Housing market situation

Buying, Selling, Building, Tax issues, anything regarding real estate or properties in Chile.
Forum rules
NO DISCUSSION OF SPECIFIC REAL ESTATE AGENTS BY NAME, LINK, OR RECOMMENDATION ANYWHERE ON THE CHILE FORUM.
Post Reply
Britkid
Rank: Chile Forum Citizen
Posts: 1546
Joined: Wed Dec 05, 2012 6:59 pm
Location: Talagante area, Chile
Contact:

Re: Housing market situation

Post by Britkid » Fri Jan 19, 2018 10:10 am

Good post by murf, pretty helpful.

What is the best source for tracking house prices in Chile?

Is there an online database that records publically actually sale values? Or an aggregator site that tracks the average price of a house being offered for sale?
In 2014/2015 I blogged about my life in Chile. http://web.archive.org/web/201601121940 ... age_id=268

Donnybrook
Rank: Chile Forum Citizen
Posts: 3166
Joined: Thu Nov 24, 2011 10:34 am
Location: Santiago, Chile

Re: Housing market situation

Post by Donnybrook » Fri Jan 19, 2018 10:25 am

admin wrote:
Fri Jan 19, 2018 8:11 am
Perhaps it a throwback to the days of hyper-inflation, where real estate holders managed to hang on to their wealth, while everyone else took the hit. There is a possibly a cultural security factor to it.
It is much the same throughout South America. Property was always considered the one safe investment. People have seen inflation eat their savings, governments steal their pensions, pensions not cover their old age. Property was safer, the old bricks and mortar. A combination of squirrelled away US dollars and owning property to rent was the go to conservative investment portfolio for so many. A lot of people think it still is.

Britkid
Rank: Chile Forum Citizen
Posts: 1546
Joined: Wed Dec 05, 2012 6:59 pm
Location: Talagante area, Chile
Contact:

Re: Housing market situation

Post by Britkid » Fri Jan 19, 2018 12:00 pm

Good post. To develop those ideas a bit, do we think that this is the justification for the high housing prices, and a counter to the bubble argument.

One way to add to this debate further would be to find out if the high value of property relative to earnings potential from rent, salaries and so on is repeated across South America, say in Argentina which has a recent history of currency devaluation or Brazil where the economy is a bit shakier than here.

However I'm not completely convinced about whether this argument as a jusitification for the current high prices ie for the recent RISE in prices.

Countries where the value of the money itself can't be guaranteed may also be countries where the value of property itself can't be guaranteed either. The currency of a South American country is only going to become worth very little in a complete economic collapse or anarchy or in a revolution, all of which might threaten the security of land ownership anyway. Not sure how strong this argument is to be honest mind you, pretty much just thinking out loud here.

The cultural factors justifying high prices also doesn't explain why prices of property/land were low say 15 years ago in Chile and have gotten a lot higher now, even as the economy has got stronger and Allende/Pinochet have become a more distant memory and the country is perhaps as stable now as a European/North American country rather than other Latin American ones.

So, I'm tenatively sticking with my bubble thesis for now.
In 2014/2015 I blogged about my life in Chile. http://web.archive.org/web/201601121940 ... age_id=268

User avatar
eeuunikkeiexpat
Rank: Chile Forum Citizen
Posts: 7267
Joined: Fri Sep 01, 2006 1:38 am
Location: Megalith of unknown origin near my digs, south V Region coast

Re: Housing market situation

Post by eeuunikkeiexpat » Fri Jan 19, 2018 2:42 pm

Donnybrook wrote:
Fri Jan 19, 2018 10:25 am
admin wrote:
Fri Jan 19, 2018 8:11 am
Perhaps it a throwback to the days of hyper-inflation, where real estate holders managed to hang on to their wealth, while everyone else took the hit. There is a possibly a cultural security factor to it.
It is much the same throughout South America. Property was always considered the one safe investment. People have seen inflation eat their savings, governments steal their pensions, pensions not cover their old age. Property was safer, the old bricks and mortar. A combination of squirrelled away US dollars and owning property to rent was the go to conservative investment portfolio for so many. A lot of people think it still is.
<Bold mine>
Very true observation but many cariocas, argies, etc. will fnd they have bet wrong in the next five years when it comes to USD as safety haven. Maybe their property holdings will make it a break even situation when that day comes.

Need to run a chart to see if Argies would have been better off holding CLP over USD over the past 5-10 years to preserve value.
Generally, just a SPAM KILLER. You are on your own in this forum. My personal mission here is done.

BUT when necessary, by way of ridicule and truth revelation we shalt do war.

