Investor attention has recently been focussed on Latin America. Rapid economic growth and increased stability has brought fresh prosperity to the region. As property there is predominantly bought in cash, the region has also been sheltered from the global credit crunch, leading MoneyWeek.com to comment that: “Easy credit and excessive leverage do not make up the foundations of the Argentine real estate boom. In other words, it’s almost bubble proof.” Our new investment opportunity comes from one of Argentina’s most reputable developers, KAS. Located in the first band of residential districts outside of Buenos Aires’ city centre, Torres Caballito Nuevo is a high-spec apartment project in the popular Caballito neighbourhood.
We have been able to secure 39 units in the Caballito Nuevo development at a 23% discount to market value. Caballito is close to the hip Recoleta and Palermo areas, meaning rental demand in the district is high, as residents of Buenos Aires, known as porteños, aspire to live as close to the city’s energetic heart as they can afford. As domestic let periods are usually long, potential net rental yields of 8% per year are achievable.
The developer has already sold 70% of the units in the development to the local market - proving that there is demand for this type of property, at this price, in this area. High demand and limited supply means plenty of growth potential and a strong exit market when you choose to sell.
We feel the timing is right to enter a market that is stabilising both politically and economically, but thriving in growth and demand. Apartments start from approximately £29,000 and we expect them to sell out quickly. Don’t miss the potential for profit in this exciting market.
To view our due diligence pack please click on the icon to the left below. You can also download our PDF brochure of the development by clicking on the icon to the right below.
Call us on 01273 627 900 to get your questions answered and to reserve your property.
Why we chose this deal
High demand means high yields
According to research by the Ministerio de la ProducciÑn, Argentina suffers from a shortage of two million houses. Buenos Aires accounts for 35% of that figure alone, meaning the city needs 700,000 homes to meet demand, and because of this, demand for rental properties is high. From our comparable research we estimate that apartments in Caballito Nuevo could potentially generate 8% net yields if let on the open market, where contracts are long and occupancy rates are good.
Clear exit
A third of ArgentinaÍs population live in the capital Buenos Aires, and demand for top quality, well located properties is high. The developer KAS has already sold 70% of the units to the local market, which is a good indication to investors that there is a domestic demand for this type of property and offering a clear onward sale.
Under market value
In a buoyant property market like Buenos Aires it is rare to be able to negotiate sizeable discounts to market value. However, Ready2invest prices for apartments in Caballito Nuevo represent a 23% discount to current market value. Buying under market value in this way provides upsides such as instant equity and leverage, as well as protecting your downside.
Timing
Argentina has experienced five consecutive years of rapid economic growth above 8%, and The Economist predicts ArgentinaÍs GDP will continue to increase by around 5% until at least 2012. These figures indicate that the countryÍs economy has sufficiently recovered from the financial crisis in 2001. Thanks to ArgentinaÍs swift economic revival, encouraged by record breaking export figures(3), the country now represents a lower risk investment environment, where high growth and returns are possible.
Increasingly affluent population
ArgentinaÍs middle classes continue to thrive as a result of the economic upturn. More than 40% of the population now fits into the middle-class demographic; double the number from 2003. In Latin America between 2002 and 2006, 15million households improved their incomes to the extent where they were no longer considered poor. If this rate of growth continues, by 2010 the middle classes will be in the majority.
Developer track record
When investing in property so far away it is important to have a good developer handling the project. KASÍs developments in the Palermo district of Buenos Aires have earned them a prestigious reputation across the city. The company is well-known for using quality materials, and for their projects completing on time, both reassuring factors for investors. Construction on Tower 1 in Torres Caballito Nuevo is already underway with completion for the whole development due in 2010. (See page 7 for more details)
Hotspot overflow
Caballito is a popular residential ïbarrioÍ, close to the centre of Buenos Aires. As with all capital cities, demand for the best districts is fierce and Caballito is ideally placed and priced to attract locals who cannot afford to live in the more fashionable areas nearby, but who still wish to live close to Buenos AiresÍ buzzing heart.
1. http://www.bainversiones.mp.gba.gov.ar/downloads/real_estate_eng.pdf
2. http://www.economist.com/displaystory.cfm?story_id=9645142
3. Jones Lang LaSalle Latin America City Profile Buenos Aires, Argentina
4. http://www.economist.com/displaystory.cfm?story_id=9645142