Housing market situation

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thisisreallycomplicated
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Re: Housing market situation

Post by thisisreallycomplicated » Thu May 16, 2019 7:22 pm

Baltimore wrote:
Thu May 16, 2019 12:28 pm
thisisreallycomplicated wrote:
Thu May 16, 2019 12:35 am
This seems like a good thread to ask this question... Do Chileans tend to borrow a lot on their home equity?
I cannot give you a solid statistic on this, but based on people I know in low, medium, and high income levels, my answer is yes for both low and medium levels. As soon as they have access to a credito hipotecario (job contract+20% down payment), they buy a property, although this might be changing for millenials.

For people in high income brackets, it depends. Friends that come from money buy properties with little or no leverage, most of them can afford gigantic down payments using inheritances or direct financial support from their families. I also know some that borrow money from companies owned by their family, as "soft loans". I know many of these have bought big apartments or houses in San Carlos de Apoquindo, Lo Barnechea, Vitacura, etc.

Friends that do not come from money, but that make good money today, are more shy about buying properties and using leverage because the areas where they want to live have really bad price-to-rent ratios (Vitacura, Lo Barnechea, Las Condes). In those areas in Santiago a mortgage with a 20% down payment gives you a pretty bad deal compared to the alternative of renting and investing somewhere else (e.g., a rental property somewhere else or using a different investment instrument). If for some reason the economy goes south, they are well aware that if they need to step out from their properties, there is no way that they will be able to cover the mortgage with the current rental prices. Think of apartments or houses that you can rent for $600.000 - $900.000 that would require mortgages of $2.000.000 per month with a 20% down payment. Add gastos comunes of $350.000 per month for a nice a apartment and things start looking not so rosy if you need to run away from your property, put the apartment up for rent, but it remains empty for months.
Thanks. So after they've owned a house for maybe 10 years, and have >20% equity in it, do they tend to refinance so they can spend that equity? Or do most leave the equity in the house, and try to pay off the original loan? I keep seeing houses going up for sale. But I don't notice any getting sold. So I'm wondering if the owners are asking too much, because they owe too much.
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Baltimore
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Re: Housing market situation

Post by Baltimore » Fri May 17, 2019 2:58 pm

thisisreallycomplicated wrote:
Thu May 16, 2019 7:22 pm
Baltimore wrote:
Thu May 16, 2019 12:28 pm
thisisreallycomplicated wrote:
Thu May 16, 2019 12:35 am
This seems like a good thread to ask this question... Do Chileans tend to borrow a lot on their home equity?
I cannot give you a solid statistic on this, but based on people I know in low, medium, and high income levels, my answer is yes for both low and medium levels. As soon as they have access to a credito hipotecario (job contract+20% down payment), they buy a property, although this might be changing for millenials.

For people in high income brackets, it depends. Friends that come from money buy properties with little or no leverage, most of them can afford gigantic down payments using inheritances or direct financial support from their families. I also know some that borrow money from companies owned by their family, as "soft loans". I know many of these have bought big apartments or houses in San Carlos de Apoquindo, Lo Barnechea, Vitacura, etc.

Friends that do not come from money, but that make good money today, are more shy about buying properties and using leverage because the areas where they want to live have really bad price-to-rent ratios (Vitacura, Lo Barnechea, Las Condes). In those areas in Santiago a mortgage with a 20% down payment gives you a pretty bad deal compared to the alternative of renting and investing somewhere else (e.g., a rental property somewhere else or using a different investment instrument). If for some reason the economy goes south, they are well aware that if they need to step out from their properties, there is no way that they will be able to cover the mortgage with the current rental prices. Think of apartments or houses that you can rent for $600.000 - $900.000 that would require mortgages of $2.000.000 per month with a 20% down payment. Add gastos comunes of $350.000 per month for a nice a apartment and things start looking not so rosy if you need to run away from your property, put the apartment up for rent, but it remains empty for months.
Thanks. So after they've owned a house for maybe 10 years, and have >20% equity in it, do they tend to refinance so they can spend that equity? Or do most leave the equity in the house, and try to pay off the original loan? I keep seeing houses going up for sale. But I don't notice any getting sold. So I'm wondering if the owners are asking too much, because they owe too much.
I don't know anyone that had refinanced her house after putting a good chunk of equity in, at least not in my circles. My impression is that refinancing a house in Chile is not as common as in the US.

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tiagoabner
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Re: Housing market situation

Post by tiagoabner » Fri May 17, 2019 3:47 pm

Housing prices are quite crazy, from what I can see. I was checking the prices of apartments in some areas of Vitacura and they were selling in the USD $300,000 to $450,000 range. The same places are being rented for CLP $600,000 to $900,000 - which is USD $900 to $1400. The numbers don't make sense. I ran them through NY Times "Buy or Rent" calculator and rent prices would need to be 1.5 to 2 times higher to make sense to buy in these areas.

