Argentine Land Values Evolution
Land prices have fluctuated over the last 60 years due to the complex interaction of various factors such as international prices, exchange rates, new technology, etc.
Generally speaking, there is a very interesting upward trend in land prices, which beats any investment in hard currency.
With respect to the “LAND PRICES IN ARGENTINA” charts, it should be noted that the marked increase in land prices between 1977 and 1980 (stated in constant dollars of 2017) is slightly distorted by the exchange rate lag during those years. The same applies for the second half of the nineties.
Land that is representative of the units described above has been used to prepare this chart:
- Agricultural land: Pergamino
- Land used to fatten livestock: General Villegas
- Land used for livestock breeding: Rauch
Land type suitable for agriculture (very good quality agricultural land) rose, between 1956 (US$ 557 per hectare) and January 2008 (US$ 10.000 per hectare) at an average rate of 3.5% in cumulative real annual interest rate (independently of the profitability of the establishment). The growth continued until the end of 2011 (with a slight stop in 2008/9 due to the financial crisis). Since 2012 and 2015 we have a period of price uncertainty and few operations, which caused a decline in land prices since 2013. This growth may be broken down into well-differentiated periods:
a – From 1956 to 1965 there was a period of substantial growth owing to the profitability of land.
b – From 1966 to 1975 prices remained relatively unchanged, with a drop in the last years due to various political circumstances.
c – From 1976 to 1984 there was a fresh period of growth owing to the introduction of technology
d – Land prices fell between 1984 and 1992, owing to the marked drops in international commodity prices caused by the high subsidies of the European Common Market and the trade war unleashed by the United States against the ECM.
e – Land prices recovered from 1992 to 1996 owing primarily to the consolidation of democracy, the new economic policy and expected higher international prices as a result of the reduction of European Common Market subsidies, the discontinuation of export withholdings on agricultural production and the improved profitability stemming from production achievements (irrigation, fertilization, foot-and-mouth-disease control).
f – From 1996 to 1999 land prices soared, strengthening the trend of the previous cycle and inaugurating a period of high demand for land. The banking sector contributed by granting long-term loans for equipment and capitalization.
g – Prices dropped between 1999 and 2002 owing to the stagnation of the Argentine economy, lower local and international prices for agricultural products and also as a typical rebound following a long rising period.
h – Land prices recovered between the second half of 2002 and 2004, following the political and economic crisis of late 2001 as a result of the good response of the agricultural industry, both in terms of production and of safeguarding inactive capital.
i – The period from late 2004 to 2011 is one of high land prices owing to various factors which include international commodity fuels, the biofuel boom, and the closer perception of land as a scarce and basic asset in the near future etc. During the year 2008/09 there was a decline due to the financial crisis of 2008.
j- The period between late 2011 and 2015 was of price uncertainty and few operations, which caused a decline in land prices since 2013. This was mainly due to factors beyond the agricultural market and related to economic policies: the so-called “foreign exchange clamp” was introduced, which restricted access to the purchase of US dollars and distorted the operation of Real Estate Markets; increased costs measured in US dollars; the decline in the price of commodities; the tax burden and last but not least the Law No. 26,737 which sets out the protection regime of the national domain over the property, possession or control of rural land in Argentina (Rural Land Regime Law) which limits the amount of land that foreigners can buy.