Saturday, May 18, 2024

ECONOMY | 14-05-2024 15:06

Argentines flock to banks as Milei awakens mortgage market

Argentines are rushing to banks to apply for mortgages as interest-rate reductions begin to wake the home-loan market.

Argentines are rushing to banks to apply for mortgages as interest-rate reductions since President Javier Milei took power begin to wake the home-loan market from a six-year slumber.

“People are very anxious, inquiries overflowed our communication channels and we are overwhelmed,” Daniel Tillard, president of Banco Nación, the country’s largest state-owned lender, said in an interview. The bank announced it will disburse some US$4 billion of mortgages over the next four years to 40,000 potential homeowners. 

For years, Argentina’s real-estate market has been buffeted by currency controls and some of the world’s highest interest rates. Home sales with a mortgage, especially in the capital, have cratered since 2018, according to the Buenos Aires notaries’ association. 

“Argentina is the only country in the world where people can buy a blender in 12 instalments without interest and a house with a bag of cash,” said Gaston Rossi, director of Banco Ciudad in Buenos Aires.  

Some of the country’s largest private and state-owned banks said in recent weeks they will start offering home loans at interest rates between 3.5 percent and 8.5 percent plus a measure of inflation, which soared to nearly 288 percent in March from the year before. The maximum loan amount offered by a bank is roughly US$250,000 for up to 30 years.

Argentines are undeterred by the high interest rates they’d have to pay on the loans, betting that Milei will be able to wrestle inflation back down. As of Friday, Banco Ciudad had already received at least 11,000 formal loans applications from its customers since mortgages were launched on April 29, Rossi said.

“I never had to wait so long, people couldn’t sit down and they crowded the aisles,” said Santiago Martellono, a prospective home buyer who visited one of Banco Ciudad’s branches the Monday after the bank announced it would issue the loans.

Martellono, a 28-year-old lawyer, added that his friends have started to express interest, too. “They see no other way to buy a house in this country in the future than with a mortgage loan,” he said. 

A growing number of Argentina’s banks are eager to meet that growing demand. Banco Supervielle started issuing home loans of up to 30 years on May 4, Banco Santander Rio intends to start offering mortgages this month, and Banco Macro started offering home loans for up to 20 years on Monday. Representatives for Banco de Galicia and BBVA Argentina declined to comment. 

Part of the calculus for banks in issuing home loans is protecting their bottom line.

In recent years, Argentine lenders have kept their money at the Central Bank, preferring the interest earned from one-day repo notes as a source of income. But with monetary authorities cutting the key rates by 8,300 basis points since December, that strategy isn’t as profitable as it once was — forcing banks to abandon short-term notes and start lending to the public at more attractive rates.

“We cannot sit on Central Bank repo notes,” said Tillard, the Banco Nación president. “Our future lies in lending to companies and citizens because neither the government nor the central bank is going to borrow more funds from us.”

Interest-earned income for banks during February 2024 plummeted 30 percent from its peak in October, according to Central Bank data.

To be sure, Argentina’s mortgage market has already seen several boom and bust cycles. 

The last time banks issued home loans was between 2016 and 2018, during former President Mauricio Macri’s administration. The amount of real estate purchased with mortgages increased sixfold. But the demand pushed the average price per square metre 27 percent higher in dollar terms, a trend that could be repeated, according to Federico González Rouco, an economist Buenos Aires-based Empiria Consultores.

And for the loans to stay attractive to consumers, Milei has to make good on his promise to tame triple-digit price growth. For now, Argentines confident that the president will continue to bring prices down are eager to invest in something they can call their own. 

“Argentines are very culturally attached to the idea of investing in bricks and mortar,” said José Rozados, an analyst at Reporte Inmobiliario in Buenos Aires.

by Ignacio Olivera Doll & Kevin Simauchi, Bloomberg


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