By Mario Gomez
Many rivers of ink have run to explain and refute what will happen in the real estate market.
What about supply, demand and prices. The buying behavior of new generations and their preferences for use, rather than possession is a key issue. In other words, millennials prioritize access and not ownership. That is the best slogan that synthesizes how young people born between 1980 and 1995 think.
However, it is interesting to consider the multiplicity of motivations that lead people to buy real estate. And at the same time understand that, even when we live in a globalized world and customs spread to the rhythm of the coronavirus, there are still domestic components that strongly impact behavior within the real estate market of each country.
I root the earth
Real estate, as the name implies, has the peculiarity of being attached to the land. This rooting has practical consequences, especially in our latitudes, where permanent economic crises cause economic agents to live in a state of permanent anxiety and uncertainty. When there is this macroeconomic instability and job insecurity, it is very difficult to “live rented” as in most first world countries.
Scholars of real estate activity show that there are countries in which the culture of owning their own property is much more rooted in the population and others in which there is what is called the “rental culture.”
The reality is that the roof itself and the four walls offer an important psychological containment and real estate is perceived as a family achievement and a factor that contributes to stability, which provides that strength that is necessary when everything seems to be seated in quicksand. .
Without a doubt, this influences the buying behavior and also the desire to remain positioned in real estate.
Why it costs so much to lower prices
Part of the reasons that make the sale value of the properties not lower is explained by the fact that the owners do not want to massively rid themselves of them.
Even when the market is slowed down and there has been a notable reduction in the number of operations, there are no significant price reductions because those who own real estate want to continue having them in their portfolio. This still occurs in a context of low income from rents and tax policies that take away the incentive to ownership of real estate.
The explanations are multiple in the same way that there are multiple reasons why people buy real estate.
Why it is worth buying
Let me tell you an anecdote: we were a few months ago at the Academy of Economic Sciences and an economist exposed the fundamentals for which he considered that the price of real estate should go down. His prestigious colleagues listened attentively, until one commented on his personal experience: “We continue to live with my wife on the same floor of 250 square meters even though our children became independent. We do not” shrink “, because one never knows, maybe tomorrow one of our children needs to live with us again, “he said.
The probable effect “I return to the house of my old men”, weighed more than all the fundamentals. No financial investment could give the containment and welcome that a property can give at certain moments in personal history.
The different “sellers”
A little reflection on prices. It is true that there is a significant amount of published properties (which includes some offer values that are no longer a reference to true market prices and the cause is that those bidders are not true sellers). At the other extreme, there are those who accept very aggressive counter offers: these are sellers who want to undo their positions, want to leave the Argentine real estate market at all costs. These exit prices are also not market prices. For these owners, the value they sell is secondary, subordinated to other reasons that have a greater weight in the decision. We have to distinguish between publication values, specific output values and true market values.
The market value is the most likely price that would be obtained for a property in a competitive and open market with all the necessary conditions for a fair sale, which is that in which the buyer and the seller act wisely, consciously, informed and unaffected by undue stimuli. Virtue is right in the middle, Aristotle said, and finding that balance is the crux of the matter.
With a long-term focus
Finally, we have to analyze real estate investment with a long-term perspective (many invest in real estate thinking about economic independence and protection when they are older adults). There are cycles as in any other sector. It is true that at the current juncture the brick does not betray, but this in no way invalidates the maxim that says that the brick does not betray. The benefits of real estate investment transcend more or less favorable conditions and provide long-term added value in which customer satisfaction resides. When everything moves, it is good to know that solidity exists.
The author is director of the real estate agency Le Bleu