Housing market situation

Buying, Selling, Building, Tax issues, anything regarding real estate or properties in Chile.
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Re: Housing market situation

Post by admin » Sat Mar 10, 2018 7:02 pm

Yea for that last run-on set of questions your going to need to use the search function.
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Re: Housing market situation

Post by admin » Mon Mar 19, 2018 9:39 am

So here is an interestig one. How many chileans have second homes?

http://www.pulso.cl/economia-dinero/sii ... nda-chile/

I find that number a bit hard to buy. I think more commen, especially with new property tax with a one time life deduction, is that people tend to spread property among family members.

For example, husband owns the house a family lives in. Wife owns the vacation home. Perhaps an adault kid owns a rental property, that mom and dad bought. The tax structure just lends itself to hiding who really owns a property, or at least not easy to troll the irs data to determine who has more than one property.

That is aside from the tendency to place rentals in to companies to get deductions on running the place or similar benfits
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Baltimore
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Re: Housing market situation

Post by Baltimore » Tue Oct 02, 2018 4:27 pm

Very interesting discussion, I wanted to share with you my experience of almost buying an apartment in Las Condes and thoughts about going through this. Disclaimer: I am a newbie in finance/real estate markets, but I know a little bit about economics.

I live in Las Condes, close to La Reina. Now I rent a pretty nice apartment (110 sq mts) for nearly 500k pesos. In March 2017 I decided that it was about time to buy an apartment, so I started looking for similar-ish options within one block of distance of where I live now. I found a gorgeous new building (six floors) with an integrated kitchen for about 270M pesos and common expenses of approximately 200K/month.

I wanted to buy it immediately, but first I decided to hire a real state agent to help me check out the apartment. The agent said that the price was close to the average of similar properties in the area and that apartment looked very good. She did warned me of one thing though. My mortgage was going to be approximately 1.4M pesos per month for 20 years (20% down), however, she said that she had many clients that had similar apartments for rent in Las Condes and that it would be extremely hard to rent it for more than 700K a month if I decided to leave. She told me that the clients she had that tried to ask for more than 800K/month for similar apartments had to wait sometimes for up to a year until someone showed up and made an offer. (BTW, she did not tried to sell or rent me one of her properties after she made that point).

So I started asking around friends that live in nice apartments/locations about rent vs property prices. One couple lives near Parque Bicentenario in Vitacura, 160 sq mts, rent paid 800K/month, the apartment sells for about 360M pesos. Another couple lives in Pocuro in Providencia, 100 sq mts, rent is 700K/month, the apartment sells for about 280M. I also asked my landlord about the price of the apartment I live in now, he did not give me an exact price but said no way below 200M. These are all price-to-rent ratios above the 30-year mark.

Well, this left me with one begging question: Why would I choose to buy a property with a mortgage that is twice the rent price and have to pay property tax? Remember that in Chile interest in your mortgage is NOT tax deductible for the price range I discuss above.

Is there a real estate bubble in some areas in Chile now? I have no idea, I don't know if bubbles are actually predictable. Is the market overpriced w.r.t. fundamental value? Well, it depends on what you use as "value", but simple indices such as price-to-rent ratio seem to be quite high now, equivalent to pricey stocks that pay small dividends. Is it possible to make money by, for instance, flipping houses? Absolutely, my dad has flipped two and made some good money, but not in Santiago or hot areas such as Las Condes, Providencia, and Vitacura.

Here are some interesting discussions about real estate and financial investments (Google):

Nobel Prize Prof. Robert J. Shiller on Market Efficiency and the Role of Finance in Society

Paul Krugman - Home Not-So-Sweet Home

Adam Posen - The Cult of Home Ownership Is Dangerous and Damaging

Cheers

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Re: Housing market situation

Post by admin » Tue Oct 02, 2018 7:33 pm

yea i doubt this is the best time to be buying apartments in santiago. especialy if your aiming to rent them out.
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Re: Housing market situation

Post by at46 » Tue Oct 02, 2018 7:39 pm

The number of dollar millionaires in Chile rose from 5K in 2007 to 57K in 2017, according to Credit Swisse. Unfortunately, there's no breakdown of house rich versus cash rich among them. But they're all in Santiago. And if you're sitting on a good chunk of equity, you can mortgage it to buy more. So it becomes a self-feeding circle, exacerbated by the shortage of prestigious land in Santiago and low interest rates.
https://www.24horas.cl/economia/cuantos ... le-2562451

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Re: Housing market situation

