It is said that there is an irrational behavior in real estate prices in Buenos Aires because they fail to adjust to the values that demand is willing to validate.
To understand the real estate market it is necessary to do a correct analysis. To do this, it is vital to differentiate the different segments that exist in the sector. The market for brand new units and sales from the well works differently than the market for used properties. In fact, at the height of UVA credits in 2016/18, the used property market was the main protagonist in most of the operations. One of the reasons was that they could be deeded without problems, an essential requirement for the property to be suitable for a loan.
In the used market, the seller does not always accept the publication value proposed in the appraisal by the real estate broker, even when it shows him with data that it is the market value that can be obtained in a given period.
What factors come into play on the price for the used property segment?
Clearly, each situation is very particular, which is why it is the real estate broker’s task to identify these variables and the sales motivators that the client may have.
Let’s analyze some variables that influence the determination of the price that the client is willing to accept in a sales authorization and that do not have to do specifically with the characteristics of the property.
1) The purchase value
How much did that client timely pay for the property? Here both the nominal value and the inflation-adjusted value of the USA matter, since we are always talking about dollars.. This establishes an important floor, since only in very extreme situations (an urgent need for liquidity) is someone willing to sell below the price at which they bought it.
2) Emotional attachment
Each used property has a life story behind it. If the story is good, the emotional component is very large and the intended price reflects that level of attachment and does not necessarily coincide with the price assigned by the market. If the story behind it is bad, there probably won’t be that level of attachment.
3) Opportunity cost and future projection of the sale
What project is behind the sale? Is this future project superior to the emotional value that the property accumulated? Is there an inability on the part of the client to project a better future that compensates for the emotional burden of “letting go” of the property?
4) The seller of the property is the owner
A fact that is not minor, and that must not be forgotten, is that Our market is practically a market of owners. Unlike other countries where people have a significant percentage of mortgage on the property, due to the systematic lack of mortgage credit in our country, the vast majority of sellers are actually the owners of the asset. This week Banco Hipotecario, Banco Ciudad and Banco Supervielle surprised with announcements of the launch of their mortgage loans after five years without that option for those who want to buy their own home.
5) Social pressure and “bragging”
How much does the environment influence the decision on the intended price? (for example: in a marriage, the couple, another family member or in the social environment, friends). There is never a lack of comments from someone in the environment who says “at that price you are giving it away.”
6) Expectations
Without a doubt, the seller’s expectations about the future constitute an important factor in the intended price. Having an optimistic view of the future price of the property can generate an intended value greater than what today’s market is willing to pay.
7) Time
The phrase “I’m not in a hurry” is the clearest signal that a salesperson can give you. about the projection you have of the price you want to obtain and the time you are willing to wait to obtain that price. A normal sale at a perfectly functioning market price (without stocks and with exchange stability, for example) takes on average between four and five months in Buenos Aires. Clearly, it depends on the type of property, a three-bedroom, for example, does not require the same sales time as a 300 square meter apartment. The more demand for the type, the closer it is to the four and five months of normal sales.
Time is not a variable independent of the rest. The time willing to wait on the part of the seller depends a lot on the level of attachment and the value assigned to the rest of the factors that influence the intended price.
Carrying out an analysis of these and other factors together with the client is essential to determine the sale price of the property and the expected time it will require.
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