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How Javier Milei revived Argentina’s dormant property market

Javier Milei
Javier Milei has brought down inflation and cut the Bank Rate six times since coming to power in December - Agustin Marcarian/Reuters

In December, Argentina’s benchmark interest rate was a staggering 133pc. Even by current global standards, as countries battle high inflation, the figure was eye-wateringly high.

By contrast, in the UK, critics of the Bank of England have been calling for a reduction from the current rate of 5.25pc.

As a result, the mortgage market has long been dormant. Data analysis by Bloomberg found that just 106 of 3,399 of home sales in Buenos Aires in February included a mortgage. The market is largely open only to wealthy buyers, who can use cash to purchase property, often relying on the US dollar, rather than the hugely devalued peso, for their purchase.


Enter Javier “Chainsaw” Milei. Argentina’s new president came to power in December on a right-wing platform of reducing the size of the state and restoring economic stability through an extreme programme of deregulation. He has since brought down inflation and cut the Bank Rate six times to its current level of 40pc.

That still sits far above what most of us would consider manageable. But the rapid rate cuts are being seen as a small glimmer of hope for borrowers in the country, and there are signs it is already reviving the beleaguered mortgage market.

289pc inflation

In April, the country’s monthly level of inflation stood at 8.8pc, down from 26pc in December. However, Argentina’s economic outlook remains uncertain. While monthly inflation has fallen, the annual figure has risen to 289pc.

And while the International Monetary Fund has announced an additional $800m (£629m) loan in a vote of confidence, the economy is expected to contract over the coming months. This will be further pain for Argentines who are feeling the impact of the devaluation of the currency, causing prices to rise further relative to their wages.

Despite this, the mortgage market has opened up again, with retail banks keen to attract customers with new offers of home loans. The industry has long been largely inactive. Currently, mortgage credit represents less than 0.5pc of the country’s gross domestic product (GDP).

The size is minuscule when compared to the UK, where the total of outstanding mortgage loans was equal to around 65pc of national GDP in 2022, according to the OECD.

José Bandin, principal manager of retail and commercial banking at Santander Argentina, says: “Over the past five years, the Argentine mortgage market faced a challenging environment due to market conditions, including inflation, exchange rate fluctuations, and interest rates. These factors contributed to a negative scenario for the loans.”

However, reforms introduced by Milei are already having a positive effect in the mortgage market – property transactions in the capital increased 18.3pc in March, compared to the same month last year, according to the College of Notaries of the City of Buenos Aires. Estate agents are also reporting a 20pc increase over the same period.

Banks re-entering the market

The previous standstill in the market is understandable. Until the start of this year, banks were offering hardly any mortgage products at all, says José Maria Segura, chief economist at PWC Argentina.

Not only did this impact those looking to buy, but it also affected those with existing loans. Under previous administrations, mortgages linked to inflation rates, known as UVA loans, gained popularity among borrowers but caused issues when inflation rebounded, says Segura.

Even though there is now growth in the mortgage market, it is still very small, with limited choice.

Yet it is clear the demand is there. Since Santander Argentina published the conditions of its domestic home loan offering in early May, the bank has been inundated with inquiries.

“We’ve already seen an acceleration in credit demand across the system in recent weeks,” says Badin.

Even though the benchmark interest rate is still well above what most borrowers would consider affordable, lenders are finding ways to offer mortgages at more realistic rates.

Banks are coming to the market with loans ranging from 3.5pc to 9.5pc, plus a measure of inflation, according to Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.

The opportunity has “ignited a surge in demand among Argentinians who have long awaited the opportunity to purchase homes through mortgage financing”, he adds.

Santander, for example, is offering a credit line at rates of around 5.5pc, for a maximum term of 30 years covering up to 80pc of the property value for permanent housing. Like in the UK, there are limits on the amount you can borrow relative to your income and the lender requires a monthly income of at least 850,000 pesos (£747.55).

But the likelihood of inflation heading upwards again means taking on a loan is not without risk. If it starts to climb again without wages keeping pace, buyers risk being unable to make their payments, warns Segura.

A new opportunity

For many, particularly young people, the new loans could offer a huge opportunity.

“Until now, renting was the only alternative to living at home with their families,” says Segura.

“There was no possibility to buy a home because either you had to pay upfront or you cannot buy.”

Under the previous administrations, renting was also a struggle for many as four-year rent controls led landlords to flee the market. In the 12 months to February 2024, rents increased 286.7pc in Buenos Aires, according to platform Zonaprop.

Since the legislation was scrapped, rents have fallen and the number of properties that are available for rent has increased significantly, according to industry body the Argentine Real Estate Chamber.

Historically, property prices in Argentina have been disproportionately high when compared to the income levels of the population, explains Andres.

“While the currently-undervalued Argentine peso has improved affordability for first-time home buyers, the persistent high inflation rates pose significant risks to the sustainability of home prices.

“The success of President Milei’s efforts to curb inflation while simultaneously stimulating economic growth and increasing incomes will play a pivotal role in determining the trajectory of the housing market’s affordability.”

Property prices have remained resilient over the past few years despite the rocky economic conditions. In April the average property in Buenos Aires was $2,219 per sq m, rising 0.8pc in the month – the largest monthly increase since April 2018. Over the past 12 months, prices have risen 2.5pc with apartments seeing the largest increase, according to Zonaprop.

This is because those with wealth deemed bricks and mortar to be a safe haven for cash.

“The financial market in Argentina is so weak that real estate is one of the popular investment alternatives,” adds Segura.

As inflation increased and domestic financial markets became too weak for investment, people with savings chose to put it into property, spurring demand and bolstering prices despite recession.

Looking ahead

Under Milei, the outlook for the property market has improved, however experts say there is still huge uncertainty in the long term. If Millei is successful in bringing down inflation, interest rates should stabilise at lower levels, increasing mortgage affordability, says Abadia.

However, whether the green shoots in the market recovery can grow depends on the extent to which the economic stability can be established – and maintained.

Abadia adds: “While challenges remain, the renewed availability of mortgage financing presents a promising opportunity for Argentinians to realise their dreams of homeownership.”