Housing market situation

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Re: Housing market situation

Post by admin » Wed Nov 21, 2018 9:20 am

The buyers are out there in the high demand areas. Frutillar is obviously the one I notice the most, because I live here; but, we are also seeing foreigner buyers return to the Patagonia. Puerto Varas is always in demand.

I typically don't need to go much further than my fence line, to find some property tourist passing by from Santiago looking to buy a lot in our complex. I had one offer to buy my house a couple of months ago.

We had a few in 2016-2017 pass by, but for the most part there was a noticeable drop in the area of people looking. The last few months we have had a pick-up in interest compared to October / November 2017 or 2016.

Even towards the end of 2017, however, lot's and houses that had been on the market in our complex for a few years, suddenly all sold. My wife and I bought a couple, knowing that Bachelet dip in the market was not going to last; but, our neighboring lots that were for sale were bought up all about the same time. There was like 6 lots up for sale for a couple of years, and they all sold within about 4 months of each other right around the election at the end of 2017.

That is with a massive increase in both lots, apartments, and new housing supply in Frutillar. In fact, I would say the supply of lots has increased by 4-5 times in the last year or two, and the town has started to go vertical with a few apartment buildings. We actually have a problem of all the slime-ball real estate agents, sticking the word "frutillar" in their advertising, even when the property they are selling is nowhere near frutillar. I have seen it pop up in advertising for property that is 100+ km away.

My guess, in high demand areas, we see something like 20-30% run-up in prices this summer in the south. It is just a pent-up demand thing, after sort of bouncing along a for several years in the 5-10% a year range.
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Re: Housing market situation

Post by Julito » Wed Nov 21, 2018 10:44 am

I was talking to a woman a few weeks ago who for years has had a hotel and cabanas just outside Pucon. She was saying they'd had many good years up until recently when all the new apartments started coming online. Alot of new owners throw them out on AirBnb and it's been affecting them. Personally I see AirBnb effect as a race to the bottom on pricing with so many new apartments now available.
It'll be interesting to watch what happens when all these new owners discover the pittance they'll be getting in returns along with poor capital gains due to the many more apartments still under construction yet to hit the market. I watched it happen years ago in another tourist destination and the outcome is not pretty.
Pucon really is becoming over developed, it's an absolute zoo in February. But they keep on piling into the property market there.

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Re: Housing market situation

Post by fraggle092 » Wed Nov 21, 2018 12:53 pm

Julito wrote:
Wed Nov 21, 2018 10:44 am
...I was talking to a woman a few weeks ago who for years has had a hotel and cabanas just outside Pucon. She was saying they'd had many good years up until recently when all the new apartments started coming online. Alot of new owners throw them out on AirBnb and it's been affecting them. Personally I see AirBnb effect as a race to the bottom on pricing with so many new apartments now available.
It'll be interesting to watch what happens when all these new owners discover the pittance they'll be getting in returns along with poor capital gains due to the many more apartments still under construction yet to hit the market.
They also publish on Booking.com and Expedia, so traditional hotels are quite hard to find among all the Apartment rentals. (Most users don't know how to use the site filters) Then those agencies have the cheek to suggest paying even higher commissions in return for increased visibility.

The La Serena beach area has had a glut of those investment apartments for some years now, but they continue building them, and Coquimbo council is currently trying to block the construction of 20-storey blocks in La Herradura, which would transform the bay into Santiago-on-Sea.
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Re: Housing market situation

Post by Gloria » Wed Nov 21, 2018 1:55 pm

fraggle092 wrote:
Wed Nov 21, 2018 12:53 pm


The La Serena beach area has had a glut of those investment apartments for some years now, but they continue building them, and Coquimbo council is currently trying to block the construction of 20-storey blocks in La Herradura, which would transform the bay into Santiago-on-Sea.
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Re: Housing market situation

Post by Julito » Wed Nov 21, 2018 3:50 pm

Our visibility is still good but outside the season we have a specific target market who book direct which is gradually growing into what I'm now calling our "bread and butter" market, one that should remain immune from the AirBnb and others apartment effect.

