The Bush family has just bought a 98,840-acre estate in northern Paraguay in a secret deal struck with the country’s administration, according to Latin American news agency Prensa Latina. A great investment? Well, it sits atop the Guarani Aquifer, one of the largest reserves of fresh water in the world, so the Bushes need not fear the global water shortage. But that aside, and for those without the clout of the US government behind them, Paraguay isn’t so attractive. The Index for Economic Freedom reports that “property protection is extremely weak”, while the US Department of Commerce says that “corruption, patronage and bias are part of the current judicial system”.
However, those seeking a Latin American hideaway need not look too far. Just over the border from Parquay is Argentina, a country whose economy has grown at 8% a year over the last three and is expected to grow a further 9% in 2006. Property prices have risen by 50% over the same period, but still cost around a tenth of the price of similar homes in the US or Europe. It’s a far cry from December 2001, when, according to Australia’s ABC Radio, Argentina “had five presidents in ten days, millions plunged into poverty and people were eating cats”. The crash came as the country defaulted on its debts and was forced to unpeg its currency from the US dollar. The Argentine peso plunged and inflation soared. But “today the investors are pouring in”. Argentina’s country risk (the difference in the yield between local government-issued bonds and US Treasury bonds) has fallen to its lowest rate since 1996.
Buenos Aires, a city of over 13 million people, has turned into a construction site, says The Wall Street Journal:Argentina’s construction industry is growing at an annual rate of 27.9%. Unlike the irrational growth seen in many other global property markets, there is reason to believe that this market is, for now, bubble-free. The mortgage market is almost non-existent, which means the boom is not being fed by over-borrowing. Indeed, as “easy credit and excessive leverage do not make up the foundations of the Argentine real-estate boom”, says Chris Mayer on the Daily Reckoning, “it’s almost bubble-proof”.
That could change as President Nestor Kirchner’s government looks to make mortgages more accessible to Argentines. There are plans to allow mortgage terms to be extended to 30 years from the current 20 and to half interest rates to 7.5%. Based on continued economic growth, this could only be good news for the property market. But it may take a while. Nestor Walenten, secretary of trade group Camara Inmobiliaria de Argentina, warns that “unless the government is seriously able to implement the credit-boosting measures it just approved”, prices will stay put in the medium term.
One concern high on most foreign investors’ minds is that of property rights. Of the productive land in Argentina, 90% is owned by 8% of the population and, perhaps unsurprisingly, opposition to rich foreign landowners is growing. Luis D’Elia, a vocal protester picked by the government to lead a land redistribution programme, recently took a set of bolt-cutters to the fence surrounding land used by Douglas Tompkins, a US environmentalist, and trespassed on it.
But this is a relatively minor incident. Unlike its volatile neighbours in Bolivia and Venezuela, “property rights in Argentina are well established”, says Mark Faber in the Gloom, Boom & Doom report. And the Argentinean administration certainly doesn’t seem to mind the influx of ‘el gringo’. “Do I agree with foreigners buying farmland?” asked agriculture secretary Miguel Campos in a recent online news conference. “This is a young country that was itself built on immigration.”
Property in Argentina: what can you get for your money?
If you’re thinking of buying in Argentina, the lowest prices for land can be found in the northwest of the country, where farmland dedicated to goat grazing can go for as little as $15 a hectare. Land in the wine-growing areas of Mendoza and Buenos Aires is the most expensive and can go for as much as $20,000 per hectare, but this depends very much on the area – Andino Property (www.andinoproperty.com) has an 11-hectare vineyard in Mendoza province for sale at $40,000.
For those who are more interested in owning a holiday or retirement home than a cattle ranch, The Guardian reports that in the most exclusive parts of Buenos Aires, property costs between £1,000 and £1,600 per square metre, against £2,700 in Moscow and £3,580 in London. For $150,000 (about £80,000), you can buy a six-bedroom home with swimming pool in the Buenos Aires suburbs. For a further $50,000 (£27,000), you can get a home in gated community, but it will be slightly smaller. For those looking for less grand accommodation, the same $50,000 can fetch you a one-bedroom apartment (see www.apartmentsba.com for more).
For more information on how to go about buying property in Argentina, www.justlanded.com has some good basic information. There are also several estate agent websites run by UK expatriots that might prove useful – these include www.mendozaproperty.com and www.argentinahomes.com.