Enterprising property investors are turning Argentina’s economic problems into an opportunity despite tumbling prices and raging inflation.
The Argentinian government has well-documented track record in defaulting on foreign debt that has plunged the economy into chaos.
The eighth and last default was in July 2014 to the tune of £57 billion.
Attempts to restrict the flow of US dollars in and out of the country have virtually exhausted currency reserves.
Reportedly, the central bank vault has just £30 billion of US dollars – barely enough to satisfy demand as the economy slumps and investors look to grab their cash and run for the exit signs.
Speculators move in
Not everyone is scared of speculating on the demise of the Argentine peso and the financial straits faced by the economy.
Inflation is difficult to guess because the government seems bent on masking the true rate, but outside economists suggest somewhere between 50% and 60% is the probable rate.
A lack of currency stability means mortgages are tough to find – and that only around 3% of the country’s 41 million population could afford to service the repayments with interest rates running at 30%.
The result is the number of house sales has collapsed to around 2,000 a month as prices have plummeted by 40% during the crisis.
Cue the speculators waving bundles of dollars. Most sellers distrust banks and prefer to deal in cash – and with the peso virtually worthless and any value it may have dwindling every day, cash means US dollars that retain their value.
Inflation off the scale
“They see this as a buy and hold opportunity because although the economy is under stress, Argentina has posted some excellent GDP figures in recent years,” said a spokesman for real estate firm Reporte Inmobiliario.
The spokesman explained most house purchases were for buy to let as few can raise a mortgage, and unsurprisingly, yields have risen as fast as prices have decreased. The average return on investment is around 8% for a landlord.
Despite the storm clouds over the economy, an end to the turbulence may be in sight as President Cristina Fernandez is ineligible to run for re-election in October 2015.
Although times seem bad for Argentinians, they have seen it all before – in 1989, inflation was off the scale at around 5,000% a year.
In those days, if you set off shopping with a wallet full of pesos, by the time you got to the shop, you could not afford to buy anything.