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Re: Housing market situation

Post by at46 » Wed Nov 21, 2018 4:51 pm

Julito wrote:
Wed Nov 21, 2018 10:44 am
I was talking to a woman a few weeks ago who for years has had a hotel and cabanas just outside Pucon. She was saying they'd had many good years up until recently when all the new apartments started coming online. Alot of new owners throw them out on AirBnb and it's been affecting them. Personally I see AirBnb effect as a race to the bottom on pricing with so many new apartments now available.
It'll be interesting to watch what happens when all these new owners discover the pittance they'll be getting in returns along with poor capital gains due to the many more apartments still under construction yet to hit the market. I watched it happen years ago in another tourist destination and the outcome is not pretty.
Pucon really is becoming over developed, it's an absolute zoo in February. But they keep on piling into the property market there.
Yeah, Chileans' love of trendy businesses has played an evil joke on them with Airbnb. And also revealed things about them they're unable to process - like that they're terrible hosts and dirty people. The majority of the Airbnb hosts in Santiago, anyway. So the bookings go to the highly rated apartments, which are few and far between, while the rest languish for a year or so before being converted to unfurnished long-term rentals. Lucky for them, there's still good demand for those here what with all the immigration, and the rent probably covers the mortgage or most of it.

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Re: Housing market situation

Post by 41southchile » Wed Nov 21, 2018 5:33 pm

at46 wrote:
Wed Nov 21, 2018 4:51 pm
Julito wrote:
Wed Nov 21, 2018 10:44 am
I was talking to a woman a few weeks ago who for years has had a hotel and cabanas just outside Pucon. She was saying they'd had many good years up until recently when all the new apartments started coming online. Alot of new owners throw them out on AirBnb and it's been affecting them. Personally I see AirBnb effect as a race to the bottom on pricing with so many new apartments now available.
It'll be interesting to watch what happens when all these new owners discover the pittance they'll be getting in returns along with poor capital gains due to the many more apartments still under construction yet to hit the market. I watched it happen years ago in another tourist destination and the outcome is not pretty.
Pucon really is becoming over developed, it's an absolute zoo in February. But they keep on piling into the property market there.
Yeah, Chileans' love of trendy businesses has played an evil joke on them with Airbnb. And also revealed things about them they're unable to process - like that they're terrible hosts and dirty people. The majority of the Airbnb hosts in Santiago, anyway. So the bookings go to the highly rated apartments, which are few and far between, while the rest languish for a year or so before being converted to unfurnished long-term rentals. Lucky for them, there's still good demand for those here what with all the immigration, and the rent probably covers the mortgage or most of it.
I can't see Airbnb working for someone who buys say a one bedroom appartment in Puerto Varas for example.
They are advertised between 40 and 60k a night, a cheap appartment in PV would be 70 million, closer to 80 probably. Occupancy rates would be what 30 to 40 percent? With interest costs, gastos comunes, insurance, utilities, cleaner etc, unless the plan is to bet on capital gains or to make a loss to offset something else. Something doesn't really add up it's not exactly a fantastic investment.
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Re: Housing market situation

