool's errand. If you have no plans to ever live in Chile again, you might as well sell it and reinvest it. There's no reason to keep such a large investment if you don't have plans to come back. And even then, you can always buy another place.
I think you're missing the roughly 50K USD in rental income over the 7 years.

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snobrd4life
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Re: Housing market situation

Post by snobrd4life » Sun Jun 02, 2019 4:22 pm

tiagoabner wrote:
Sun Jun 02, 2019 3:03 pm
That said, gaming the exchange market is a fool's errand. If you have no plans to ever live in Chile again, you might as well sell it and reinvest it. There's no reason to keep such a large investment if you don't have plans to come back. And even then, you can always buy another place.
I belong to a chilena :lol:

Anything is possible. It's nice knowing we have another nest in case things go completely to sh!t up North. Not that I would want to digress from the topic of this thread...
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Re: Housing market situation

Post by snobrd4life » Sun Jun 02, 2019 4:29 pm

at46 wrote:
Sun Jun 02, 2019 4:18 pm
I think you're missing the roughly 50K USD in rental income over the 7 years.
Rental income is almost entirely eaten up by the mortgage interest, insurance, and contribuciones. I'd call income a wash, really. Anything we've earned is really just appreciation.

The insurance policy is a bit expensive, but it really came through when we had to replace all of the floors that were not tile due to the flooding.
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Re: Housing market situation

Post by at46 » Sun Jun 02, 2019 4:43 pm

Sheesh, I just posted something and it never showed up. What's going on?

Anyway, here's a repeat. I think that apartment has a bit more appreciation potential so I wouldn't sell it just yet. Keen interest from your current renter is a good proof of that. It's a good location, good layout that can be shared by two independant renters, great view, and it's probably good size given it's a bit 'older' versus newer concrete dog houses they're building these days.

Nunoa will be the new Las Condes/Provi in a few years. There's a lot of fill-in construction that's going to be happening for the next few years, but you're not there to be affected by it, and you'll never have a problem finding a renter this close to a Metro station.

Assuming you're renting it empty, the costs of fixing it up every five-six years are pretty minimal also.

You can sell it and get two one bedrooms that'll pay for themselves and also have a bit left over for your new toys, but you'd need to come over here for a while to do that, so why bother?

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Re: Housing market situation

Post by at46 » Sun Jun 02, 2019 4:48 pm

snobrd4life wrote:
Sun Jun 02, 2019 4:29 pm
at46 wrote:
Sun Jun 02, 2019 4:18 pm
I think you're missing the roughly 50K USD in rental income over the 7 years.
Rental income is almost entirely eaten up by the mortgage interest, insurance, and contribuciones. I'd call income a wash, really. Anything we've earned is really just appreciation.
So your cost of capital is basically zero. It's not too bad :)

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tiagoabner
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Re: Housing market situation

Post by tiagoabner » Sun Jun 02, 2019 5:53 pm

snobrd4life wrote:
Sun Jun 02, 2019 4:29 pm
at46 wrote:
Sun Jun 02, 2019 4:18 pm
I think you're missing the roughly 50K USD in rental income over the 7 years.
Rental income is almost entirely eaten up by the mortgage interest, insurance, and contribuciones. I'd call income a wash, really. Anything we've earned is really just appreciation.

The insurance policy is a bit expensive, but it really came through when we had to replace all of the floors that were not tile due to the flooding.
This is exactly what I assumed in my calculations. In the end, it's really a matter of what you prefer. The numbers will be roughly the same in the end, for a 5-10 year horizon.

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Re: Housing market situation

Post by at46 » Sun Jun 02, 2019 6:38 pm

Another consideration is the 35% tax you pay on the difference between your purchase price versus your selling price for a non-resident. So a long 6 months+ vacation in Chile might be in order, to re-establish residency before selling...

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Re: Housing market situation

Post by snobrd4life » Sun Jun 02, 2019 8:24 pm

at46 wrote:
Sun Jun 02, 2019 6:38 pm
Another consideration is the 35% tax you pay on the difference between your purchase price versus your selling price for a non-resident. So a long 6 months+ vacation in Chile might be in order, to re-establish residency before selling...
Hadn’t considered that, but my wife (Chilean) and I are co-owners. Maybe could transfer title entirely to her prior to eventual sale?
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Re: Housing market situation

Post by at46 » Sun Jun 02, 2019 8:40 pm

snobrd4life wrote:
Sun Jun 02, 2019 8:24 pm
at46 wrote:
Sun Jun 02, 2019 6:38 pm
Another consideration is the 35% tax you pay on the difference between your purchase price versus your selling price for a non-resident. So a long 6 months+ vacation in Chile might be in order, to re-establish residency before selling...
Hadn’t considered that, but my wife (Chilean) and I are co-owners. Maybe could transfer title entirely to her prior to eventual sale?
It's not about Chilean citizenship but about tax residency of the owners. If she's living with you in the States for more than 6 months in a fiscal year, she's a US tax resident for that year, for all I know. And I think it's the same in Chile.

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