Housing market situation

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at46
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Re: Housing market situation

Post by at46 » Sat Oct 06, 2018 6:44 pm

fraggle092 wrote:
Sat Oct 06, 2018 4:58 pm
at46 wrote:
Sat Oct 06, 2018 1:54 pm
Higher property values mean higher property taxes - and everybody's happy, right?
at46 wrote:
Sat Oct 06, 2018 1:54 pm
While higher taxes on rental income mean higher rents, and that's only going to play well among socialists, and who wants that?
Whatever.

Anyway, the trend here has been to try to increase revenue over the years in order to pay to pay for all those electoral promises, plus an ever-increasing number of state and local government employees.

They are already harvesting all the low-hanging fruit, especially when the promised compulsory boleta electronica is introduced, so they are certain to be looking at e-commerce and the informal property rental market sooner or later.
I guess by informal rental market you mean airbnb etc. Well, that game has played itself out, imho. With the huge increase in airbnb properties everywhere over the last few years, the rentabilidad has dropped precipitously. I'm pretty sure airbnb will itself start reporting or maybe even collecting IVA for the government soon for furnished rentals, kinda like what Amazon is doing in online shopping. But that will only drive out the small fry. Otherwise, we're back to basics: location, location, location.

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Re: Housing market situation

Post by admin » Sat Oct 06, 2018 7:23 pm

a lot of buildings band airdnb due to the noise and problems it brought to the neighbors with things like 3, 5, or 7 day minimal rentals.
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Re: Housing market situation

Post by admin » Sat Oct 06, 2018 7:41 pm

i think a lot of what we are seeing the apartment market in santiago right now is distortions introduced by bachelet's tax reforms related to real estate. it will take a while, as in likly years, to work itself through the market.
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Re: Housing market situation

Post by paladin » Sun Oct 07, 2018 4:50 am

I believe that the more you pay for the property, the harder it is to rent it out for a reasonable return, and also it can sit empty for some time waiting for a tenant.
I would agree that for an investment, it is far better to go for lower value property that is easier to rent and gives around 5% return. This is not difficult. For example in a high demand area like Manuel Montt, a 1 bed apartment with bodega and parking, is around $100 mm? Monthly rental income $450 k, $5.4mm pa . Take off contribuciones and you’ve got yourself 5% return , and no doubt an increase in tne property value, equal at least to inflation.

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Re: Housing market situation

Post by admin » Sun Oct 07, 2018 9:26 am

paladin wrote:
Sun Oct 07, 2018 4:50 am
I believe that the more you pay for the property, the harder it is to rent it out for a reasonable return, and also it can sit empty for some time waiting for a tenant.
I would agree that for an investment, it is far better to go for lower value property that is easier to rent and gives around 5% return. This is not difficult. For example in a high demand area like Manuel Montt, a 1 bed apartment with bodega and parking, is around $100 mm? Monthly rental income $450 k, $5.4mm pa . Take off contribuciones and you’ve got yourself 5% return , and no doubt an increase in the property value, equal at least to inflation.
yea, and if you say go up to los condes you are looking at 200 million to 300 million for a similar sized apartment that only rents for say 600 or 700,000 a month. two or three times the price, but you are not even getting double the rent.

those numbers have a way of swinging. the construction association seems to hold back supply as needed to support prices, while the banks are offering low interest rates and have also dialed back the size of downpayments.
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at46
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Re: Housing market situation

Post by at46 » Thu Oct 18, 2018 7:00 pm

at46 wrote:
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.
The number of dollar millionaires in Chile has increased by 10,000 over the last 12 months, reaching 67,000, according to Credit Swisse. That's 27.4 new millionaires per day, including Saturdays and Sundays. If each new millionaire buys one apartment in an apartment building, that's one building sold in 4.38 days, or 83 buildings in one year :)
https://www.df.cl/noticias/tendencias/l ... b5eb29960d

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Re: Housing market situation

Post by Baltimore » Tue Nov 20, 2018 4:06 pm

I understand that now there are more millionaires in Chile, but I wonder what % of those that are now above 1M USD-mark are there because their main asset—their house—is now worth much more than it used to. Say I own a nice house in San Carlos de Apoquindo that is now worth 800K USD and that it used to be worth, say 400K USD. This actually happened to a friend:

"Fantastic, I am so rich now, I just need sell the house and buy another one and pocket the difference! Oh wait, what did you say honey? You still want to live in this neighborhood in a similar house? Oh crap, but those houses also cost nearly 800K USD, just like ours! Damn it real estate! :oops: "

I believe that it is all the private and small investors that are pouring all their money into the real state market and out of stocks that are driving prices up at the speeds we have seen in the last 8 years, while rents increase at a much slower rate. Facebook is full of ads offering "fantastic opportunities, only for you, to get a safe 5% return on an apartment, we don´t want that 5% return, we want to save it for smart people like you".

My concern is that a lot of small investors (a.k.a. regular people) are taking more than one mortgage at a time and there is little that banks can do about it because there is no centralized system to check the total amount of debt that a person has (read El Financiero or Economia & Negocios in El Mercurio). Banks are now starting to realize that many clients took 2 or 3 mortgages with different banks at the same time, one of them to pay for the house to live in and the other ones for rental properties that will be paid for on their own through rentals. This formula works splendidly while the economy grows, but it is not much different to investing on derivatives and the risks that come with them—contract for differences?

Chile is a richer country than it used to be, there is no doubt about it. And of course, higher willingness to pay for stuff comes with higher property prices. However, I still believe that many investors are playing kind of a risky game here and inmobiliarias are loving it! Ask any 60-70 year old Chilean if she can remember a time when home prices went down, you will get "never" as an answer. Such scenario is not even a possibility, ever. I have a hard time believing that prices are correct if a rather large percentage of investors believe that the odds of home prices going down is equal to zero.