--eeuunikkeiexpat

paladin
Rank: Chile Forum Citizen
Posts: 464
Joined: Tue Dec 28, 2010 3:32 pm

Re: Housing market situation

Post by paladin » Fri Jan 19, 2018 8:45 pm

I also have never been able to fathom out how Chileans afford to buy properties , but they do. I see all those new high price apartments going up on the east side and wonder how they will ever sell, but they all do. I think though that perhaps more so here, than in other countries I know, many sellers choose a figure out of the sky and see what happens, and many who find they’ve been too optimistic just sit around, maybe for years, until values catch up and then they sell. A good example is that this week, I enquired about the prices of two apartments of the same size in the same building, that had obviously private adverts for sale stuck on their windows. One replied that he was asking 160 million and the other 190 million ! When buying here you just need to do your homework and be patient.

Gloria
Rank: Chile Forum Citizen
Posts: 4412
Joined: Sat Jan 20, 2007 12:30 pm
Location: Región de los Ríos

Re: Housing market situation

Post by Gloria » Fri Jan 19, 2018 10:13 pm

paladin wrote:
Fri Jan 19, 2018 8:45 pm
I also have never been able to fathom out how Chileans afford to buy properties , but they do. I see all those new high price apartments going up on the east side and wonder how they will ever sell, but they all do. I think though that perhaps more so here, than in other countries I know, many sellers choose a figure out of the sky and see what happens, and many who find they’ve been too optimistic just sit around, maybe for years, until values catch up and then they sell. A good example is that this week, I enquired about the prices of two apartments of the same size in the same building, that had obviously private adverts for sale stuck on their windows. One replied that he was asking 160 million and the other 190 million ! When buying here you just need to do your homework and be patient.
Is a mystery to me! Never have been able to figure it out. The only thing I could say is that a good percentage of chileans are in debt up to the wasoo (?).
I'm from the generation of common sense, wisdom and unfiltered answers. I sayeth as I seeth.

Donnybrook
Rank: Chile Forum Citizen
Posts: 3166
Joined: Thu Nov 24, 2011 10:34 am
Location: Santiago, Chile

Re: Housing market situation

Post by Donnybrook » Fri Jan 19, 2018 10:49 pm

I have a friend who lives in an enviously nice apartment in Providencia. She rents and so does everyone else in the building. The owners are a USA based group. This is the second large building which I have learned is entirely owned by foreign investors. I wonder how many others there are.

at46
Rank: Chile Forum Citizen
Posts: 561
Joined: Fri Sep 20, 2013 6:13 pm
Location: Vancouver/Santiago

Re: Housing market situation

Post by at46 » Sat Jan 20, 2018 12:16 am

Donnybrook wrote:
Fri Jan 19, 2018 10:49 pm
I have a friend who lives in an enviously nice apartment in Providencia. She rents and so does everyone else in the building. The owners are a USA based group. This is the second large building which I have learned is entirely owned by foreign investors. I wonder how many others there are.
Similar experience in the Centro here. Also, browsing on airbnb I come across a lot of foreigner hosts.

User avatar
fraggle092
Rank: Chile Forum Citizen
Posts: 1319
Joined: Fri Mar 28, 2008 6:35 pm
Location: In Chile

Re: Housing market situation

Post by fraggle092 » Sat Jan 20, 2018 10:24 am

paladin wrote:
Fri Jan 19, 2018 8:45 pm
I also have never been able to fathom out how Chileans afford to buy properties , but they do. I see all those new high price apartments going up on the east side and wonder how they will ever sell, but they all do.
Chileans like to llorar la carta.
Après moi, le déluge

StrawberryHeartsForever
Rank: Chile Forum Citizen
Posts: 125
Joined: Sat Jan 28, 2012 7:05 pm

Re: Housing market situation

Post by StrawberryHeartsForever » Sat Jan 20, 2018 8:50 pm

Yes I would say definitely a lot of foreign investment and people in a lot of debt. My sister when she bought her house in the UK they could not believe the market prices would go up any further, with how expensive houses were. But they did. And in 6 years, her house has doubled in value from 350k to 700k. We bought our 70m2 appartment in ñuñoa/providencia border for 110 millones October last year. I can not now find anything similar for less than 140 millones. So as a buyer I am hopeful we will not have drastic decreases in prices. I think the inmobiliarias are in it together with the prices, so I could see how people selling at high prices would continue to buy at high prices, but can not fathom how first time buyers unless extremely rich or with good contacts can buy houses in Santiago. The prices are really off the scale in relation to wages.

User avatar
admin
Site Admin
Posts: 16675
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Housing market situation

Post by admin » Sun Jan 21, 2018 1:14 pm

In both Argentina and Venezuela, as inflation really took off, there were building booms. People rushed to stick their money in to real estate, because at the end of the inflation (whenever that is), there is a pretty good chance they will still have an assets of some sort.

