Housing market situation

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Baltimore
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Re: Housing market situation

Post by Baltimore » Thu May 16, 2019 12:04 pm

admin wrote:
Thu May 16, 2019 11:34 am
as i read that article above,

https://www.df.cl/noticias/mercados/bol ... 95328.html

what struct me as not making sense was the estimated nearly 5 million people in dicom as dead beat debtors, in a population of 18.5 million. that number just does not square with reality in any form.

so, that would mean something like over 50% of the adult population is in dicom, once you subtract children from the population, etc, and then put a 7 year statute of limitations on debts, etc. sounds like dicom has more debtors than live people.
Yeah, that number is odd. I wonder if what they mean is "number of delinquent accounts in Chile", not "number of people with delinquent accounts". Regardless, it is still a high number with a solid upward trend.

Baltimore
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Re: Housing market situation

Post by Baltimore » 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.

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fraggle092
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Re: Housing market situation

Post by fraggle092 » Thu May 16, 2019 2:12 pm

Chileans, like people everywhere have been sold the "natural living" myth, which here basically comes down to having a pretty view from their apartment windows. But they want those natural surroundings without sacrificing any mod cons. In practice this means that areas of natural beauty are often transformed into high-rise ghettos, a version of Santiago-by-the-Sea. (or Lake)

In their self-interested way, the protagonists don't want to understand that they are harming the environment they claim to love by building there. And this will continue, as long as there is money to be made by the inmobiliarias and the property investors, right down to the AirBnb level. Hay que aprovechar....

.
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Re: Housing market situation

Post by admin » Thu May 16, 2019 5:12 pm

well most of that credit bubble is the frigen banks' here own fault. a bank is basicalyy in the pay day loan biz in chile. no checking acount in the country happens without millions of pesos of consumer credit attached. in fact, they wont open you a checking acount if you dont quantify for credit cards, consumer loans, etc, etc. you cant just have an account to put money in and, as many banks have put it, be a "real" customer.
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Re: Housing market situation

Post by admin » Thu May 16, 2019 5:23 pm

yea, I am taking the attitude right now of not buying any real estate untill this "boom" blows up.

i got one little property deal for myself i am closing right now, on a rural property that i own half already and my partner made a great offer for me to buy them out cheap.

guess what they want the money for?

to put a down payment on an apartment in santiago.

other than that i am just waiting. in a couple years, like it always does, , the economy will hick-up. all these over stretched buyers will panic sell or default. there will be a pile of deals on the market.

no need to rush. i got plenty of real estate already. when i see things hit the minus 25% of market price or better, then i might start nibbling. not going rush around bidding against all the window shoppers for property i dont even like.
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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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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!).

GAminer
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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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