UVA credits: what has to happen with the dollar, inflation and property prices for them to be a good deal

UVA credits: what has to happen with the dollar, inflation and property prices for them to be a good deal
UVA credits: what has to happen with the dollar, inflation and property prices for them to be a good deal

The Mortgage Bank threw the first stone with its launch with UVA credits plus a rate of 8.5% and from there another 10 public and private entities launched their respective offers (Illustrative Image Infobae)

The return of credit has become in recent weeks the new great hope for an economic recovery that is somewhat more promising than what the consumption, industrial activity and also construction figures indicate so far. Particularly, the resurgence of UVA mortgage loans has concentrated great attention since last month. The Mortgage Bank cast the first stone with its launch with UVA credits plus a rate of 8.5% and from there another 10 public and private entities launched their respective offers, with different characteristics and even rates starting from 3% in some cases for specific areas.

With the rebirth of this modality, the question that generated so much “economic trauma” in an important sector of society or, at least, that became very visible returned: the viability of this mechanism in times of rising inflation and, particularly, of salaries that lose against the rise in prices.

The evolution of the dollar compared to inflation is a variable that will eventually determine the weight of the debt in dollars, the currency in which properties are also quoted.

That was the main problem on which the debate mostly stopped in recent days: the convenience or not of going into debt, in the case of gathering sufficient income to access it, depending on the risk involved in the indexation of the capital owed compared to the evolution of those incomes. That is, at the risk of returning to the past. Even though inflation is on the decline today and the prospect is that salaries will recover.

However, that is not the only consideration that needs to be made, at least in the coming months, to make the decision. Also the evolution of the dollar compared to inflation is a variable that will eventually determine the weight of the debt in dollars, the currency in which the properties are also quoted.

Inflation expectations according to the BCRA REM

With that perspective, determining when to take credit can make all the difference between a good deal and a bad deal. This is because, from now on, as indicated by the inflation expectations included in the latest edition of the Central Bank’s Expectations Survey (REM), the price increase between May and the end of the year would accumulate 50 percentage points while the dollar, According to the same survey, it would show an increase of 27% if the average exchange rate of $1,320 predicted by the REM were taken. That is to say, inflation, the variable by which the capital owed is adjusted, would go faster than the rise of the dollar, so the debt, measured in dollars, would be higher.

With that in mind, the first reflex could be to wait for the variables to adjust and, eventually, certify that inflation has gone down and is aligned with the rise of the dollar or even below. But the truth is that, while this happens, the demand for credit from individuals who decide to risk it anyway can impact the price of the properties, which, ultimately, the dollar debt to be taken on would also be greater.

“If the price of the property rises more than 27%, you win. If not, you lost: it would have been better for you to wait to get the credit” (Kowalczuk)

“Assuming that inflation coincides with that expected by REM 25, then until the end of the year it will be 50%, while if the dollar reaches the expected average of $1,311 (we assume that without stocks) the increase will be 18%. Conclusion; you will owe 27% more in dollars,” contributed the CEMA economist, Alejandro Kowalczuk, also a portfolio manager. It is worth clarifying: the survey among market analysts and consultants refers to the official exchange rate but, eventually, without stocks. But, even in the event that these restrictions are maintained by that date, it is expected – or at least it is the current market expectation – that the gap will not jump, so this projection is sustained.

“If the price of the property rises more than 27%, you win. “If you didn’t lose, it would have been better for you to wait to get the credit,” the analyst added. In short, the elements to take into account when defining whether or not it is advisable to go into debt with a UVA credit does not depend exclusively on income or prices. The evolution of the exchange rate and, above all, the reaction of prices in the real estate market will also influence.

 
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