Post by admin » Wed Oct 03, 2018 7:50 am

at46 wrote:
Tue Oct 02, 2018 7:39 pm
The number of dollar millionaires in Chile rose from 5K in 2007 to 57K in 2017, according to Credit Swisse. Unfortunately, there's no breakdown of house rich versus cash rich among them. But they're all in Santiago. And if you're sitting on a good chunk of equity, you can mortgage it to buy more. So it becomes a self-feeding circle, exacerbated by the shortage of prestigious land in Santiago and low interest rates.
https://www.24horas.cl/economia/cuantos ... le-2562451
and that 57k is just the ones that show-up in the official stats. there are way more than that, especialy when talking about real estate.
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Baltimore
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Re: Housing market situation

Post by Baltimore » Wed Oct 03, 2018 11:00 am

Here is an interesting article from Diario Financiero:

"La inversión en viviendas de arrendamiento ha crecido, pues ésta ha demostrado más rentabilidad y seguridad que otros instrumentos de inversión. La mayor rentabilidad no procede de los valores de arrendamiento, sino de la plusvalía de las propiedades"

So it seems that lots of folks are investing at a loss w.r.t. the current rent price but betting on home prices to keep increasing at the same pace they have grown in the last 5-10 years. It seems like a risky game to play, but I might be wrong and maybe the number of millionaires might just double in the next 10 years thanks to real estate investments.

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at46
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Re: Housing market situation

Post by at46 » Wed Oct 03, 2018 11:25 am

One thing that amazes me about Chile is just how big of an exporter of everything it is. I don't know if there's another country out there that sells so many goodies all over the world while being itself a small humilde place with just a few decent comunas in Santiago to live in. Unless they make monster investments to improve livability elsewhere to match those posh neighborhoods, those neighborhoods are going to keep rising in prices. Because the money keeps flowing in.

at46
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Re: Housing market situation

Post by at46 » Wed Oct 03, 2018 12:17 pm

admin wrote:
Wed Oct 03, 2018 7:50 am
at46 wrote:
Tue Oct 02, 2018 7:39 pm
The number of dollar millionaires in Chile rose from 5K in 2007 to 57K in 2017, according to Credit Swisse. Unfortunately, there's no breakdown of house rich versus cash rich among them. But they're all in Santiago. And if you're sitting on a good chunk of equity, you can mortgage it to buy more. So it becomes a self-feeding circle, exacerbated by the shortage of prestigious land in Santiago and low interest rates.
https://www.24horas.cl/economia/cuantos ... le-2562451
and that 57k is just the ones that show-up in the official stats. there are way more than that, especialy when talking about real estate.
Yep, I can totally see that. In Canada they estimated the grey economy not covered by the official stats at 17% some years ago. And Canada is a pretty strictly regulated country. Here I'd say 30% of the local economy could easily be under the official radars, plus another 5-10% shuffle-fudged by the powers that be.

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Re: Housing market situation

Post by Britkid » Wed Oct 03, 2018 4:09 pm

The comment about buying on a bet of rising prices seems somewhere between risky and dumb. The comments about rents being half the mortgages do not make me inclined to buy either.

When my wife told the house prices 10 years ago I couldn't believe how low it was. Of course, at the time we weren't living in Chile, and we didn't have any money for investment. The people who bought 10 years ago (or 20) are quite happy with the rent they are getting of 600 or 700k in Las Condes, if their mortgage is beneath that, and well on the way to being paid off.

The smart money was spent in about 2005 or so.
In 2014/2015 I blogged about my life in Chile. http://web.archive.org/web/201601121940 ... age_id=268

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Re: Housing market situation

Post by at46 » Wed Oct 03, 2018 5:56 pm

There are two distinctly different markets we're talking about here. The millionaires market, where the average Westerner can forget about buying but enjoy renting, for now. And the average Chilean market, where you can find a rental property that'll completely cover your mortgage and other costs and will basically deliver you a 5-10 times increase on your initial 20% pie in 20 years time. Just keep your fingers crossed for interest rates to stay low.

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Re: Housing market situation

Post by Britkid » Thu Oct 04, 2018 12:06 pm

at46 wrote:
Wed Oct 03, 2018 5:56 pm
the average Chilean market, where you can find a rental property that'll completely cover your mortgage and other costs
If this is true, I didn't realize that. This is not the impression I got. But I've never looked at it in detail. At some point, I may do so.
In 2014/2015 I blogged about my life in Chile. http://web.archive.org/web/201601121940 ... age_id=268

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