Housing market situation

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Britkid
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Re: Housing market situation

Post by Britkid » Sun Jul 28, 2019 1:41 pm

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.

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Re: Housing market situation

Post by Britkid » 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and here: https://www.ine.cl/prensa/detalle-prens ... 93-en-2017) The data is a few years out of date, but probably we can assume that the average salary in Chile might be more like $17,000 in 2019.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....

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41southchile
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Re: Housing market situation

Post by 41southchile » Sun Jul 28, 2019 3:30 pm

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 .
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fraggle092
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Re: Housing market situation

Post by fraggle092 » Sun Jul 28, 2019 7:02 pm

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"...
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Britkid
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Re: Housing market situation

Post by Britkid » Sun Jul 28, 2019 9:03 pm

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.

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.

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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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