Housing market situation

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tiagoabner
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Re: Housing market situation

Post by tiagoabner » Wed Oct 30, 2019 12:42 pm

Baltimore wrote:
Wed Oct 30, 2019 12:27 pm
http://www.diarioestrategia.cl/texto-di ... tributario

451 contribuyentes tienen entre 51 y 100 viviendas

255 contribuyentes tienen entre 101 y 200 viviendas

62 contribuyentes tienen entre 201 y 300 viviendas

40 contribuyentes tienen entre 301 y 400 viviendas

28 contribuyentes tienen entre 401 y 500 viviendas

51 contribuyentes tienen entre 501 y 1.000 viviendas

23 contribuyentes tienen entre 1.000 y 2.000 viviendas y

25 contribuyentes tienen 2.001 y más viviendas

Let's see what comes out of the tax debate that is coming...
51 to 100 isn't too far fetched. A cheap, 1 bedroom rental apartment starts at - say - 2000 UF, or USD $75,000. 20% down payment would be USD $15,000. I can easily see it being feasible for people in the top 5-10% income range to be able to buy a couple of these every year to build a real estate portfolio.

Chileans do like to invest in real estate, and getting to 50+ properties isn't too far fetched on a 10-20 year horizon. Heck, these properties probably pay for themselves after the initial down payment.
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 » Wed Oct 30, 2019 1:46 pm

tiagoabner wrote:
Wed Oct 30, 2019 12:42 pm
Baltimore wrote:
Wed Oct 30, 2019 12:27 pm
http://www.diarioestrategia.cl/texto-di ... tributario

451 contribuyentes tienen entre 51 y 100 viviendas

255 contribuyentes tienen entre 101 y 200 viviendas

62 contribuyentes tienen entre 201 y 300 viviendas

40 contribuyentes tienen entre 301 y 400 viviendas

28 contribuyentes tienen entre 401 y 500 viviendas

51 contribuyentes tienen entre 501 y 1.000 viviendas

23 contribuyentes tienen entre 1.000 y 2.000 viviendas y

25 contribuyentes tienen 2.001 y más viviendas

Let's see what comes out of the tax debate that is coming...
51 to 100 isn't too far fetched. A cheap, 1 bedroom rental apartment starts at - say - 2000 UF, or USD $75,000. 20% down payment would be USD $15,000. I can easily see it being feasible for people in the top 5-10% income range to be able to buy a couple of these every year to build a real estate portfolio.

Chileans do like to invest in real estate, and getting to 50+ properties isn't too far fetched on a 10-20 year horizon. Heck, these properties probably pay for themselves after the initial down payment.
that whole article makes no sense. there are hundreds of real estate development companies that own massive tracks of homes and apartments, just as part of their standard stock of houses for instance. there are others that hold a big portions in their rental portfolio, like RIETs do in the United states.
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Baltimore
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Re: Housing market situation

Post by Baltimore » Tue Nov 12, 2019 3:25 pm

Fondo Independencia Rentas Inmobiliarias nearly 30% down from the beginning of the crisis:

http://www.independencia-sa.cl/renta/indepen02

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Re: Housing market situation

Post by Britkid » Tue Nov 12, 2019 5:07 pm

Is that the share price of a fund that invests in property?

If their share price is down 30%, I would guess that the value of the property they hold is down less than 30%?

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Re: Housing market situation

Post by admin » Tue Nov 12, 2019 5:14 pm

Britkid wrote:
Tue Nov 12, 2019 5:07 pm
Is that the share price of a fund that invests in property?

If their share price is down 30%, I would guess that the value of the property they hold is down less than 30%?
perhaps they own supermarkets and malls. :lol:
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Baltimore
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Re: Housing market situation

Post by Baltimore » Tue Nov 12, 2019 6:47 pm

They have a portfolio of properties all over Chile, including some in the US. If the fund is 30% down, that means that some individual valuations might be down way more than 30%.

