Housing market situation

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tiagoabner
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Re: Housing market situation

Post by tiagoabner » Mon Jul 29, 2019 5:44 pm

He has a Chilean wife, though, so MAYBE he can get 10%. Not sure, though.
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Re: Housing market situation

Post by admin » Mon Jul 29, 2019 6:06 pm

at46 wrote:
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.
as exchange rates go, you are probably in pretty good shape right now in the 650 to 720 range the peso has been sitting in for a long while now.
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Re: Housing market situation

Post by scandinavian » Mon Jul 29, 2019 6:07 pm

I guess depends on situation, but I also have Chilean wife. Did not help - I think what matters is who is going to actually repay the mortgage - Ie based on which income is the mortgage given

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Re: Housing market situation

Post by admin » Mon Jul 29, 2019 6:08 pm

scandinavian wrote:
Mon Jul 29, 2019 4:46 pm
Britkid wrote:
Mon Jul 29, 2019 2:02 pm

Thanks for the tips about the banks (although sadly I don't have a current account anywhere).
Getting a mortgage without a current account as a foreigner without local employment is going to be very, very difficult. You need to change that first...
even though your research ends up showing that the timing is bad for buying, then you need to get above in order for when the timing is right.

My experience is 20% minimum down payment as a foreigner. 10% is only for Chileans. (Santander, Banco de Chile and Scotiabank)
It is the same for everyone, and is based on credit history.
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Re: Housing market situation

Post by Britkid » Mon Jul 29, 2019 10:09 pm

So I went onto Yapo, Emol, Portalinmobiliario and noted the sale/rental price of 100 houses in my area alongside the sizes. From that, I was able to determine the average rental price per m2, and the average sale price per m2. From there, I was able to determine the Price to Rent Ratio of my local area: sale price of house/ annual rent. It's 18.

If that number is 15, it is considered better to buy; above 20 better to rent. 16-19 is considered middle ground or maybe a bit better to rent that buy. So the data is in the middle - it suggests rent and sale prices are reasonably in alignment. If anything, it suggests that sale prices are a bit on the high side, but not much.

If we compare to the UK I found a 2010 Zoopla article suggesting that 17-19 was fairly typical for the whole country. I couldn't find more recent data, but I think things are similar now, maybe rents grew a little less than house prices, so say 16 for UK for today. For the house in the UK I still own, the value is 19. For the US, according to article in rentberry.com, 16-22 is typical for the US, but higher in major cities. So:the Price to Rent Ratio ratio for my area of Chile is similar to the UK, US which seem to currently have a normal market condition, suggesting market prices for Chile are at least in the ball park, but not excessively over the top which is what I was previously worried about.

[You might expect the fair Price to Rent ratio in Chile to be slightly higher than UK since the situation is not precisely the same. There is less expectation on the owner to fix stuff in Chile, and more often the renter pays for more stuff than the UK, so rents could be a little lower since a rental ought to be worth a notch less for this reason. Apart from that, I think the ratios are fairly comparable, e.g. tax situation I think is similar.]

My area may benefit a little from the upcoming expansion of the motorway to Santiago to 3 lanes and changing of the toll booth to free flow (both will reduce the commute time to Santiago) and the train that they are supposedly going to build to Santiago as well so there may be a slight boost to the market in the next few years.

Price to rent ratios may be fairly sensible for Chile as a whole also, according to these links which compare Chile with other countries and find Chile very middle of the road:
https://data.oecd.org/price/housing-prices.htm
https://www.imf.org/external/research/housing/

So I assume the price to rent misalignment talked about in this thread previously is only for some Santiago barrios and maybe a few other special places, but probably not for the country as a whole.

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Re: Housing market situation

Post by at46 » Mon Jul 29, 2019 10:37 pm

Good point about the train - get something within 10-12 min walk to the station if you're going to buy.

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Re: Housing market situation

Post by admin » Mon Jul 29, 2019 10:40 pm

keep in mind there has been a big swing in recent years back towards apartments, after a say 10 year push for houses, in the central region. think that is mostly speculation / airbb type thing. also perhaps a bit of the view safety in apartments being better (although i think that is a myth). probably more of a rental investment for lazy urban millenials thing. give it 10 years, they will want houses too.

you could also push out a bit, ahead of the development curve, to try and find something slightly cheaper. of course that comes with its own set of problems and risks.

test the waters with some banks, and see what they say. caution though, get everything in writing. don't let the secretaries blow smoke up your rear, when they don't actually make the decisions.
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Re: Housing market situation

Post by tiagoabner » Mon Jul 29, 2019 10:48 pm

I believe that most of what has been said on this thread was more focused on the more "desirable" expat comunas, such as Las Condes, La Reina, Vitacura and Lo Barnechea. Which makes sense: higher demand leads to higher prices and more real estate speculation.

