Housing market situation

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Britkid
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Re: Housing market situation

Post by Britkid » Mon Jul 29, 2019 2:02 pm

I am also looking at a local research for my area. I don't think salaries by area will be easy to find, though. Yesterday I did some work on determining the rent prices vs house sale price ratios for my area to see if it makes sense. I might post a summary later if I have time.

The motivation for buying the house is

1 that my wife and kids want to own a house. They like the idea of having something that's yours, and being able to do what you want with it, so it's not necessarily a practical financial decision.

2 Also, I'm having difficulty living in an environmental way while renting: it is genuinely challenging: it isn't cost effective as a renter to add insulation or solar panels for instance. If we buy a house we will be able to either design one from scratch, or at the very least add solar panels, a geothermal heater, better windows etc to an existing house. So that is a change from before compared to 2 years ago: I have become more environmental, and the climate emergency is becoming more severe. (I have NEVER seen an eco house on the market to RENT in the small area I want to live in. I wonder, can anyone even post a link to such a house available for rent right now anywhere in the whole country? Or ever remember seeing such a thing in Chile ever?)

Therefore, it doesn't need to be a winning financial strategy, as long as it's not a losing one. The New York times buy or rent calculator suggests that for our situation it would be better financially to buy by a clear margin, however they don't seem to factor in the value of a person's time.

Thanks for the tips about the banks (although sadly I don't have a current account anywhere).

The length of time is a tricky one because we might need to leave in 2 years (if I suddenly get a job offer or lose this one and then fail to succeed working as a consultant remotely meaning I would need to go to Europe to get similar salaries), 5 years (if my daughter decides to go to University in England, I may go also), 12 years (this is when my youngest will be University age), or even longer. So, it's a gamble. I put 7 years as an average guess when I did the New York Times calculator.

Leaving in something like 2 years seems less likely nowadays though. The industry I am in is less dynamic these days. I used to occasionally get informal offers or headhunted years ago and the industry was growing, so I half expected to leave at some point and go in live in Germany or US or London. But it seems less likely these days. The industry stabilized. It's been a few years since anyone tried to recruit me. Also, I negotiated my salary up to the point where it may not make financial sense for me to start a new job elsewhere in a newer role (my salary demand might be higher than my worth). Also, I don't want a jet-setting lifestyle where I fly off to yet another country anymore. It is bad for the environment to do so many flights and the kids ended up stable and happy in the school, at least for now. My daughter has a great group of friends at the moment which would perhaps incentivize me to refuse an offer to leave.

And then the other factor is, compared to a few years ago, we have a bit more savings so will be more likely able to afford a deposit and have something to fall back on if I lose my job after getting a mortgage.

Britkid
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Re: Housing market situation

Post by Britkid » Mon Jul 29, 2019 2:28 pm

admin wrote:
Mon Jul 29, 2019 9:31 am

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.
We currently live in (renting) a 180m2 house in a 5000m2 parcela, and it is probably worth about US$300,000 or so, and that is the high end of what we would be aiming at. It would require a bank to not only agree to give us a mortgage (already tricky) but to agree to give us a mortgage for something like 80-90%. It might mean stretching our finances for a few years, no holidays, old car and so on.

Alternatively, to reduce risk, or if we're really struggling with finance, the absolute lowest we might go might be a 90m2 house for about $100,000. If the banks won't give us anything, we could probably figure out a way to swing this without any mortgage at all. My wife would have to choose between a small, non-parcela owned house in a town or a large rented one. I am pretty skeptical about this, however. Although we did live in a 70m2 house in England, we have got used to the space since then, neighbours are noisier here, and we've accumulated too much stuff. In theory my wife says she would consider this type of option, but when I say we would have to sell the dining table, one of the sofas, and get rid off a bunch of junk in the shed we are keeping "just incase"...I don't see her doing it and I won't pursue this type of option until she starts selling stuff.

So there is quite a wide range for now. 90m2 - 180m2 house; town or parcela; US$100-$300k.

at46
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Re: Housing market situation

Post by at46 » Mon Jul 29, 2019 3:26 pm

Don't go for a 90 meter house. It's not going to work for a family of four coming down from a 180 meter house. Also, the smaller the house, the shittier it's construction/neighbourhood.

I'd just drop 5 or 10 grand on improving your current rental. You can still get some bang for that kinda buck. The thing is you can certainly loose a lot more on buying and selling a house in two years if things don't go well.

Anyway, your major issue is lack of local financial history, so you need to talk to the bank before anything else.

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Re: Housing market situation

Post by at46 » Mon Jul 29, 2019 3:40 pm

Lastly, talk to a family lawyer before buying a house...

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Re: Housing market situation

Post by scandinavian » 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)

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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.
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 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.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

Britkid
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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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