Housing market situation

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at46
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Re: Housing market situation

Post by at46 » Sun Jul 28, 2019 10:14 pm

What would be your motivation for buying a house in Chile? Like, you said before you're not sure if you're going to be here long-term. Buying a house for investment return as well as your residence is a tough call anywhere. The market here is very segmented and things change quickly. My personal strategy is buy liquid rentals and live in a rental as well.

at46
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Re: Housing market situation

Post by at46 » Sun Jul 28, 2019 10:28 pm

Having said that, you can go to your bank and ask them for a pre-approval of your mortgage. Once you give them all the papers they want, they get back to you within a couple of weeks. It's not binding on the bank in any way, but a good 'conversation starter'.

One trick is to go the bank where you don't have a current account. The executives get a commission for opening one, and a new mortgage is always accompanied by opening a current account. So that way you give the executive an incentive to make that mortgage happen for you.

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Re: Housing market situation

Post by nwdiver » Mon Jul 29, 2019 1:36 am

If it's your 20 year house it will be worth more in 20 years, if its a 3-5 year house maybe not....
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Re: Housing market situation

Post by admin » Mon Jul 29, 2019 9:31 am

Britkid wrote:
Sun Jul 28, 2019 2:25 pm
Average salary in Chile vs the average house price.

Average gross salary in Chile appears to be about $16,000 (sources: average of OECD data in wikipedia article on salaries by country, data here: https://www.worlddata.info/average-income.php and here: https://www.ine.cl/prensa/detalle-prens ... 93-en-2017) The data is a few years out of date, but probably we can assume that the average salary in Chile might be more like $17,000 in 2019.

108 million pesos is stated as the average (US$156,000) is stated as the average apartment for Santiago here: https://unegocios.uchile.cl/imposible-m ... -santiago/ citing GFK Adimark. Article April 2017. If it’s only for apartments, perhaps it could be higher if we include houses?? Maybe $170,000??

According to http://www.plataformaurbana.cl/archive/ ... ma-decada/ 4,200UF was the average vivienda cost in Santiago at the end of 2015. That's US$170,000 using the UF rate of today. But only for Santiago.
If Santiago is $170,000 average, then perhaps that means an average of $120,000 for other places, and say $145,000 for the whole country???

Does that (145) look in the ballpark?? (for the whole country including small houses in mediocre barrios of Santiago and poor areas of mediocre towns that some of you would never think of living in?) Does it pass a basic smell test? (I can't find an official source of data? Is there one?) If yes, that would put the average house price at 8-9x salary (probably more like 9x), which might mean the market is overheated or in a bubble. I would expect the ratio to be higher than the 4-6x ratio of US, UK because in a poorer country you will have more people, more earners per house, but not that much?

Hope someone can help me improve this analysis....
think i would break those out in differently for a whole bunch of reasons.

location vs. average salary / income in those locations.

about half the country (conservative) is not even in the ball game financially to say buy or rent a $200,000 plus u.s. dollar house. no credit, insufficient income, etc.

At the same time, on the low end of the income levels they are getting government subsidies. which also eliminates about 50% of the houses. you don't want to buy a house in essentially a ghetto, or i assume that is not what we are talking about.

like no one is issuing a mortgage to someone for a 300 million peso apartment in los condes, with only 17,000 dollars year in income. well, at least not many.

do some homework to get more accurate numbers, but you get my point. there are some dramatic economic class differences in the real estate market here for all kinds of reasons.
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Re: Housing market situation

Post by admin » Mon Jul 29, 2019 9:44 am

for example, the llanquie vs. say puerto varas would be a good example. one i have an idea of the prices, and the town are only about 10 km apart.

almost the same exact starter home in llanquie (possibly the same floor plan), that is 30 or 40 million, will be 100 million plus over in puerto varas.
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Re: Housing market situation

Post by tiagoabner » Mon Jul 29, 2019 11:01 am

Location, location, location. Yep, that's the name of the game for real estate everywhere, and especially in Chile, where neighborhoods are highly valued. The same house plan and lot size will have wildly different prices in Las Condes, Lo Barnechea, Talagante, and Ñunoa. The best way to go through it would be to pinpoint where you would like to live and then run the numbers based on that.

Check this out:

"Comunas del Gran Santiago por sueldo promedio (Diciembre 2017): ya no queda ninguna bajo los $600.000 mensuales"

Image

Raw data (for 2015): http://observatorio.ministeriodesarroll ... hogar.xlsx
I'm NOT your lawyer, accountant or financial planner. All information at this post should be considered for your entertainment only. Consult a professional before making a decision regarding whatever topic was mentioned in this post.

at46
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Re: Housing market situation

Post by at46 » Mon Jul 29, 2019 12:15 pm

Also, don't let exchange rates cloud your thinking. If you wanna be in the forex market, buying a house in Chile is not the way. But if you're here long-term and dead set on a house of your own, finding something you really like is what you need to do, even if it takes a year.

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Re: Housing market situation

Post by Britkid » Mon Jul 29, 2019 2:02 pm

I am also looking at a local research for my area. I don't think salaries by area will be easy to find, though. Yesterday I did some work on determining the rent prices vs house sale price ratios for my area to see if it makes sense. I might post a summary later if I have time.

