Financing Property in South America, Argentina

Although we are currently in the grip of a global recession/depression, there are still areas where property prices continue to rise and emerging property markets where investors can still find cheap, appreciating property, good for long term investment potential.

South America is a diverse continent that offers investors many opportunites for the acquisition of potentially profitable property assets.  Expats living in South America, or those wanting to invest in the South American region have a range of locations, climates and properties available, from apartments in mega cities such as Rio de Janero or Buenos Aires, to beachfront houses in Chile, small farms in the Andes Mountains of Peru or ski apartments in Argentina. 

So how can you go about financing your property or getting a mortgage in South America?

Looking at the continent alphabetically, we start with Argentina.  The property market in Argentina is largely a cash market, which is one of the reasons the country doesn’t seem to have been so affected by the current financial crisis.

The citizens of Argentina have also been used to living over many decades with economic uncertainty and an economic cycle that has seen boom periods followed by very bad crashes every 10 years, and as such the people are viewing the current crises as nothing much out of the norm! 

As regards to financing a property or getting a mortgage in Argentina, it is almost impossible for a foreigner to get a mortgage with local banks, unless they have been working in Argentina legally for more than 2 years - and even then it is not easy. 

Loan to value rates of 75%, interest rates of up to 12% and repayment terms of around 15 years are common.  If you need to finance your South American property in Argentina the normal option is to remortgage or sell a property that you hold outside of the country.

Property developers in Argentina have identified the problems with finding property finance in South America and will often offer forms of finance on new property purchases.  Obviously the list of developers is mainly restrcited to larger cities within Argentina - such as Buenos Aires, Cordoba and Mendoza, and may not currently help you if you want to buy an established vineyard in Mendoza for example.

In a few cases you may find a seller willing to offer owner financing, but it is rare as the seller will usually need the cash to finance his next purchase.  Getting a loan overseas to finance property in Argentina is also difficult as there is no structure for verifying property values. 

During the sale process, the property value on the title is usually entered as a lower amount than is actually being paid, for tax reduction purposes, so it is very difficult for loan providers to ensure that their loan can be recovered in the event of a default.

Financing property in South America is not as straightforward as popping into the local bank, but there are ways to help you achieve your goal of buying a property in Argentina for example.  Take your time, do your research, and if you do need a mortgage or financing to buy your property, concentrate on the most likely forms to offer repayment assistance, such as new development projects.