FYI, the price to rent ratio on my current building is 16.73, while in Portugal it was exactly 15. Which makes sense: Portugal's rental market has been on the rise in the last few years. The house I have in Brazil in my hometown is also 14.70, but it's in an area where there simply aren't enough good properties and rent is inflated.
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Re: Housing market situation

Post by Britkid » Mon Jul 29, 2019 10:53 pm

Britkid wrote:
Sun Jul 28, 2019 1:41 pm

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.
a - I found that average house price in Chile was perhaps 9x salary (higher than other countries), suggesting house sale prices are too high.
b - I found that rent vs sale prices in my local area of Chile (and perhaps most of Chile excluding fancy/central areas of Santiago) make perfect sense, suggesting house sale prices are about right.

Obviously, there is some contradiction there.

Reflecting on this I think the rent prices are a more fundamental guide to the true value of a house than salary. As I said before, salary/house price ratios may not compare as well to a richer country where less people live per house. (Also, some reports suggest that the ratio of house price to salary in the UK is getting more towards 7-8x.)

I have now found this data which arguably supports such a conclusion:
https://www.numbeo.com/property-investm ... ountry.jsp
Look at the price to income ratio in the first column which shows a trend of higher ratios in poorer countries. [The only rich places at the top of the list are Hong Kong and Singapore which are basically cities and Taiwan which is similar: people crowded into a smaller space so land is worth more: these should be compared instead to Greater London or New York state as city states.] If we exclude those, virtually every country with a high price to income ratio is a poor one: Syria, Cambodia, Nepal, Iran, Philippines, Vietnam, Thailand.
Richer countries are all clustered at the opposite end, and the 3.5-4 sales/income ratio in the US is more of an anomaly than the norm.
Chile's number (which here is listed as 13 rather than the 9 I calculated) is actually a very normal figure sat right in the middle of the chart, and is better than the estimates for Brazil, Argentina, Peru, Colombia which are all even higher. Chile is better or similar to all the BRIC countries and is more or less in the ball park of where you would expect given its wealth level. So this chart to me is evidence that Chile's house prices are not way out of line.

So, I have said in the past (on this very thread I believe, more than once) I thought there was likely a bubble in real estate in Chile, but I did say this was basically pub talk based on no data. Now I've done some actual analysis, I take that back. Maybe for some parts of Santiago (although the Santiago situation is really not that different to New York, cities in California, London etc either), but perhaps not for Chile in general, and probably not for the area I live in.

I think me sitting on the sidelines not doing the research and waiting for prices to miraculously come down 20%-40% was probably wishful thinking. The prices have increased a lot vs 2005/2010, but I wonder if that's to a greater extent because they were undervalued in the past, rather than because they are overvalued now, and the waiting for the prices to fall is just a kind of unproductive reaction to having missed out on a historical opportunity that we won't see again.

So that's my conclusion (unless anyone can point out a mistake or improve this analysis). Prices (at least for my area, but I suspect it might be similar in some other places) are about right, or at most a little over valued, and if you really prefer to own your home, and are going to stay here more than a short few years, there isn't a strong financial reason in general not to (assuming you do the rent to price analysis for your area/town and get a similar answer).

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Re: Housing market situation

Post by mem » Mon Jul 29, 2019 11:08 pm

Britkid wrote:
Mon Jul 29, 2019 10:53 pm
Britkid wrote:
Sun Jul 28, 2019 1:41 pm

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.
a - I found that average house price in Chile was perhaps 9x salary (higher than other countries), suggesting house sale prices are too high.
b - I found that rent vs sale prices in my local area of Chile (and perhaps most of Chile excluding fancy/central areas of Santiago) make perfect sense, suggesting house sale prices are about right.

Obviously, there is some contradiction there.

Reflecting on this I think the rent prices are a more fundamental guide to the true value of a house than salary. As I said before, salary/house price ratios may not compare as well to a richer country where less people live per house. (Also, some reports suggest that the ratio of house price to salary in the UK is getting more towards 7-8x.)

