20 April 2007

A home of my own

I've just begun walking the way towards having my own home! This is something I've been thinking about for years. I used to be a little ashamed to live with my parents at 30, but there really was no way out of it, not with an average salary in these times of abusive rents.

It must be only in Argentina that a huge real estate boom, with apartment towers popping up everywhere in the big cities, is coupled with extreme price raises in rents. I mean, everything has become much more expensive lately; in Rosario the average price of 1 square meter in a 1-bedroom appartment is close to US$1,000. It makes sense (in a twisted, very Argentine sort of way) that construction companies and real estate sellers are trying to return to the profit levels (in dollars) they had before the collapse of 2001. Real estate is a long-term investment, and people with enough money or credit to buy a new house or a flat already have savings in hard currency anyway.

However, rents are paid every month in local currency and may be re-negotiated within reasonable time periods. People who rent often have no other alternative; they tend to be the average guy or girl or young couple or family who live on fixed income and cannot save much, if at all. It makes sense to raise their rents following the inflation rate and/or the average wage, or a bit more — nobody says the owner has to be compassionate. But it's plainly stupid to raise the rents so much that you effectively evict your tenants, and it seems to me idiotic beyond belief to spend millions building a huge tower in the poshest neighbourhood and then charge so much for the apartments that almost nobody can rent them.

Of course I never intended to approach the owner of one of those luxurious apartments being built downtown with a view of the river. I initially thought of a small flat somewhere in the macrocentro (just outside the downtown area, maybe 10 minutes' walk from work). That would've meant a rent of at least 500 pesos, not including administrative expenses and taxes (I'm not going to tell you how much I make, but that's more than 1/3 of my salary). I'd discarded the idea of buying beforehand and was more-or-less resigned to a frugal lifestyle. Then one day my mother insisted, "Why don't you at least try asking for a loan so you can buy your own place? Paying a rent is like throwing money into the garbage, and once you begin renting you'll be renting forever."

Well, I went to the Banco Hipotecario, the venerable bank that has helped fulfill the dream of owning a home for generations of Argentinians (even my parents built their [our] house with a loan from the Hipotecario!). Big mistake. I don't know how things were before, but the Hipotecario nowadays is like regular banks (the quote is not mine): they lend you money only if you can prove that you don't need it. My salary is not high but, being single and childless and with a stable job, you'd think the bank could've trusted me. After getting out of there, I made some calculations based on the maximum amount of the loan based on your salary and the maximum paying time, and it turns out that with the minimum required salary, what you can buy amounts to little more than a concrete cubicle. And that's if you have at least 6 or 7 thousand dollars to pay up front before the first installment.

Then I heard about something called Cooperativa de Vivienda Rosario. This is a cooperative that builds apartment buildings and family homes for sale (not rent). You pay them and they build, but you don't know when you'll get your appartment. Every two months they have a "lottery"; if you paid your installment that month, you're in, and you can be awarded with an apartment. If you don't pay for a while, nothing happens (you only miss the change of being in the lottery). Once you move, the installment doubles and becomes obligatory. You won't truly own the apartment until you finish paying, and the remainder of the value will be adjusted by the cost of the construction index published each month by INDEC; the installments themselves are also indexed (by the salary index). So there's the certain risk that the cost of your future appartment will skyrocket out of control during one of those economic hysterias typical of this country; but that seems to be the only way.

I learned of this word-of-mouth, from my boss, who told me her maid had actually bought a very nice house this way. So I called, got an interview (the guy from the cooperative came to see me at home) and a comprehensive explanation. I thought about it and told them I'm in. I paid my first installment (which is very accessible), and I'm signing the definitive contract next week.

