Housing market situation

Buying, Selling, Building, Tax issues, anything regarding real estate or properties in Chile.
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Baltimore
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Re: Housing market situation

Post by Baltimore » Mon Nov 26, 2018 7:04 pm

From Diario Financiero, today:
Screen Shot 2018-11-26 at 6.59.11 PM.png

paladin
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Re: Housing market situation

Post by paladin » Mon Nov 26, 2018 8:03 pm

I agree completely with the principles used by admin. As he clears points out, the only guarantee with holding cash is to lose by inflation. After the last big earthquake that his us, and the atms couldnt work, nor could we use credit cards for a bit, I stuffed some billetes in a box, so that if something similar were to happen again, at least I’d be able to buy gas and food.
We’ve had loads of posts over the past few years, predicting a drop in property prices because of “ the bubble” which obviously doesnt exist, etc. I am an investor in apartments, not new as I dont want the nightmares, and all in high demand areas of Santiago. Prices in UF have continued to rise each year; not by the ridiculous amounts as we had a couple of years ago, but good returns, plus the rentals on top.
However, what I never invest in are Chilean quoted shares, that rise and fall for no real reasons apart from the fact that it’s the AFP’s that control the market .

Baltimore
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Re: Housing market situation

Post by Baltimore » Tue Nov 27, 2018 12:46 pm

Yeah, holding cash in the long term seems like a bad idea and the term "bubble" is rather vague to me, it's only clear in retrospect.

That aside, can the price of a security keep increasing at a faster rate of an increase in the dividends it pays in the long term? Can house prices in, say, Vitacura, Las Condes, Providencia, and Ñuñoa keep increasing at twice the rate of rental price increases in those areas indefinitely? So, for instance, the 400M apartments that today you can rent for nearly 1M per month will be worth 800M in 5 more years, but you will be able to rent one for 1.5M per month.

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admin
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Re: Housing market situation

Post by admin » Tue Nov 27, 2018 2:56 pm

just for fun, i did a search of when was the first time the word "bubble" was used on the forum in the context of real estate in chile. looks like it was around 2006-2007.

so we have been waiting for "the bubble" in chilean real estate to burst pretty much since the forum went live.
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Re: Housing market situation

Post by admin » Tue Nov 27, 2018 3:09 pm

that said, i have two antidotal bits of info from this morning.

opened the local paper to check the property auctions. for the first time, in a very very long time, there were none.

a family member has had a property up for sale in pichileume for several years, with very little action because it has a rediculas high price, even among properties with rediculas high prices. finaly got a serious buyer talking about buying it. we subdivided a former 5000 square rural lot, in to 500 meter urban lots (city urban zone expanded), to get more money out of it and make it easier to sell. buyer wants it all.

if this is a bubble, being chile and all, it will probably run its course untill prices smooth themselves out just from old age deflation.

which when i have seen bubble like localized real estate markets in chile, they tend to sort of slowly deflate / pause, as the rest of the economy catches up, rather than burst.
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Baltimore
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Re: Housing market situation

Post by Baltimore » Tue Nov 27, 2018 4:03 pm

admin wrote:
Tue Nov 27, 2018 3:09 pm
which when i have seen bubble like localized real estate markets in chile, they tend to sort of slowly deflate / pause, as the rest of the economy catches up, rather than burst.
So you expect selling and rental prices to get back in line eventually in the future or is it totally fine for those two two climb at different rates?
rent-vs-buy-chart.jpg
rent-vs-buy-chart.jpg (60.45 KiB) Viewed 296 times
It is also interesting to see the evolution of inflation-adjusted average home values in the US as well, not that it applies to Chile, but...
case-shiller-chart-updated.png

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Re: Housing market situation

Post by admin » Tue Nov 27, 2018 5:24 pm

here is the problem.

the u.s. market, unlike possibly any other market in the world, has been systemitized, comoditized, and over anyalized, untill every last penny of value can be accounted for; thus, squeezed out of the markets. you have everyone from the banks and the fed, to insurance companies, state and local tax authority, and the local licensed apraiser that can agree on a the value of any property in the country within a few dollars.

you can't do that in chile. the goverment can't do that. the banks, the insurance companies, the tax authority; hell, i can't do that in chile, and i do it for a living.

if i sent a dozen apraisers to evalute a property, i would probably get a dozen diffrent values. yea, santiago has gotten a bit more refined, but you will still see 10, 20, even 100 million diffrence in ideas of what property is worth. even properties, right next door to eachother, that in almost every way are exactly compariable, will have radicaly diffrent prices on them.

the name of 5he game from an investment perspective, is identifying the ones that are grossly under market. that is still far more an art than anything else.
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Re: Housing market situation

Post by admin » Tue Nov 27, 2018 5:53 pm

when i get a moment i will tell the story of the crazy pricing distortions of the properties in the condo community where i live, as i own several lots here and have helped friends and family buy lots here over the years.
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Baltimore
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Re: Housing market situation

Post by Baltimore » Tue Nov 27, 2018 6:48 pm

admin wrote:
Tue Nov 27, 2018 5:24 pm
the name of 5he game from an investment perspective, is identifying the ones that are grossly under market. that is still far more an art than anything else.
Although I do not consider myself an investor, what you say is in line with what I've seen after coming back to Chile. I'm actually quite impressed at the level of financial education of most Americans, at least at what I saw from friends deciding whether to rent or buy at different locations in the US. Quite different from the level of education of an average Chilean that is considering buying real estate.

To me, the moral of the story you tell is:

"although prices have increased a lot in the last five years, there are still good investment opportunities because, unlike the real estate market in the US, in Chile the real estate market is very inefficient and there are lots of opportunities for arbitrage if you can find them"

However, the more common sentiment I perceive from friends and some colleagues is:

"buy whatever property at any price as soon as you can afford it/get a loan, otherwise you are dumbass that does not want to get rich while everyone else is having so much fun at this party!"

But maybe I'm just hanging out with the wrong group of friends :shock:

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Re: Housing market situation

Post by at46 » Wed Nov 28, 2018 2:59 pm

Baltimore wrote:
Tue Nov 27, 2018 4:03 pm
admin wrote:
Tue Nov 27, 2018 3:09 pm
which when i have seen bubble like localized real estate markets in chile, they tend to sort of slowly deflate / pause, as the rest of the economy catches up, rather than burst.
So you expect selling and rental prices to get back in line eventually in the future or is it totally fine for those two two climb at different rates?
The independent Central Bank sets interest rates used to price mortgages but has little influence on wages from which rent is paid. That's the basic disconnect. It can lower or raise your mortgage costs but can not do much about your wages. The government has to step in and raise the minimum wage. But does it really have to given there are still plenty of people in this economy who can put up a 20% pie to get what's a pretty expensive mortgage by any Western standard?

Looking at Munich, Germany, for example: the wages are pretty comparable to Chile - the average pay is 2500 Euros (luquido) which corresponds to about 1200 million pesos, according to https://www.numbeo.com/cost-of-living/c ... ty2=Munich. Property prices are like 8 times higher but rent is only 1.25 times higher than here. If you can find a rental at all, that is :)

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tiagoabner
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Re: Housing market situation

Post by tiagoabner » Wed Nov 28, 2018 5:05 pm

2500€ is almost 2 million pesos, actually. But yeah, there's always a disconnect between wages and the interest rates.
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.

Baltimore
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Re: Housing market situation

Post by Baltimore » Wed Nov 28, 2018 5:12 pm

It seems like most Germans are pretty happy renting though...

https://qz.com/167887/germany-has-one-o ... hip-rates/

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