They also dumped money in to more stable neighboring countries, to protect their money. That includes Chile. It also includes Uruguay.

Chile has very much always been a regional safe-haven. Back in the 80's the Colombian drug cartels loved Chile, and used a lot of those high-rise projects in Santiago to launder their money. In fact, it ultimately caused the creation of the super-pain the rear money laundering laws that Chile has now.

So, yea, the real estate market is to some significant extent underwritten by foreigners, but on the high-end of the market.

The other end of the real estate market, the poorer end, is under written by the government subsidy programs. Both poor and lower middle class get rather big subsidies for houses. Many, then use that government house, and trade-up / build a credit history, to buy other real estate. So, that creates the pressure on the lower end of the market.

People wonder how an average Chilean can afford a house. It works something like this, for foreigners that don't play in this part of the real estate market.

Let's say a Socovesa (one of the major builders in Chile), has a middle class track home development in Chile, with a market price of 120 million pesos for a small three bedroom, two bath house.

A middle class family, nothing special, but has two incomes, and otherwise average credit rating. Let's say they have a 1.2 million pesos a month income in the household income.

They get one of those matching loan subsidies from the government. Can't recall, but I believe the matching grants were like max 20 or 30 million total, you put it in a savings account, the government matches how much they save.

So, they have a down payment of 20 million. Half the government, half the family.

The banks and sovovesa have pre-negotiated loan approvals. The bank finances say up to 80%. Sometimes the building company will finance the down payment, other times people may use the middle class subsidy.

So, to get in to the house, they need about 10 to 15 million pesos out of pocket in cash. Sometimes even less. Especially considering a lot of buyers will go after a green build, and get a bigger discount. You will regularly see apartment buildings and developments that are nearly 100% sold out on their first phase of the project, and selling the second and third phases green, while the first phase is still under construction.

For the banks part, they are interested not so much the value of the property, but that the borrowers have a steady income. Also, helps if say this now middle class family, also fully owns a smaller home, that say was part of the subsidized home for the poor they acquired 10 or 20 years ago. They rent it or sell it.

They might really only be in for a few million pesos in cash, banks often allow for grace periods for the payments to start, and so on. They end up with a major asset, and monthly payments of 300,000 - 500,000 pesos a month, and something like 4% interest payment (often less right now), over 20+ years, on say 100 million principle. Hardly a stretch for most middle class families in Chile.

The point is, what is driving the real estate market is easy entry for most people in the market.

Banks are pretty loose with their credit when it comes to real estate, because they got security. They have the actual property under mortgage, but they also go after other assets if the property after liquidation does not cover the full debt. If you look at the banks quarterly and yearly reports in Chile, their bad debts are pretty small. In fact you see a lot of them pushing to increase their share of the private lending right now.

I think that is possibly where foreigners are reading the market wrong. They are looking at the raw sticker price, as an all cash buyer, from a private seller.

First most prices in Chile, have a 10% negotiable factor, where a seller will accept say an offer of 10% less. 20% less tends to insult sellers, but with the right deal 10% is possible.

Then add in the real costs of getting the keys in the door for most Chileans above, and you start realizing that say 120 million price tag, is really like 5 or 10 million pesos in cash they need to muster.

Then say 5 years later, they have put a bit of a dent in their mortgage, made regular payments, and the house appreciates to say 150 million. They put their house on the market, sell it, take the 50 million pesos in equity, and trade up to another new neighborhood.

One of our housekeeper that worked part time for us a few years ago at one point owned three houses. One she inherited, one she got as a subsidized house from the government, and one she bought with a mortgage. She finally sold all three and moved out to the country to live with some family. She quit working as a housekeeper to start her own furniture business. Think she had less than 10 million pesos in to all three houses over about 10 years, and was able to sell them for 40 million pesos each.
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.

User avatar
admin
Site Admin
Posts: 16675
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Housing market situation

Post by admin » Sun Jan 21, 2018 1:22 pm

When the economy turns, you would think the major builders would be the ones that take the hit. They just drop their prices, and liquidate their stock of homes, slow down construction on pending projects, until the economy catches up.

Walk in to one of those big, new buildings in los condes. Look at their pilot apartments or an existing one. Add up the building materials. You will quickly realize they have perhaps 10 or 20 million pesos in to that apartment that sells for 150 million+ pesos. They have plenty of profit margin for errors; especially if they sell the vast majority green, while financing the project from the bank, bonds, or stock at say 3% or less on a corporate loan.

That is not bubble. That is a healthy, liquid market, with a population that is demanding better and better homes. Remember, 40 years ago, a large portion of the population was below the poverty line (pick anyone's poverty line). Now that new middle class is on the hunt for better digs, and their kids are on the hunt for better digs than what their parents had.
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.

Post Reply