Now, the building is not yet done; indeed, the idea is they'll have all apartments assigned to their owners when the building is finished, about one year and a half from now. If by then I haven't had any luck, I'll have to wait one more year to get an apartment in the next building, which will be built around the corner from the other one. The area isn't close to the downtown; it's about 20 minutes from it by bus, near the bus terminal station. It's close to the geographical center of the city, though, within walking distance of my Japanese school, 20 minutes from my current house, and well supplied with bus lines. Looks like a peaceful neighbourhood, too.

They say time flies when you're getting old, so maybe an 18-month wait won't feel like so much.

6 comments:

  1. Felicitaciones.
    Participe una vez de algo similar, pero eran casas con un terreno en zona sur, muy al sur, adonde dobla el viento, pero un dia deje de pagar porque no pude mas y no paso nada malo.
    El tiempo a esta edad no vuela, se teletransporta.

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  2. Mike17:46

    Hola Pablo!
    Congratulations and the best of luck to you! As noted i think you have a great blog and intend to contribute financially when i am in Rosario(and i will be there). That said, there is quite a debate whether renting or owning is best. I have done lots of both and know the advantages of each. There is a huge stealth housing and credit bubble imploding in the US and it probably will implode worldwide. The best source of info on this is www.thehousingbubbleblog.com and it is a brilliant source of info. The greatest bubble in history shows every sign of blowing even as TPTB try to prevent this. No one knows the future but THBB has been incredibly prescient so far. Still we all desire our own place to call home, even a rolling stone like me. Someone said "If you can sleep on it, with it, or in it, rent it, dont buy it" but that does not work for everyone.

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  3. Hey Pablo,

    i wanted to email this to you but you don't have your address on site (probably a good idea)...

    anyway, i can't remember if you mentioned what line of work you're in, i seem to have a vague recollection that it was something in systems or computer stuff..maybe...? what i wanted to send was a link to a company that a friend of mine runs in BA. They recruit from all over south america to work in finance and IT in the uk, ireland, australia and now spain. i thought it might be of interest to you or your friends (they pay a 'finders fee' if you recommend someone).

    as this is completely off topic feel free to delete this comment. the link to the company is www.txtinternational.com

    ps, i don't get anything out of this...as i said, the owner's a friend of mine and i just wanted to help him out.

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  4. Congratulations Pablo! Investing in one’s first place is always a great feeling, if somewhat scary at the same time.

    It seems that the housing data for Rosario is very similar to BsAs – sky-high rentals and apartment towers being constructed everywhere. Some pundits have blamed foreigners for pushing up the price of housing in BsAs, but that surely isn’t the case in Rosario. I remember reading a couple of years ago that rentals in the better neighborhoods of BsAs were increasing at 25% or more per year (and that was my personal experience as well).

    In the San Francisco Bay Area, some cities have rent control indexed to the Consumer Price Index of the local area. That way landlords can make a reasonable profit and tenants can be sure that they won’t be forced out of their apartments because of unreasonable rental demands (in San Francisco city, the current maximum increase is 1.5% per annum).

    How does the cooperative work? Does the cooperative have title to all the apartments until you are fully paid up, and then you do the escritura? Are all the apartments the same size, and how do they decide where in the building and on what floor your apartment will be?

    I guess now you’ll be hoping that INDEC “underestimates” increases in the construction and salary indices ;-)

    At least you have time to polish your domestic skills (like cooking) before you leave the family nest.

    John

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  5. Thanks for all the comments. I'll deal with the questions in another post. Regarding the real estate boom, coincidentally, Rosario3 publishes an article about the impact of high-rise buildings in the city: "Los megaedificios, un balcón preferencial al río Paraná". It says Rosario will have the highest building in Argentina (50 floors) 4 years from now.

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  6. No shame in living with your parents in Argentina at 30 Pablo. There are thousands and thousands of them. Reason is just what you said, the middle class can't get a housing loan. It's real shit and not fair.

    My own thinking as to why they do this in the big order of things?

    Because when people become land and property owners they become empowered and that's the last thing some want.

    Why let someone own something when you can own it yourself and make someone else dependant. Serfdom. You know what I mean.

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