Argentinian real estate?
Is investing in Argentinian real estate a potential investment opportunity? It seems the new president is trying to implement some fiscal reforms and clean house.
My understanding is that property values in USD in Buenos Aires are approximately one-third of what they were five years ago. There seems to be some excitement about the economy after the new president was elected… refer to the gap up in the $ARGT ETF a couple of months ago. I would welcome any opinions from this forum one way or the other.
Based on the most helpful WSO content, investing in Argentinian real estate is indeed a complex matter. Here are some key points to consider:
Currency and Valuation: Real estate in Argentina is typically valued in dollars, which is a critical factor given the country's history of currency volatility. This means that while prices may appear lower in USD terms, the actual investment risk could be significant due to potential fluctuations in the exchange rate.
Capital Controls: Argentina has had strong capital controls, which can make it difficult for investors to repatriate funds. This could affect the liquidity and exit strategy of your investment.
Inflation: With high inflation rates, the value of the Argentine peso can erode quickly, impacting the real return on investment in local currency terms.
Market Sentiment: While there may be excitement about economic reforms, it's important to consider the long-term stability and track record of such reforms in Argentina. The ETF you mentioned, $ARGT, could reflect short-term optimism, but real estate is typically a long-term investment.
Legal and Regulatory Environment: The legal system and property rights in Argentina can be complex, and it's crucial to understand these before investing.
Investment Strategy: Some investors have resorted to alternative methods of preserving capital, such as purchasing expensive cars like BMWs as a currency hedge. This indicates a general wariness towards traditional investment vehicles.
Given these points, it's advisable to conduct thorough due diligence and possibly consult with financial experts who specialize in the Argentine market before making any investment decisions. Remember, while there may be potential for high returns, the risks are also correspondingly high.
Sources: Argentina Case Study: How a Black Market Currency Emerges, Actual Crisis In Argentina, Actual Crisis In Argentina
I'm the farthest thing from an expert on Argentina have some limited experience with investors from there. Property values are worth a 1/3rd of what they were five years ago because of rampant inflation. The newly elected president has promised reforms, but we will see. Argentina could be a worthy investment, but real estate is probably a bad conduit for that bet. For what it's worth, people who have a little money in Argentina are usually trying to get it out of the country as fast as they can.
Very well aware of the rampant inflation… however as real asset prices in USD have declined Argentina’s GDP has grown over the last 5 years. Investors can acquire real estate in the most desirable areas of Buenos Aires for good value. Investors in the US have done well by purchasing real estate in awful areas that have gentrified (look at Bushwick Brooklyn 20-30 years ago and what it is now).
About inflation, all else being equal, the dollar will weaken as rates decrease especially if rates drop as rapidly as their ascent over the next 12–24 months. This factor in isolation will make the Argentine peso stronger if the new president can accomplish some of his objectives.
I made this post as I am visiting Argentina next week to look at real estate to buy for myself and a HNW individual who is interested in my thesis.
I guess my point is you are making a bet on the Argentinian economy and the peso's value relative to the dollar. Why layer real estate on top of it? I think real estate is a terrible conduit for bets like that, because you can nail the macro bet but lose out at the property level. Why not just make an investment that directly supports your thesis? Feels like a good way to end up with some orphan properties in Buenos Aires that are a constant headache for you.
Wouldn't trust someone's "thesis" if they're seeking approval on an Internet forum. Go kick rocks.
it sounds like there is more pain coming as the pres wants to "unhinge" from china which is a lot easier said than done. if you can stomach turbulence in the near future and believe free market capitalism can be successful in modern day south america, its not a bad bet.
I'm pretty bullish on ARGT right now. In my opinion, dollarization is such a huge move that this change by itself can bring stability to the Argentinian economy.
If Milei can get other major reforms through, that's just a cherry on top. Argentina has a lot of problems but the number one issue has always been the currency. If you get that fixed (which seems to be the case), you've made a giant move to changing the direction of the ship regardless of what happens next.
Bullish on the ETF ARGT or the economy and assets there as a whole?
Over the years I've realized the value in RE comes from the U.S.'s property rights and legal process. It is very interesting in concept to invest in emerging markets, but when you consider RE, you want property rights.
If you want exposure to EM markets, I suggest learning more about their stock market and gaining exposure that way to benefit from any outsized gains in effective values.
You have no idea what will happen tomorrow in EM's. Tenant rights may go nuts, more inflation or disinflation could kill your basis in USD, after the current president's term there could be a wild socialist who traps your USD in-country, or the gov could flat out take your property.
You would probably want a 50% premium on your returns to be in an EM; in order to find that, you need a local-team. I would NOT do this on my own without a local team you can trust - i mean trust as in it better be your cousin or brother - not a friend from business school LOL.
The U.S. is the best, most liquid, highest returning on a risk adjusted basis RE market in the world - hands down, no contest. I've worked with a lot of international investors, so I understand the themes and events outside of the US, and especially in EM's.
If you want to invest in EM's, do so in highly liquid securities like stocks. Unless you have the team and cojones to be a real one and buy up a condo tower in downtown Buenos Aires which would be really cool.
Dude, how hard could it be? All he has to do is hire some high school dropouts to collect rent checks and maybe pay a couple bills. And then watch the money flow in!
I've owned in Brazil via PE fund, pretty sure we exited the country because all the contracts meant nothing and stuff was kind of written in best Case scenario XYZ happens in anything other than that we win you lose.
You can't go to countries outside the US/Maybe Europe and expect similar treatment. I know China has minimal investment because it's all made up ect.
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