Lofty ambitions in Buenos Aires
Imagine buying a chic and cheerful designer loft apartment in one of the world’s most vibrant capitals for the price of a garage in London’s Mayfair. Picture yourself within walking distance of the best beef restaurants on the planet, some of the most exclusive designer stores in the world and just a quick step away from an international-standard tango show. Sounds good eh? Well, it’s a dream that’s easily realised if you buy a property in Buenos Aires.
By Andy Round
If you wander around the fashionable districts of San Telmo, Recoleta, Palermo or Puerto Madero it doesn’t take long to realise that for between US$2,000 and US$4,000 per square metre you can snap up a top end luxury apartment. So what can you get for those prices in central New York or London? Er, perhaps a small kennel.
“The easy answer to why Argentina is such a good investment destination is simple,” president of property company Gateway to South America, Geoffrey McRae, tells Jumeirah. “The peso is the most undervalued currency in South America and is deliberately undervalued to encourage exports. However, this will not last forever and today you need to be investing for the medium to long term.”
Ah yes, devaluation. In 2003, the Argentinean economy was so bad that the country couldn’t even pay its municipal workers let alone its debts to the International Monetary Fund. Every day thousands of passionate Latinos, understandably if not bizarrely, banged pots and pans outside the country’s banks for hours on end to protest at the fact that their savings were worth two thirds less overnight.
“When I first walked down the streets of BA in April 2003, I couldn’t believe the prices of property in the city,” remembers David Cummings of Tierra Estates. “The market was in free fall and people just wanted out. It was a blood bath, nobody wanted to buy and many people had to sell or go bankrupt. Prices dropped like a stone.” Clearly one man’s economic crisis is another’s property boom opportunity and those with liquid cash moved in for the kill.
Three years later, the country has comfortably shaken off its legacy of economic misery and prices in Buenos Aires’ more fashionable areas are reported to have rocketed by 25 per cent last year. Still they are still highly attractive by US or European standards. “Foreigners look around and are thrilled with the idea of what they can get for their money,” says Cecilia Campbell of Reynolds Properties.
According to World Travel & Tourism Council figures, the tourism economy is expected to grow at a steady four per cent a year until 2016 and government predicts visitor arrivals to continue to grow year on year by 10 per cent. Cranes bristle over parts of the city that were once run-down, scaffolding hugs ancient baroque facades, regeneration is creeping into back streets and the old river district of Puerto Madero has been completely transformed.
Building on the success of the Philippe Starck-designed Faena Hotel+Universe, voted best new hotel by Wallpaper magazine, the Faena Group has stepped up its renovation of “historical, landmark properties”. According to the company’s European spokeswoman Faena aims to “create a harmonic blend of the past and present that will last well into the future” and create a “diverse mix of living alternatives”. The result has been the transformation of what is now being dubbed ‘the Art District’ where 100-year-old port buildings have been completely transformed into ‘urban spaces’ such as the Starck-conceived La Portena Residence.
However, the best is probably yet to come. After joining forces with the architectural genius behind London’s Gherkin and Beijing International Airport, Sir Norman Foster, Faena aims to create six more buildings in the district including 300,000 square metres of residences, exhibition spaces and retail outlets.
If you walk from the Faena Hotel across the road towards La Plata River today you will discover what is probably the most stylish show room of property in the whole of Argentina. Artist’s impressions and scale models of the project reveal a world of sleek lines, restored Victorian brick, cutting-edge interiors and astonishing river views. Undoubtedly, this will be the Buenos Aires address when it is completed in 2009 and with prices in the US$3,000 per metre range (depending on floor and location) compares very favourably with other international capitals.
“Buenos Aires is a wonderful city, the weather is great, the culture dynamic and the Faena residences complement these aspects perfectly,” the spokeswoman tells Jumeirah. “To get a Philippe Starck or Norman Foster-designed apartment for a fraction of the price of an apartment in, say, London has got to be a very worthwhile long-term investment. Imagine how much that could cost in Paris?”
For those who can’t wait for their Foster/Starck-designed BA home and want to tango into the market now, where should you go? “If you are looking for a lifestyle choice and easy resale, the popular areas of Recoleta and Palermo are still a number one consideration,” says McRae. He’s not wrong. It is estimated that one in three sales in these areas are now foreign with the British, Americans, French and Spanish spearheading a new wave of immigration into Argentina.
But is it worth it? “The returns are rather academic as the ones rolled out at investment seminars of 10 per cent I feel are difficult to achieve after the costs of tax and management fees etc,” says McRae. Rental income of about four to six per cent of original sale price is believed to be a more realistic figure, although some real estate companies have cited figures three per cent higher.
Cummings says he owns a four-bedroom house in Palermo and rents out individual rooms to pack-packer holiday travellers gaining him a 14 per cent return. Nearby, off the cobbled streets, bohemian bars and achingly fashionable boutiques of the neighbourhood Palermo Viejo (where writer Luis Borges used to live), reports of making 50 per cent in a year in 2006 were not uncommon.
Like any other city exploring the lesser-known areas of Buenos Aires, like Barracas, will reveal the real bargains. McRae believes that the best investment areas are effectively the residential suburbs where the Argentinean middle class live. “They have not risen to the same extent as the foreign-favoured areas and as bank finance becomes more readily available they should grow more quickly.”
Of course the whole drive to invest in Buenos Aires property is not only motivated by cash returns. For most people the city represents a vibrant alternative lifestyle that is cheap, cheerful and completely unique.
Robert Smith, a Brussels-based businessman, bought in Recoleta 18 months ago. “I went there on holiday two years ago and just fell in love with the nightlife, architecture, old markets, café life and the people. Yes, my property has increased in value, but I won’t sell. In the long term I want to retire there. Buenos Aires is alive in a way no other European city is and I have made a lot of long-term friends.”
It’s a seductive thought. When I visited Buenos Aires last year, you could enjoy a three-course meal for two with wine in a top class restaurant for US$50. A decent tango show was only US$30, entry to the Evita museum was peanuts and my wife bought a good pair of Argentinean leather boots for the cost of a jacket from Zara, or so she told me.
“We purchased an apartment in one of Buenos Aires’ most well-known character buildings called the Estrugamou Chico four years ago,” says McRae. “This is something that we could not have done in our home country of New Zealand. We liked the country so much that we invested in a farming company.”
McRae recommends that any potential property buyer in Buenos Aires should carefully examine ownership structures, tax implications and planning procedures before putting down the 30 per cent deposit required to secure a new home. An ideal way to do this is to rent a place for three or four weeks to get a feel for the best areas. Even if you don’t end up buying, Buenos Aires as a holiday destination in itself has got to worth the price of return flight.