Post by at46 » Wed Nov 21, 2018 8:14 pm

41southchile wrote:
Wed Nov 21, 2018 5:33 pm
at46 wrote:
Wed Nov 21, 2018 4:51 pm
Julito wrote:
Wed Nov 21, 2018 10:44 am
I was talking to a woman a few weeks ago who for years has had a hotel and cabanas just outside Pucon. She was saying they'd had many good years up until recently when all the new apartments started coming online. Alot of new owners throw them out on AirBnb and it's been affecting them. Personally I see AirBnb effect as a race to the bottom on pricing with so many new apartments now available.
It'll be interesting to watch what happens when all these new owners discover the pittance they'll be getting in returns along with poor capital gains due to the many more apartments still under construction yet to hit the market. I watched it happen years ago in another tourist destination and the outcome is not pretty.
Pucon really is becoming over developed, it's an absolute zoo in February. But they keep on piling into the property market there.
Yeah, Chileans' love of trendy businesses has played an evil joke on them with Airbnb. And also revealed things about them they're unable to process - like that they're terrible hosts and dirty people. The majority of the Airbnb hosts in Santiago, anyway. So the bookings go to the highly rated apartments, which are few and far between, while the rest languish for a year or so before being converted to unfurnished long-term rentals. Lucky for them, there's still good demand for those here what with all the immigration, and the rent probably covers the mortgage or most of it.
I can't see Airbnb working for someone who buys say a one bedroom appartment in Puerto Varas for example.
They are advertised between 40 and 60k a night, a cheap appartment in PV would be 70 million, closer to 80 probably. Occupancy rates would be what 30 to 40 percent? With interest costs, gastos comunes, insurance, utilities, cleaner etc, unless the plan is to bet on capital gains or to make a loss to offset something else. Something doesn't really add up it's not exactly a fantastic investment.
I totally agree. But, say, 4 or 5 years ago the earnings used to be pretty good (in a good Santiago location anyway) because of the small number of furnished apartments at that time managed by English-speaking people. Airbnb was still new, Chilean landlords were really inflexible about the papers etc., and Chile was just starting to attract the younger international computer savvy crowd. Of course, the Argies brought in a lot of money that one year when their currency controls were lifted. Then there was a good number of Brazilians for about a year or two. But now it's pretty slow and the furnished market has shrunk around the very best locations.

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Re: Housing market situation

Post by admin » Thu Nov 22, 2018 7:09 am

i dont know. the airbnb is probably not too bad of a return.

say you have a house or apartment in a high demand area. if it is not, your airbnb biz is not going to do well anyway. you pribably get at least 10 to 15% a year in apreciation. if you can get even probably one two airbnb a year, you have covered cost of ownership such as community expenses, property tax, etc. a few more a year, and you are covering the interest payment on the mortgage. a few more a year and you are covering the mortgage payments. especialy the last few years with historicaly low interest rates. cost of ownership can get close to zero with just few bookings a year, which probably gives a better return than a full yearly rental with rents running pretty close to mortgage payments or even a bit below.

the numbers are probably even better for anykne that owns their property outright, or at least has so.e substantial equity built up in their property.

i would never do it. too much of a hassel, but i can see why it would be popular.
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Re: Housing market situation

Post by admin » Thu Nov 22, 2018 9:39 am

so funny story i just was told.

my wife and i rent an apartment in los condes, near the golf course. we use it perhaps on average 10 days a month depending on the flow of work and other things, or just passing through santiago on the way to somewhere else. we lend it out to friends and family that live in the south when they need to go to santiago. sort of our own apart hotel in santiago.

so the owner told us she was going to sell it. she offered it to us at like 140 million pesos. gave it some thought, but just can not bring myself to buy one of those concreate coffines, when i know there is perhaps 10 to 20 million pesos of materials in a 1 bedroom apartment. i also got a bunch of issues with the apartment. fine for few days a month, dont want to buy the problems. we were kicking around the idea of renting something closer to our office anyway. not like we HAVE to have thst apartment because for instance we got kids in school or something.

so she put it on the market. guess how long it lasted?

sold in 2 weeks, to someone looking for investment property.

