Argentine real estate transactions have ground to a halt since
the government imposed strict limits on the ability of people to
acquire U.S. dollars two weeks ago, industry officials say.
Though the market is small, some fear that if the problem
persists it could affect the construction industry in general and
have a broader impact on economic growth.
In most countries the currency market has little to do with real
estate, but Argentine properties are priced and sold in dollars.
Individuals and companies need greenbacks to buy apartments, houses
and commercial real estate.
Unexpectedly, the government made it much harder to get dollars
on Oct. 31, imposing strict limits on their purchase, rocking the
real estate business.
"The market is at a standstill," said Luis Ramos, president of
LJ Ramos, one of Argentina's biggest real estate companies. "The
only people who can get dollars are those who already have them in
safety deposit boxes or under a mattress."
Ramos said the currency controls have scared people and led them
to take properties off the market or postpone purchases.
The controls hit a special nerve partly because Argentines have
an unusual affinity for the dollar. After experiencing decades of
economic crises, currency devaluations and bouts of hyperinflation,
Argentines view the dollar as a safe investment.
After that, they view real estate as the safest bet around. And
it's been a good bet. Property values rarely decline.
But the inability to buy dollars has caused a lot of uncertainty
and could change things, insiders said.
"The currency controls and similarly-unexpected policy changes
are going to lead people with money to invest in neighboring
countries or in the U.S.," Ramos said.
Ramos's client list is a veritable who's who of big name firms,
including multinationals like 3M Co. (MMM), Carrefour SA (CA.FR,
CRRFY), NIKE Inc. (NKE) and Unilever PLC (UL).
"Many foreign companies are not doing anything now because they
are waiting to see how things evolve," he said.
The same is true of smaller investors, according to multiple
real estate brokers who declined to comment on the record.
"People don't know what's going to happen to the market. That's
going to reduce the number of transactions and we could see less
investment from developers in new projects," said German Picasso,
an analyst at the industry website Reporte Inmobiliaro.
"People who have dollars think that if they wait, they may get
more bang for their buck or eventually buy the same property for
less," he said.
It'll take two or three months before data confirm how the
number and value of transactions has been affected, he added.
The only deals taking place now are those that were signed
before the currency crack-down occurred, brokers say.
Other say dealing will eventually resume.
"People are scrambling to convert new contracts into pesos
because nobody knows how much the dollar will cost," said a
purchasing manager at a major international firm. He declined to be
named because of company policy.
"This is the kind of thing that only happens in Argentina," said
the person, who oversees major property acquisitions throughout
Latin America.
By making it harder to get dollars, the government has sparked
fears that Argentina's currency, the peso, will loose value
quickly, making it imperative to get dollars now.
That's led some people to value the dollar even more than
property, analysts said.
Economists say real estate is closely tied to the construction
industry, which accounts for around 5% of gross domestic
product.
"The important thing here is construction," said Fausto
Spotorno, an economist at Orlando J. Ferreres & Asociados.
Spotorno said the impact on construction will be nil if the
government makes it easier to buy dollars.
But if problems persist, it could have a bigger impact on
construction, employment and related manufacturing sectors--cement,
glass, steel production, etc., he said.
"Real estate was booming, people were buying cars and we were
doing well," said Ramos. "But now we're in a big mess and I don't
know how we'll to get out of it."
-By Taos Turner, Dow Jones Newswires; 5411-4103-6728;
taos.turner@dowjones.com
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