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Re: Housing market situation

Post by at46 » Tue Nov 20, 2018 7:32 pm

Baltimore wrote:
Tue Nov 20, 2018 4:06 pm
I understand that now there are more millionaires in Chile, but I wonder what % of those that are now above 1M USD-mark are there because their main asset—their house—is now worth much more than it used to. Say I own a nice house in San Carlos de Apoquindo that is now worth 800K USD and that it used to be worth, say 400K USD. This actually happened to a friend:

"Fantastic, I am so rich now, I just need sell the house and buy another one and pocket the difference! Oh wait, what did you say honey? You still want to live in this neighborhood in a similar house? Oh crap, but those houses also cost nearly 800K USD, just like ours! Damn it real estate! :oops: "

I believe that it is all the private and small investors that are pouring all their money into the real state market and out of stocks that are driving prices up at the speeds we have seen in the last 8 years, while rents increase at a much slower rate. Facebook is full of ads offering "fantastic opportunities, only for you, to get a safe 5% return on an apartment, we don´t want that 5% return, we want to save it for smart people like you".

My concern is that a lot of small investors (a.k.a. regular people) are taking more than one mortgage at a time and there is little that banks can do about it because there is no centralized system to check the total amount of debt that a person has (read El Financiero or Economia & Negocios in El Mercurio). Banks are now starting to realize that many clients took 2 or 3 mortgages with different banks at the same time, one of them to pay for the house to live in and the other ones for rental properties that will be paid for on their own through rentals. This formula works splendidly while the economy grows, but it is not much different to investing on derivatives and the risks that come with them—contract for differences?

Chile is a richer country than it used to be, there is no doubt about it. And of course, higher willingness to pay for stuff comes with higher property prices. However, I still believe that many investors are playing kind of a risky game here and inmobiliarias are loving it! Ask any 60-70 year old Chilean if she can remember a time when home prices went down, you will get "never" as an answer. Such scenario is not even a possibility, ever. I have a hard time believing that prices are correct if a rather large percentage of investors believe that the odds of home prices going down is equal to zero.
Higher prices mean you get more equity you can mortgage in order to buy more real estate or do whatever. There's obviously a limit to that kind of growth, but that's just a by the way. What you really need to take into account is the structure of the Chilean economy - and it's very different from a lot of economies out there. Things like historically positive current account, higher target inflation rate than in the golden billion countries, extreme centralization, low amount of Chilean money kept off-shore, high quality construction, very poor stock market investment options available to the general population - and the workers already fund the stock market via AFPs to the tune of 7% of their salaries, why would they ever wanna buy even more paper assets? Etc., etc. You can still buy 7 or 8 small apartments here today for the same price you'd pay for one in Munich, Germany. So if anybody should be worried...

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Re: Housing market situation

Post by eeuunikkeiexpat » Tue Nov 20, 2018 7:38 pm

Thanks ALL for an especially good conversation on this topic that supersedes anything I've seen elsewhere.
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BUT when necessary, by way of ridicule and truth revelation we shalt do war.

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Re: Housing market situation

Post by admin » Tue Nov 20, 2018 7:47 pm

here is somothing foreigners tend to not understand due to how long ago it happened, and it is part of the reason the housing crisis in 2008 never hit chile.

they had its housing / banking crisis in the 80's. it was mix of real estate bubble, financed by money laundering. basicaly the cocain cowboys were washing their money through chilean real estate. after they put in strict lending requirments, banking regulations, and capital requirments. basicaly all the stuff the u.s. should have done after 2008, and did not do.

i know a lot of people with more than one mortgage, but they all have the income to do it. banks don't even care so much about your assets, as much as your income.

also there is a centralized credit system avaible to the banks through the credit agencies. if they dont check, that is on the lazy bank executives.
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Re: Housing market situation

Post by admin » Tue Nov 20, 2018 7:57 pm

and as for the magic random number of 67,000 u.s. dollar millionares. i have already covered here why i think that is low. chief among those reasons is exactly because the stats used to calculate it do not include acurate market prices of real estate, but instead is based on the "legal value" or amount property tax is based on (which is always lower than market).

here is the thread:
viewtopic.php?f=23&t=16758
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Re: Housing market situation

Post by admin » Tue Nov 20, 2018 9:14 pm

admin wrote:
Thu Jun 22, 2017 9:52 am
41southchile wrote:
StrawberryHeartsForever wrote:So I have noticed that many new builds don't seem to be selling. Lots of offers starting to be made buying two together, deposit paid in quotas etc. With even more buildings being constructed are we going to start seeing a drop in prices? Ive seen used buildings overpriced and keeping fingers crossed I will have more options soon.
More a stagnation of prices for a while or maybe small drops buy certainly no crash or drops which would make it worthwhile not to buy now on the horizon, see admins answer for best response. Most of the storm has been ridden through, its only the really desperate now, which there probably are a few there, but certainly no mass house price crash from what I've heard and read lately on the topic.
actually, after all the Bachelet screwing around with the housing market, construction industry, and overall economy, I expect there to be a housing shortage at some point. At least in the most high-demand / fast growth areas. How far that is away? No idea. When the prices move again, they are really going to move.
well, to quote myself from back in 2017 when this thred started. i think what we are seeing now is a lot of the bachelet distortions finaly working their way through the market.

we had a rush before the new tax went in to effect. a drop in demand after. a holding period while no one knew what was going to happen next around the elections. now we are seeing a shortage driving prices. next is all the development projects that got put back on the front burner, but that will take a year or two for that supply to start hitting the market.
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