Does Chile Property Price Bubble?

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Baltimore
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Re: Does Chile Property Price Bubble?

Post by Baltimore » Tue Feb 25, 2020 3:20 pm

I forgot to add one more thing, if you want to invest in real estate in Chile you don't really need to buy a property, there are investment funds available. However, they have not performed very well lately

https://www.elmercurio.com/Inversiones/ ... arias.aspx
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PXYC
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Re: Does Chile Property Price Bubble?

Post by PXYC » Wed Feb 26, 2020 10:33 pm

China has 50 million unoccupied houses and their bubble has never bursted nor is predicted to burst in the near future.

I don't think it's the quantity of new housing that bursts the bubble, by definition, it should be the combination of a large group of people forced to sell a large quantity of overvalued housing they cannot sell for the original price, typically because they can't pay their loans, and this representing a significant % of available housing. I would like to know what is the % of people that are paying their house on credit vs the total amount of houses already paid. I have the impression that buying your house on credit in Chile is a recent phenomen (>10 years), which means that if there is indeed people forced to sell overvalued houses the impact on the total amount of housing might not be that big - it will impact something, but maybe it won't burst anything.

Now, what I find very particular of Chile market is the price cost to rent ratio, which is pretty low, you need to wait a few generous years so that inflation works your way - on other countries it starts working on your favor almost as soon as you buy it. Comparing it with the rest of the world, where people invest their excess of capital on housing to generate more capital excess, wich rises renting prices to prohibited levels, I think it is at least something that young santiaguino professionals can't complaint (I know people with wages on the 600 lucas levels renting those very small apartments all for themselves for 250 lucas in Santiago with the subway on their door, while in my early years as a young professional in Europe, while having a higher that average wage level, I couldn't rent more than a shitty bedroom on a shared appartment with 3 other young professionals).

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Re: Does Chile Property Price Bubble?

Post by admin » Thu Feb 27, 2020 10:10 am

couple related points.

The inflation ups and downs are very real, but are affecting different markets in the country differently.

supply and demand can be turned on its head in Chile.

when I first bought in frutillar, there were very limited options on the market; but, prices were accelerating fast.

fast forward 10 years, and everyone and their brother is offering parcels for sale. Did the increased in supply of parcelas take the wind out of the price?

Nope, in fact it increased the demand because they all started dumping money in to promoting frutillar across the country.
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Baltimore
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Re: Does Chile Property Price Bubble?

Post by Baltimore » Thu Feb 27, 2020 10:49 am

PXYC wrote:
Wed Feb 26, 2020 10:33 pm
Now, what I find very particular of Chile market is the price cost to rent ratio, which is pretty low, you need to wait a few generous years so that inflation works your way - on other countries it starts working on your favor almost as soon as you buy it. Comparing it with the rest of the world, where people invest their excess of capital on housing to generate more capital excess, wich rises renting prices to prohibited levels, I think it is at least something that young santiaguino professionals can't complaint (I know people with wages on the 600 lucas levels renting those very small apartments all for themselves for 250 lucas in Santiago with the subway on their door, while in my early years as a young professional in Europe, while having a higher that average wage level, I couldn't rent more than a shitty bedroom on a shared apartment with 3 other young professionals).
Yeap, there are some areas in Santiago where rents are very low compared to the cost of buying that same property at current prices. Here is a good story, there is a new apartment building right next to mine here in Las Condes. I went to visit the building last year, way before the social crisis, and really liked the apartments, but I didn't like the price. A 20% down payment in a 25-year loan would have required monthly payments of 1.6M pesos approximately with gastos comunes starting at 250K pesos per month. I decided not to buy it because I'm lucky to rent a large but older apartment for only a third of that price, however, I was curious about what those new apartments were going to rent for. It was really funny to see some owners initially asking for rents exactly equal to their mortgage payment (~1.6M) at Portal Inmobiliario. It was only a matter of months until some units became available for ~800K per month. Las Condes is not Santiago and Santiago is not Chile, still, this plot did not come as a surprise when I saw it for the first time this year:
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"Prediction is very difficult, especially about the future" No one knows if there is a bubble or not, that's only clear in retrospect. If you are currently looking for a place to live it is very easy to make a rational decision: look at what those properties rent for (do the homework, don't just look at Portal Inmobiliario) and compare that to selling prices. There are tons of buy vs rent calculators online, some allow you to tweak parameters such as expected appreciation rate, interest rates, taxes, etc. If renting is way cheaper than buying, then rent and invest your savings elsewhere, if not, just buy it. If you are loaded or if you are buying for emotional reasons, then buy and be happy about it, forget about price-to-rent rations and all that jazz. Last, if the price-to-rent ratio says "rent" but you want to play the appreciation game, well, good luck!

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Re: Does Chile Property Price Bubble?

Post by admin » Mon Mar 02, 2020 12:46 pm

puerto varas, now the most expensive apartment estate market in the country.
Screenshot_20200302-124402_Brave.jpg
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41southchile
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Re: Does Chile Property Price Bubble?

Post by 41southchile » Mon Mar 02, 2020 2:31 pm

admin wrote:
Mon Mar 02, 2020 12:46 pm
puerto varas, now the most expensive apartment estate market in the country.

Screenshot_20200302-124402_Brave.jpg
Yeah they are expensive, but compared to worldwide property prices, depending on where you look, it's not outrageous, definitely enough people in Chile to pay those prices .