I agree with Admin: I would rather rent for a while and invest my money to avoid buying at these highly-inflated prices.
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.

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41southchile
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Re: Housing market situation

Post by 41southchile » Sat May 18, 2019 12:18 am

tiagoabner wrote:
Fri May 17, 2019 3:47 pm
Housing prices are quite crazy, from what I can see. I was checking the prices of apartments in some areas of Vitacura and they were selling in the USD $300,000 to $450,000 range. The same places are being rented for CLP $600,000 to $900,000 - which is USD $900 to $1400. The numbers don't make sense. I ran them through NY Times "Buy or Rent" calculator and rent prices would need to be 1.5 to 2 times higher to make sense to buy in these areas.

I agree with Admin: I would rather rent for a while and invest my money to avoid buying at these highly-inflated prices.
You absolutely right (I may have ranted on about that a while ago?) I cant make those rent to sale price ratios work either, and neither can any other gringo I have talked to about this . Surely we can't all be Missing something? it's either that, or average rents are about to see a dramatic spike to readjust to sale prices, or theres going to be tears as people are forced to sell.
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Baltimore
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Re: Housing market situation

Post by Baltimore » Sat May 18, 2019 1:13 am

To me the odd part of the story is not that price to rent ratios are so skewed towards renting in those neighborhoods (whatever, the rational thing to do is to rent a place), it is that people are still buying properties in spite of those price to rent ratios. From my perspective, the theory of "extremely wealthy folks that just buy whatever at any price" seems implausible. I buy more the theory of people betting on appreciation, regardless of the bad current price to rent ratios (risky game!).

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Re: Housing market situation

Post by GAminer » Sat May 18, 2019 2:54 am

Sale/rental prices all throughout santiago are getting ridiculous. In my building alone rental price for 23 m2 studios have gone from 180.000 to over >300.000 in 2 years. I was looking into buying something if my perm residency ever gets approved, but after seeing prices and knowing the type of quality you get in return, there is no way I could justify it.

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tiagoabner
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Re: Housing market situation

Post by tiagoabner » Sat May 18, 2019 7:34 am

41southchile wrote:
Sat May 18, 2019 12:18 am
tiagoabner wrote:
Fri May 17, 2019 3:47 pm
Housing prices are quite crazy, from what I can see. I was checking the prices of apartments in some areas of Vitacura and they were selling in the USD $300,000 to $450,000 range. The same places are being rented for CLP $600,000 to $900,000 - which is USD $900 to $1400. The numbers don't make sense. I ran them through NY Times "Buy or Rent" calculator and rent prices would need to be 1.5 to 2 times higher to make sense to buy in these areas.

I agree with Admin: I would rather rent for a while and invest my money to avoid buying at these highly-inflated prices.
You absolutely right (I may have ranted on about that a while ago?) I cant make those rent to sale price ratios work either, and neither can any other gringo I have talked to about this . Surely we can't all be Missing something? it's either that, or average rents are about to see a dramatic spike to readjust to sale prices, or theres going to be tears as people are forced to sell.
I don't really see rent prices spiking any time soon. I've been back in the country for less than a month, but my perception is that there's to much available real estate for a spike to happen.
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.

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Re: Housing market situation

Post by mem » Sat May 18, 2019 11:59 am

Yeah...rent prices are not spiking. You have rent prices and sale prices. One of these is out of whack...inflated bubble. Guess what. It's not rent prices.

The people that rent are simply not going to pay more than 200k-500k. If they are the unusual renter who either has a much higher appreciation for the house they rent or they are relatively rich compared to the average renter...they will be willing to pay 600k - 999k'sh...basically those places in vitacura or la dehesa. Outside of Santiago...same thing

There is just a lot more bravo sierra going on in the buy/sell market driving up the prices...real estate agents lobbying for higher prices with the owners, finding a schmuck that will pay the higher bubble price...while smiling fiendishly that they got a higher commission. That same hysteria goat rodeo nonsense simply doesnt fly in the rental market.

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Re: Housing market situation

Post by nwdiver » Sat May 18, 2019 3:01 pm

mem wrote:
Sat May 18, 2019 11:59 am
Yeah...rent prices are not spiking. You have rent prices and sale prices. One of these is out of whack...inflated bubble. Guess what. It's not rent prices.

