Argentina can be a profitable 'adventure'
British financial magazine MoneyWeek once called buying property in Argentina 'an adventure' - adding, in 2007, that 'like all the best adventures, it's not without its rewards'.
The writer went on to explain why a foreigner would take the plunge into Argentina. He mentioned raging inflation, a shattered economy, 'slippery' currency and 'greasy' courts - and then threw in cheap prices. The 'real cost of the cup of coffee in Buenos Aires is only 16th as much as London', he reasoned, drawing a parallel with the property market.
While it's true that your money goes a long way in Argentina, there's also risk. Yet, investors don't seem to be as gun-shy as they were a few years ago, and Singapore-based Ella Sherman, managing director, Asia-Pacific, of Worldwide Investments, is now recommending it to her clients.
'We feel Argentina offers investors the opportunity to diversify their property portfolio by gaining exposure to South America,' she says. 'The capital, Buenos Aires, has property owners from all over the world. Property laws are respected and good quality properties can command double-digit rental yields.'
Since Argentine property is purchased with cash, following its banking crash of 2001, there tends to be fewer property bubbles and fewer forced sellers during a recession. 'The trend is for property prices there to rise steadily,' Sherman says.
But isn't it risky? If you were considering buying Argentine government debt, then yes, as most analysts consider that risky, Sherman concedes. However, property and land has a history of being stable.
'We always perform extensive due diligence to reduce risk. You can buy risky investments in established markets like London, and really it comes down to the developers and agents you're dealing with.'
Others note Argentina's recovery from the economic crisis. 'In 2010, the resurgence of exports and pick-up in tourism are expected to push the housing market back up into positive growth again,' says Fiona Bosticky, of Fresh Property. Her company is marketing the luxury Soho Deluxe Residences in the upmarket district of Palermo Soho - from US$68,946 for a studio and US$105,877 for a one-bedroom flat - which has an expected rental yield of about 15 to 20 per cent. The units, in the 'most trendy and designer location in Buenos Aires', are due for completion at the end of the year.
'Some off-the-plan luxury projects prices have increased by 20 per cent over the crisis period as they completed, and may increase again,' Bosticky says. 'Buenos Aires prices will probably rise 8 per cent this year. It's a good time to get in.'
Yet, for Sherman, green acres is the place to be. 'The most attractive area of investment in Argentina is farmland,' she says.
'Essentially, we're talking about food. And, while food commodities notoriously have highly volatile cyclical prices, the long-term trend is clear: increased demand. There is a general trend, seen most clearly in Asia and caused by increasing affluence, of growing demand for high quality food.'
In China alone, it is estimated that 10 million people a year join the middle class. The result is a hugely increased hunger for high quality food of all kinds, especially protein, most notably in the form of meat and milk.'
According to Australian investment advisory firm Caiani & Company, as quoted in The Economist, global milk consumption has grown 700 per cent in the past decade, and olive oil 600 per cent. The report said China consumed twice as much vegetable oil, 60 per cent more poultry, 30 per cent more beef and 25 per cent more wheat than the global average, with a knock on effect on other foodstuff.
'The managed farmlands our clients are investing in is grain or crop producing,' Sherman says.
'Developing countries with burgeoning food needs are taking extraordinary measures to secure supply - all the way along the food production chain. China's state-owned food production giant, Cofco, bought into a slice of Smithfield, the world's biggest producer of pork; an Abu Dhabi-based investment company, Al Qudra, is reported to have bought big areas of farmland in Morocco and Algeria, and is doing deals in Pakistan, Syria, Vietnam, Thailand, Sudan and India. There are reports of investors in China buying 50,000 hectares of arable land in Argentina and considering others in the country, as well as Brazil.'
Aidan Rankin, economic analyst at Property Frontiers, is another fan of farmland. According to Rankin, there are 'ideal opportunities in alternative and eco-friendly investments that yield a good return, have a safe exit strategy and provide a reliable source of income'. He says the company's latest product, Argentine Farmland, 'does all three things'.
And there are other reasons why famous foreigners - among them Ted Turner, Tommy Lee Jones and Sylvester Stallone - reportedly own property there. Argentina offers privacy, visual beauty, great wine, a sunny climate and favourable tax laws. And, of course, there's the polo - doubtless a key to why British royalty, notably Princes William and Harry, are also said to be fans.