So about 2400USD per square meter, or 223USD per square foot purchase price for a new appartment.

Possibly about 20 percent more than Santiago?

High demand still not enough supply. Puerto Varas has been trying to sort out a plan regulador for like the last 10 plus years and are still cant do it , still using guidelines that date from 1990 (a lot has changed since then). The city is already collapsing infrastructure wise. Many permissions were already given out, and are being built regardless.
Another Chilean developer/shady local officials short term thinking example of killing of the golden goose to get the egg today and screw tomorrow.
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41southchile
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Re: Does Chile Property Price Bubble?

Post by 41southchile » Tue Mar 03, 2020 11:44 pm

So little old Llanquihue will get its first appartment buildings on a hill on the edge of town, they cant build in town center because it used to be a swamp and there are height restrictions. Two seven story towers to be built, starting at 2400 UF off the plans for 50 something square meters.
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Re: Does Chile Property Price Bubble?

Post by admin » Wed Mar 04, 2020 9:16 am

yea, the limits on building in pv, has pushed development out to llanquiheu and frutillar.

That entire corridor from puerto montt north to osorno along ruta 5 is filling in fast with development. Another 10 years, and there will not be much agro land visible from the highway.
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Re: Does Chile Property Price Bubble?

Post by Baltimore » Tue Mar 10, 2020 4:27 pm

https://www.elmercurio.com/Inversiones/ ... punte.aspx

“Aquí no había un golpe fuerte a la economía desde el año 82’: mucha gente pensaba comprar varias propiedades, porque creían que esto iba a subir para siempre y que no tenía riesgo”, dice Pablo Salcedo, director ejecutivo y socio de Value Advice. "Esto es una lección para muchos, todo tiene riesgo y en el caso de los fondos inmobiliarios o las propiedades, es la poca liquidez”, dice.

Oh, liquidity, that little bitch...like going into a huge room with a bunch of other people, but with a tiny little exit door.

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Re: Does Chile Property Price Bubble?

Post by admin » Tue Mar 10, 2020 7:50 pm

Baltimore wrote:
Tue Mar 10, 2020 4:27 pm
https://www.elmercurio.com/Inversiones/ ... punte.aspx

“Aquí no había un golpe fuerte a la economía desde el año 82’: mucha gente pensaba comprar varias propiedades, porque creían que esto iba a subir para siempre y que no tenía riesgo”, dice Pablo Salcedo, director ejecutivo y socio de Value Advice. "Esto es una lección para muchos, todo tiene riesgo y en el caso de los fondos inmobiliarios o las propiedades, es la poca liquidez”, dice.

Oh, liquidity, that little bitch...like going into a huge room with a bunch of other people, but with a tiny little exit door.
wooo, real estate is not very liquid.

He is a frigen genius.

Guess why Chileans are able to build wealth with real estate more than any other investment?

Because it is not liquid. Just about any other asset class, and they would piss it away on their next vacation or trip to the casino.
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tiagoabner
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Re: Does Chile Property Price Bubble?

Post by tiagoabner » Sat May 08, 2021 4:41 pm

Here's an interesting article: https://www.biobiochile.cl/noticias/eco ... ntas.shtml

There was a 58% increase in real estate sales for the first quarter of 2021 when compared to the first quarter of 2020, as a 14% increase when compared to the average for the last 10 years. It seems that sales have been increasing consistently over time.
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Re: Does Chile Property Price Bubble?

Post by admin » Sun May 09, 2021 11:06 am

tiagoabner wrote:
Sat May 08, 2021 4:41 pm
Here's an interesting article: https://www.biobiochile.cl/noticias/eco ... ntas.shtml

There was a 58% increase in real estate sales for the first quarter of 2021 when compared to the first quarter of 2020, as a 14% increase when compared to the average for the last 10 years. It seems that sales have been increasing consistently over time.
Yea, whatever else might be going on in the country, we are handling way more real estate deals than last year. I have not crunched the numbers, but probably something easily over 300% of the deals we were handling last year in the first quarter (that is number of deals, not market value of property, but sort of the same thing at the end of the day).

Last year, Q1 2020, however is probably a bad comparison. everyone was sort of holding their breath after 18-0 to see what was going to happen, and the pandemic was just getting going.

I also think there is a lot of people getting their priorities in order. being locked in a shitty little apartment in Santiago for months on end will tend to do that to you.

There is also a lot of building and development that has been put on hold everywhere in the country, and at the same time lumber, copper, and everything that goes in a house has increased in price.

but, even against say Q1 2019, we are seeing a lot of action this year.

I still am inclined to see what happens over the winter. traditionally real estate gets hot in about the first quarter of every year. I will be especially interested in office and commercial space in Santiago does, and really everywhere in the country.

We finally just gave up our little office in frutillar this week. We were being optimistic and kept paying the rent for year, but no one had been going there for over a year. At the same time, not all that broken up about it, as we got the big office in Santiago still and when things start opening up again, we will get the pick of the litter among all the failed tourism buisness that are directly on the lake front.

Before the pandemic, those rental prices were far too ridiculous to waist on office space. You had to run a bar or a restaurant for them to make sense for the cost per square footage / meter, and even then it was often a stretch to make economic sense. I sure was not going to pay those prices, just to have my secretary storage. we rarely ever went to our office long before the pandemic. We work from home, the Patagonia, or beach in the carribean.
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