I'm really curious about that number, 30%. Me and a group of friends from all over the world that work in hedge funds in Chile estimated that a many properties in Santiago (not all of them) were about 30%-40% overvalued with respect to valuations based on expected rental income, almost ignoring trends of appreciation from the last 5-10 years (i.e., speculation). But the 30% drop might just be a coincidence.

We are well aware that 99% of Chileans adhere to the religious views that "real estate is the best investment ever", "property prices can never go down", "my grandparents and my parents made lots of money investing in real estate, therefore I can make money too" and "culture drives prices more than economic and financial principles". However, we are part of that stubborn 1% of weirdos that valuate assets mostly based on expected dividends (value investing), paying less attention to expected appreciation.

The next months and years will be a great opportunity to see how things evolve and moneys get reallocated. Too soon to draw any conclusions. Maybe we will find that the real estate market in Chile is indeed this exceptional example of a market that does not follow principles that, on average, apply to real estate markets in most other mildly civilized places on earth (I do not mean it ironically, maybe it is true).

But history shows that mean-reverting processes can take a loooong time to work.

Amsterdam
Screen Shot 2019-11-12 at 6.00.10 PM.png
Average US
case-shiller-chart-updated-2006.jpg
case-shiller-chart-updated-2006.jpg (43.04 KiB) Viewed 185 times
UK and Spain index
Screen Shot 2019-11-12 at 6.29.30 PM.png
Our own human biases can also fool us into thinking that we are more intelligent than we actually are :)
https://www.fidelity.co.uk/static/pdf/i ... estate.pdf

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Re: Housing market situation

Post by Britkid » Tue Nov 12, 2019 7:48 pm

Baltimore wrote:
Tue Nov 12, 2019 6:47 pm
They have a portfolio of properties all over Chile, including some in the US. If the fund is 30% down, that means that some individual valuations might be down way more than 30%.
I am assuming their stock price, if that's what is, would not correlate neatly to house prices. The stock price is related to the value of the company which is related to the amount of profit it can generate which is related to the amount of revenue it can generate which is related to the house prices...I think.

So let's say the company spends 100 units of money to buy houses, and hopes that the houses will increase to 105, so it will make a profit of 5. But the houses in Chile fall by about 10% - from 105 to 95. It will now be making a loss, making the company entirely worthless - a company's value is related to its ability to generate profit. So, in this over simple example, a 10% fall in house prices causes the stock price to lose 100%.

So my theory is that it would take a lot less than 30% house price fall (related to revenue) to cause a 30% stock price fall (more related to profit).

?

Baltimore
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Re: Housing market situation

Post by Baltimore » Tue Nov 12, 2019 8:02 pm

Very good point, the 30% drop is a loss in profitability and not necessarily a 30% drop in property prices. My bad, that 30% number might not have anything to do with the estimate of overvaluation of property prices we came up with. Most properties in the portfolio are for rental though, so it is still not clear to me how an x% drop in profitability from renting the property translates into a y% drop of property prices.

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Re: Housing market situation

Post by admin » Tue Nov 12, 2019 8:10 pm

having owned a few riets in my portfolio,

don't forget leverage. how leveraged up are they?

If mortgage rates bottom out, and possibly going to reverse, what is their exposure? how tide are lown convenient to the value of the property portfolio, stock, etc?

lot of moving parts in a large real estate company.
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PXYC
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Re: Housing market situation

Post by PXYC » Tue Nov 12, 2019 10:04 pm

If their debt is in dollars and their profit is in pesos, it might be harder to pay their debt with a weaker clp.
Or if big funds have relevant % of this stock, selling one single stock at a loss is almost irrelevant to those big funds, and they are selling just because an algortihm says so, but selling will cause stock price to fell.
Also the impact of one month of cash flow if retail can't pay one month of rent is big for Q4.

Anyway I think all stock values will have an emotional reaction to current events, but it doesn't necessarily mean the stock has lost its fundamental value (for 2020 at least) and this might also be an opportunity for new buyers.

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