I have now found this data which arguably supports such a conclusion:
https://www.numbeo.com/property-investm ... ountry.jsp
Look at the price to income ratio in the first column which shows a trend of higher ratios in poorer countries. [The only rich places at the top of the list are Hong Kong and Singapore which are basically cities and Taiwan which is similar: people crowded into a smaller space so land is worth more: these should be compared instead to Greater London or New York state as city states.] If we exclude those, virtually every country with a high price to income ratio is a poor one: Syria, Cambodia, Nepal, Iran, Philippines, Vietnam, Thailand.
Richer countries are all clustered at the opposite end, and the 3.5-4 sales/income ratio in the US is more of an anomaly than the norm.
Chile's number (which here is listed as 13 rather than the 9 I calculated) is actually a very normal figure sat right in the middle of the chart, and is better than the estimates for Brazil, Argentina, Peru, Colombia which are all even higher. Chile is better or similar to all the BRIC countries and is more or less in the ball park of where you would expect given its wealth level. So this chart to me is evidence that Chile's house prices are not way out of line.

So, I have said in the past (on this very thread I believe, more than once) I thought there was likely a bubble in real estate in Chile, but I did say this was basically pub talk based on no data. Now I've done some actual analysis, I take that back. Maybe for some parts of Santiago (although the Santiago situation is really not that different to New York, cities in California, London etc either), but perhaps not for Chile in general, and probably not for the area I live in.

I think me sitting on the sidelines not doing the research and waiting for prices to miraculously come down 20%-40% was probably wishful thinking. The prices have increased a lot vs 2005/2010, but I wonder if that's to a greater extent because they were undervalued in the past, rather than because they are overvalued now, and the waiting for the prices to fall is just a kind of unproductive reaction to having missed out on a historical opportunity that we won't see again.

So that's my conclusion (unless anyone can point out a mistake or improve this analysis). Prices (at least for my area, but I suspect it might be similar in some other places) are about right, or at most a little over valued, and if you really prefer to own your home, and are going to stay here more than a short few years, there isn't a strong financial reason in general not to (assuming you do the rent to price analysis for your area/town and get a similar answer).
I looked at a house we rented in 2016 that was actually for sale, listed. I approached the owner about renting and he agreed. This was in the south in region 9. The price to rent ratio was almost 21 and I was told I was paying too much!

Are the houses for sale or rent mostly the similar in your area? (Mass developed area)I know in my area in region 9 the houses are all over the place in terms of quality and size and other factors I would think it difficult to get an accurate ratio taking listings down from a site and averaging if there are wide variations. I thought you would have come out with a much higher ratio

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Re: Housing market situation

Post by Britkid » Tue Jul 30, 2019 12:47 am

There is a size difference but I accounted for that by working out the price ratio on an area basis. The price to rent ratio comes out as 25 if I just take the average rental and sale price in my analysis, ignoring area, because the average size is higher in the houses for sale in my sample. But I worked out the price per square metre for every house in the sample and used that as the average to produce a more meaningful 18 ratio adjusted for size. Quality I reckon is more even between rental and house for sale from experience and knowledge of the area. If anything I would put rentals a notch behind; there is an occasional tendency for both owner and renter to let a property deteriorate as neither takes responsibility, but probably not enough to have much impact on the data.

One difficulty is how you compare a house of say 150m2 on a 200m2 plot vs a house of 150m2 on a 5000m2 plot. However I just tried different variables (for the question of how many m2 of garden is worth 1m2 of house) and it didn't make much difference. Even ignoring the garden size completely produced the same results in terms of averaged price to rent ratios (to within plus or minus 1). So that was good as I thought that would complicate it.

I did look at the data set of only houses on a 2000m2 piece of land or higher. Doing that, the price to rent ratio (again, allowing for area) increased from 18 to 21 which is a bit concerning from a point of view of buying these houses. Then again, that could be because it's difficult to find renters in these types of properties (i.e. that the rental value is depressed rather than the house overpriced and likely to go down in price) given the dynamics of the area (rural school area and upper middle class culture of buying/building; often the renters are people that are building their house nearby or planning to as soon as they get settled, no culture of youngsters sharing houses here). Or it could be because my sample size (only 14 houses on 2000m2+ land for rent) is too small to be statistically meaningful. Perhaps if we do get mortgage approval I can run that data set again with more data at a later point.

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Re: Housing market situation

Post by bones » Tue Jul 30, 2019 10:56 am

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.
Regarding salary validation, I know the best way is to start declaring income and paying taxes to SII. But, has anyone had success/heard of anyone having success validating income in a different way?

For example, I've heard these suggestions:
  • Validate at US Embassy. Sounds like a rumor - highly doubt it.
  • Validate at Minsterio de Relaciones Exteriores.
  • Validate at Chilean consulate
In any of those cases, it sounds like you'd need to get contracts, pay stubs, etc. notarized and apostilled beforehand. Obviously it would be the bank's call, but maybe someone has done it this way.

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