The people that rent are simply not going to pay more than 200k-500k. If they are the unusual renter who either has a much higher appreciation for the house they rent or they are relatively rich compared to the average renter...they will be willing to pay 600k - 999k'sh...basically those places in vitacura or la dehesa. Outside of Santiago...same thing

There is just a lot more bravo sierra going on in the buy/sell market driving up the prices...real estate agents lobbying for higher prices with the owners, finding a schmuck that will pay the higher bubble price...while smiling fiendishly that they got a higher commission. That same hysteria goat rodeo nonsense simply doesnt fly in the rental market.
Your right, many of the owners HAVE to rent or the bank owns the property, so they like nice stable renters. This moderates the prices.......I see a bubble in some properties, big apartments being the first one.....
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Re: Housing market situation

Post by paladin » Sun May 19, 2019 10:55 pm

nwdiver wrote:
Sat May 18, 2019 3:01 pm
mem wrote:
Sat May 18, 2019 11:59 am
Yeah...rent prices are not spiking. You have rent prices and sale prices. One of these is out of whack...inflated bubble. Guess what. It's not rent prices.

The people that rent are simply not going to pay more than 200k-500k. If they are the unusual renter who either has a much higher appreciation for the house they rent or they are relatively rich compared to the average renter...they will be willing to pay 600k - 999k'sh...basically those places in vitacura or la dehesa. Outside of Santiago...same thing

There is just a lot more bravo sierra going on in the buy/sell market driving up the prices...real estate agents lobbying for higher prices with the owners, finding a schmuck that will pay the higher bubble price...while smiling fiendishly that they got a higher commission. That same hysteria goat rodeo nonsense simply doesnt fly in the rental market.
Your right, many of the owners HAVE to rent or the bank owns the property, so they like nice stable renters. This moderates the prices.......I see a bubble in some properties, big apartments being the first one.....
I think you may be righf about the big apartments. I just bought a 1 bed apt from an investor who is offloading a number of properties he owns, and the 1 bed go like hotcakes, but he said he has found very little interest in the 3 bed ones, as it seems those kind of buyers are preferring a house further out.

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Re: Housing market situation

Post by admin » Mon May 20, 2019 9:20 am

i dont know if i would call it a "crisis" at this point. more of a overheated market, that is heavily concentrated in particular areas or sectors of the market.

one thing the banks in chile are good at, is covering their rear. they will be fine. this is not some u.s. housing bubble 2.0 where the banks are handing out loans with no money down to any warm body that walks through the door.

we might question the financial soundness of people investing so heavily in real estate, but chileans have always tended to lean towards real estate vs. other types of investments. I get it. it is fairly easy to understand vs. say picking stocks, etc. for the "new rich" or "new middle class", yea they are going to first invest in real estate. especialy now they have access to mortgages and credit.

so a lot if this demand is simply a reflection of the new found wealth. what the average wage went from something like less than $10,0000 in 2010 to over $16,000 a year last year. that is a lot of liquidity sloshing around, and people want more. for the first time millions of chileans, get to play in that middle class investment sandbox. do they know what they are doing? perhaps, but that is a diffrent conversation.
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Re: Housing market situation

Post by nwdiver » Mon May 20, 2019 2:48 pm

paladin wrote:
Sun May 19, 2019 10:55 pm
nwdiver wrote:
Sat May 18, 2019 3:01 pm
mem wrote:
Sat May 18, 2019 11:59 am
Yeah...rent prices are not spiking. You have rent prices and sale prices. One of these is out of whack...inflated bubble. Guess what. It's not rent prices.

The people that rent are simply not going to pay more than 200k-500k. If they are the unusual renter who either has a much higher appreciation for the house they rent or they are relatively rich compared to the average renter...they will be willing to pay 600k - 999k'sh...basically those places in vitacura or la dehesa. Outside of Santiago...same thing

There is just a lot more bravo sierra going on in the buy/sell market driving up the prices...real estate agents lobbying for higher prices with the owners, finding a schmuck that will pay the higher bubble price...while smiling fiendishly that they got a higher commission. That same hysteria goat rodeo nonsense simply doesnt fly in the rental market.
Your right, many of the owners HAVE to rent or the bank owns the property, so they like nice stable renters. This moderates the prices.......I see a bubble in some properties, big apartments being the first one.....
I think you may be righf about the big apartments. I just bought a 1 bed apt from an investor who is offloading a number of properties he owns, and the 1 bed go like hotcakes, but he said he has found very little interest in the 3 bed ones, as it seems those kind of buyers are preferring a house further out.
Exactly, 3-4 bed apartment cost the same as a 3 bed well built house in the southern barrios, with metro down there and new freeways they are SEEN as a better deal.......Santiago is turning into a commuter city, oh well....
It's all about the wine.

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