The new owner was estatic to have good renters already in the place (we are hardly there, pay our rent on time, and have made improvments on the place) and has offered us a new contract for as long we want to stay. still debating renting something a bit bigger and closer yo our office. we can make up the diffrence in taxi rides, but for moment dont want to deal with hassel of moving.
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Re: Housing market situation

Post by 41southchile » Thu Nov 22, 2018 3:13 pm

admin wrote:
Thu Nov 22, 2018 7:09 am
i dont know. the airbnb is probably not too bad of a return.

say you have a house or apartment in a high demand area. if it is not, your airbnb biz is not going to do well anyway. you pribably get at least 10 to 15% a year in apreciation. if you can get even probably one two airbnb a year, you have covered cost of ownership such as community expenses, property tax, etc. a few more a year, and you are covering the interest payment on the mortgage. a few more a year and you are covering the mortgage payments. especialy the last few years with historicaly low interest rates. cost of ownership can get close to zero with just few bookings a year, which probably gives a better return than a full yearly rental with rents running pretty close to mortgage payments or even a bit below.

the numbers are probably even better for anykne that owns their property outright, or at least has so.e substantial equity built up in their property.

i would never do it. too much of a hassel, but i can see why it would be popular.
Let's say I have 80 million sitting around so I dont need a mortgage and I buy one bedroom appartment in Puerto Varas let's assume that includes furnishing, everything I need to rent it out. I can rent it for 50000 pesos a night.
Over the summer I can probably rent it out nearly every day, but the rest of the year, it will be harder and there is so much supply , so let's say it was rented out 35 percent of the time as an average over the year, that's 11 nights a month. 550000 gross, I have to pay gastos comunes of say 50000, insurance probably the same, a cleaner after each guest if I dont want to do myself, that's 110000, power and internet say 50000, that's leaving me aprox 290000 PM, or 3.48 million a year, so its probably giving me 4.35 percent on my freehold appartment . I haven't included guests stealing stuff, replacement linen etc, gas heating costs etc, my time spent receiving guests and looking after the place .
So while it's not a terrible return if its freehold, its certainly not great either for the effort and if I have to take a mortgage out I'm probably barely making a return, I am just banking on making capital gains, but the number of apartments is increasing every year increasing supply so what's my used appartment going to be worth in 10 years time?
I honestly can not see prices increasing at the rate they have been in the last 5 years. The time for investing in apartments was 5 years ago, I think. I may he wrong in my assumptions and I guess they are best guess estimates on occupancy rates based on what I've heard and read etc. Either I am wrong or the market will continue on its illogical path and in 2023 I'll be saying why the hell didn't I buy an appartment in 2018? but looking at whats happening to real estate globally at the moment there could be a few bargains in the next few years for apartments in Chile.
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Re: Housing market situation

Post by at46 » Thu Nov 22, 2018 3:15 pm

admin wrote:
Thu Nov 22, 2018 7:09 am
i dont know. the airbnb is probably not too bad of a return.

say you have a house or apartment in a high demand area. if it is not, your airbnb biz is not going to do well anyway. you pribably get at least 10 to 15% a year in apreciation. if you can get even probably one two airbnb a year, you have covered cost of ownership such as community expenses, property tax, etc. a few more a year, and you are covering the interest payment on the mortgage. a few more a year and you are covering the mortgage payments. especialy the last few years with historicaly low interest rates. cost of ownership can get close to zero with just few bookings a year, which probably gives a better return than a full yearly rental with rents running pretty close to mortgage payments or even a bit below.

the numbers are probably even better for anykne that owns their property outright, or at least has so.e substantial equity built up in their property.

i would never do it. too much of a hassel, but i can see why it would be popular.
If the purchase price is around 2200-2400 UF, as it is in the Centro around Bellas Artes, and Airbnb with superhosts starts at 20 mil these days, you need to rent it out for 18-22 days just to cover the mortgage, GGCC and utilities.

Average occupancy used to be around 22 days back when I looked at it a few years ago. You could get a bit more if you really pushed it, but it´s a lot of hassle, as you correctly pointed out, and you´d still not be able to get to 365 days a year if you wanted to have a life and not just prove a point.

At the same time you can get it rented out unfurnished for around 290-310 ano corrido and get all or most of your mortgage covered that way while the renter pays the gastos and utilities.

Appreciation is the same in both cases.

So, to me, renting it unfurnished is a no brainer, and I think that's what Chilean Airbnb superhost wannabes have started to realize in the last year or so.

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