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Re: Housing market situation

Posted: Sun Jun 02, 2019 4:29 pm
by snobrd4life
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.

Re: Housing market situation

Posted: Sun Jun 02, 2019 4:43 pm
by at46
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?

Re: Housing market situation

Posted: Sun Jun 02, 2019 4:48 pm
by at46
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 :)

Re: Housing market situation

Posted: Sun Jun 02, 2019 5:53 pm
by tiagoabner
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.

Re: Housing market situation

Posted: Sun Jun 02, 2019 6:38 pm
by at46
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...

Re: Housing market situation

Posted: Sun Jun 02, 2019 8:24 pm
by snobrd4life
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?

Re: Housing market situation

Posted: Sun Jun 02, 2019 8:40 pm
by at46
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.

Re: Housing market situation

Posted: Sun Jul 28, 2019 1:41 pm
by Britkid
I am going to start looking at buying a house more seriously now.

My two major concerns are firstly whether the whole housing market is overheated and you would end up losing money buying now and secondly whether I can even get a mortgage as a foreign contractor paid in another currency.

I'll start with the first point for now. Are the house prices in a bubble and overpriced or not? I think I can come at this from at least 2 angles.

a - Average salaries vs house price compared with other countries.
b - Comparing rent prices vs sale prices.

I am trying to do some basic googling and thinking on point a. I'll post the results shortly but I think I'll need other forumites help to make it useful.

Of course, we've talked about this a lot before, but I'm hoping to do a more robust analysis based more on data than just opinions.

Re: Housing market situation

Posted: Sun Jul 28, 2019 2:25 pm
by Britkid
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....

Re: Housing market situation

Posted: Sun Jul 28, 2019 3:30 pm
by 41southchile
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....
I think you need to find salary average for Santiago to compare house prices there. And possibly by region to so apples with apples analysis , but you are right housing prices to supposed income ratios at a quick glance, do seem out of range what is deemed normal (4 or 5 times gross earnings ). In saying that I've seen houses for sale in Llanquihue and Puerto Montt for 23 million pesos or approx 33000USD, someone with an average salary of say 400k or nearly 6 million a year (less than 10000USD) that puts them within the 4 to 1 ratio, but they are getting a low salary and living in dodgy neighborhoods, so not sure how much weight to put on those supposed ratios. NZ and Auckland in particular are supposedly at ratios of 9 to 12 to gross earnings, yet the market still chugs along and has done so for the last few years , people still manage it .

Re: Housing market situation

Posted: Sun Jul 28, 2019 7:02 pm
by fraggle092
Britkid wrote:
Sun Jul 28, 2019 1:41 pm
... and secondly whether I can even get a mortgage as a foreign contractor paid in another currency.
I would make that my "firstly"...

Re: Housing market situation

Posted: Sun Jul 28, 2019 9:03 pm
by Britkid
Well, the logic is like this...

"firstly whether the whole housing market is overheated and you would end up losing money buying now" is something that I can make substantial initial progress on in a shorter time (say 5-10 hours work without bothering to leave the house or even make a phone call)

whereas "secondly whether I can even get a mortgage as a foreign contractor paid in another currency" is probably going to take a lot longer and involve traveling into town, queueing in the bank only to be told so and so is unexpectedly in the other location today, trying to find out how to get my salary validated, asking my company to provide a letter about my employment status etc etc.

So even though my secondly is more likely to kill the whole idea than my firstly (which is probably your point) I decided it still makes sense to do the other point first. To avoid spending a very long time looking into my secondly and have all that time wasted if we decide the prices are too high and so we won't buy.