The motivation for buying the house is

1 that my wife and kids want to own a house. They like the idea of having something that's yours, and being able to do what you want with it, so it's not necessarily a practical financial decision.

2 Also, I'm having difficulty living in an environmental way while renting: it is genuinely challenging: it isn't cost effective as a renter to add insulation or solar panels for instance. If we buy a house we will be able to either design one from scratch, or at the very least add solar panels, a geothermal heater, better windows etc to an existing house. So that is a change from before compared to 2 years ago: I have become more environmental, and the climate emergency is becoming more severe. (I have NEVER seen an eco house on the market to RENT in the small area I want to live in. I wonder, can anyone even post a link to such a house available for rent right now anywhere in the whole country? Or ever remember seeing such a thing in Chile ever?)

Therefore, it doesn't need to be a winning financial strategy, as long as it's not a losing one. The New York times buy or rent calculator suggests that for our situation it would be better financially to buy by a clear margin, however they don't seem to factor in the value of a person's time.

Thanks for the tips about the banks (although sadly I don't have a current account anywhere).

The length of time is a tricky one because we might need to leave in 2 years (if I suddenly get a job offer or lose this one and then fail to succeed working as a consultant remotely meaning I would need to go to Europe to get similar salaries), 5 years (if my daughter decides to go to University in England, I may go also), 12 years (this is when my youngest will be University age), or even longer. So, it's a gamble. I put 7 years as an average guess when I did the New York Times calculator.

Leaving in something like 2 years seems less likely nowadays though. The industry I am in is less dynamic these days. I used to occasionally get informal offers or headhunted years ago and the industry was growing, so I half expected to leave at some point and go in live in Germany or US or London. But it seems less likely these days. The industry stabilized. It's been a few years since anyone tried to recruit me. Also, I negotiated my salary up to the point where it may not make financial sense for me to start a new job elsewhere in a newer role (my salary demand might be higher than my worth). Also, I don't want a jet-setting lifestyle where I fly off to yet another country anymore. It is bad for the environment to do so many flights and the kids ended up stable and happy in the school, at least for now. My daughter has a great group of friends at the moment which would perhaps incentivize me to refuse an offer to leave.

And then the other factor is, compared to a few years ago, we have a bit more savings so will be more likely able to afford a deposit and have something to fall back on if I lose my job after getting a mortgage.

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Re: Housing market situation

Post by Britkid » Mon Jul 29, 2019 2:28 pm

admin wrote:
Mon Jul 29, 2019 9:31 am

about half the country (conservative) is not even in the ball game financially to say buy or rent a $200,000 plus u.s. dollar house. no credit, insufficient income, etc.

At the same time, on the low end of the income levels they are getting government subsidies. which also eliminates about 50% of the houses. you don't want to buy a house in essentially a ghetto, or i assume that is not what we are talking about.
We currently live in (renting) a 180m2 house in a 5000m2 parcela, and it is probably worth about US$300,000 or so, and that is the high end of what we would be aiming at. It would require a bank to not only agree to give us a mortgage (already tricky) but to agree to give us a mortgage for something like 80-90%. It might mean stretching our finances for a few years, no holidays, old car and so on.

Alternatively, to reduce risk, or if we're really struggling with finance, the absolute lowest we might go might be a 90m2 house for about $100,000. If the banks won't give us anything, we could probably figure out a way to swing this without any mortgage at all. My wife would have to choose between a small, non-parcela owned house in a town or a large rented one. I am pretty skeptical about this, however. Although we did live in a 70m2 house in England, we have got used to the space since then, neighbours are noisier here, and we've accumulated too much stuff. In theory my wife says she would consider this type of option, but when I say we would have to sell the dining table, one of the sofas, and get rid off a bunch of junk in the shed we are keeping "just incase"...I don't see her doing it and I won't pursue this type of option until she starts selling stuff.

So there is quite a wide range for now. 90m2 - 180m2 house; town or parcela; US$100-$300k.

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Re: Housing market situation

Post by at46 » Mon Jul 29, 2019 3:26 pm

Don't go for a 90 meter house. It's not going to work for a family of four coming down from a 180 meter house. Also, the smaller the house, the shittier it's construction/neighbourhood.

I'd just drop 5 or 10 grand on improving your current rental. You can still get some bang for that kinda buck. The thing is you can certainly loose a lot more on buying and selling a house in two years if things don't go well.

Anyway, your major issue is lack of local financial history, so you need to talk to the bank before anything else.

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Re: Housing market situation

Post by at46 » Mon Jul 29, 2019 3:40 pm

Lastly, talk to a family lawyer before buying a house...

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Re: Housing market situation

Post by scandinavian » Mon Jul 29, 2019 4:46 pm

Britkid wrote:
Mon Jul 29, 2019 2:02 pm

Thanks for the tips about the banks (although sadly I don't have a current account anywhere).
Getting a mortgage without a current account as a foreigner without local employment is going to be very, very difficult. You need to change that first...
even though your research ends up showing that the timing is bad for buying, then you need to get above in order for when the timing is right.

My experience is 20% minimum down payment as a foreigner. 10% is only for Chileans. (Santander, Banco de Chile and Scotiabank)

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