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ENENThe rural real estate market is currently showing an upward trend, and analysts predict a recovery by 2025. In good agricultural areas, prices rose by 301% in dollars, but there is no land available.
In economic journalism, there is a phrase that is repeated in newsrooms every time the government or an agency releases a survey that raises doubts about its veracity. “There are three kinds of lies: lies, damned lies, and statistics.”.
The phrase was popularized by American writer Mark Twain in the late 19th century, who attributed it to former British Prime Minister Benjamin Disraeli, although there is no certainty that the UK politician actually uttered those words.
Be that as it may, the important thing is that statistics are often viewed with suspicion, as the popular imagination believes that numbers can distort reality.
The flip side of this phenomenon is what is happening today. the rural real estate market in Argentina, which is currently undergoing a period of significant expansion, to the point that prices rose sharply in the most sought-after regions. There is a trend there that is leading many owners to decide not to sell and to hold on to their land in anticipation of better prices.
On Thursday, December 19, the Argentine Chamber of Rural Real Estate (CAIR) released the latest sector activity index for November, which stood at 65.94 points and marked “a very sharp rise in activity.”.
In December 2023, it registered a low of 21.52 points, meaning that in eleven months, the index tripled. “Clearly, exchange rate and political stability have a favorable impact on activity,” argue CAIR, maintaining that demand is solid.
“Inquiries and visits to farms continue to increase,” while investor demand “remains very strong” and there is “less supply” in the market, but above all, “there are no new, good-quality farms for sale.”.
Agricultural engineer Juan José Madero, director of the Farm Division at L.J. Ramos Brokers Inmobiliarios, recalls that in 2023 the market was literally flat, “we didn't even go out on the road,” he says, but “now demand is very high for quality agricultural and livestock farms.”.
For Madero, in some ways this moment resembles the period from 2002 to 2012 in terms of movement, but it has yet to translate into higher land prices. In the first decade of the century, fueled by soybeans at US$1,600 per ton, land values grew by 101% annually in dollars.
Today, this is not the case. In fact, until 2023, sales transactions were few and far between, and the market thrived on agricultural and livestock rentals. “A cattle farm today has an annual yield of 3.51 TP3T in dollars,” says the expert.
Federico Nordheimer, CEO of Nordheimer Campos y Estancias, points out that “this was a good year with very steady activity. The problem is that there is now a shortage of land, as good quality plots are no longer coming onto the market.”.
Despite this, he believes that the sector's growth and dynamism will continue because “the agricultural season defines the year, and so far it is going well.” However, Nordheimer points out that there is a warning sign in the form of international agricultural commodity prices.
Regarding fields for agricultural use, Madero explains that The quality of the fields in the Core Zone (southern Santa Fe and Córdoba, northern and central Buenos Aires province) “is among the three best in the world, along with Illinois in the US Corn Belt and Ukraine in Eastern Europe.”.
Madero admits that “this year there is pressure on the market to recover profitability,” but maintains that there is room to achieve this. While at the end of the pandemic the price floor was in the Core Zone—the benchmark for the agricultural sector—at US$12,500 per hectare, by the end of 2023 investors were validating US$15,000 per hectare, the expert points out.
Today, the situation is more complex. “An investor may offer US$16,000 per hectare, but the owner asks for US$18,000 or US$19,000, so there is tension in the market,” Madero points out.
But in this context, there is room for growth, and plenty of it. Since the end of the 1:1 ratio in 2002, for roughly a decade, the land price ratio between Illinois and Argentina's Core Zone was between 1.5 and 2:1 in favor of the US. But since 2012, the gap has begun to widen and now stands at 3:1.
Madero provides data from L.J. Ramos and the Illinois Society of Professional Farm Managers and Rural Appraisers, according to which 15,000 US$/ha is currently paid in the Core Zone, while in Illinois, good fields are valued at around 44,000 US$/ha.
With the Large Investment Incentive Regime (RIGI) ruled out as a way to boost investment in the sector, which sets a minimum threshold of US$200 million to obtain tax benefits, what gave the market a slight boost was the tax amnesty, which in many cases led investors to say, “I'm getting out of there and going to land.”.
When asked about demand from foreign investors, Federico Nordheimer confirmed that “there are more inquiries from abroad,” but that not many deals are being closed yet.
On the one hand, in the United States and Europe, they are “waiting to see if the 2025 elections consolidate these changes in the country,” in relation to the typical electoral noise. On the other hand, the clampdown and the inability to transfer currency abroad are a problem.
“Foreign investors generally have holdings around the world, but although there are inquiries today, Argentina is not in their portfolio,” Nordheimer explained.
At this point, he recalled that in the last five to eight years, “it was impossible for a small investor (500 to 700 thousand dollars) to invest in Argentina” due to currency controls and other factors, and large institutional funds, which can invest 50 or 100 million dollars, are unable to find large, high-quality farms. “Those who have them are not selling,” Nordheimer points out.
With regard to foreign investors, Juan José Madero points out that “Argentina's portfolio was on the sidelines, but now it's back on their radar,” but he agrees with the issue of the scale of the business.
“Until recently, the typical transaction size was up to $2 million, but after the middle of the year, transactions of up to $5 million began to appear.” This is still a low amount for the arrival of major international players.
