In Argentina, real estate agents have one key piece of advice for potential home buyers: bring cash, big bags of it. Pro-free-market President Javier Milei is trying to fix the South American country’s economy after years of crisis and high inflation. Part of his solution is to encourage banks to revive the moribund local mortgage market. But buyers and real estate agents say that won’t be easy. Argentina’s mortgage market is tiny, less than 1% of the country’s GDP versus around 30% in Chile, 10-15% in Brazil and Mexico, and 15% in the U.S. Regular cycles of economic uncertainty mean borrowers – and lenders – fear the risk of long-term credit. “People buying properties in Argentina come with cash, in a backpack or a bag,” said Juan Verzero, owner of Buenos Aires broker Succeso Propiedades. Typically, he said, sellers and buyers get together in locations such as shops or offices to sign the contract, exchange keys, and hand over cash, usually in dollars to defuse inflation and devaluation fears – counting it out on the spot. “Now and in recent years everything we sell is done without a mortgage,” he said. “People come with cash and leave with cash.” Paying in this way locks most people out of the market. “Only those with a very high income, around the top 9% to 10%, are able to buy a house. The rest have to rent,” said Cynthia Goytia, director of the Urban Policy and Housing Research Center at the University Torcuato Di Tella. In an attempt to tap into middle-class dreams of home ownership, there have been new mortgage launches this year. Local banks Banco Nacion and Banco Galicia pledged billions of dollars of mortgage loans, adding 4.5%-8% interest on top of an official inflation-linked index. Fabian Kon, General Manager of Banco Galicia, told Reuters the bank had received tens of thousands of initial queries, but said ultimately most chose not to take on the financial risk. “The problem is inflation, not the mortgages. If you have 200% inflation, people get scared,” he said. “(The market) could make a comeback. What does it depend on? That there really will be no inflation in Argentina for many years, that we won’t again have an explosive situation where someone who has a loan is scared of what could happen to them.” In May, only 141 houses were sold with mortgages in capital Buenos Aires, edging up from 134 a year earlier, the college of notaries said in a report. In the first five months of the year it was 509, down from 515 in the same period in 2023. A Reuters reporter went to nearly a dozen real estate firms in June and July. None said it had assisted a local buyer in acquiring a home with a new loan this year. ‘I DON’T TRUST BANKS’: Argentina’s economic track record doesn’t help. The country has registered nine sovereign debt defaults, the most recent in 2020, which has left it largely cut off from foreign capital markets. In 2001, the government froze bank withdrawals after a then world-record debt default, leaving many to watch the value of their savings evaporate as the peso plunged and sparking sometimes violent protests. In addition, inflation is among the highest in the world. Although it has cooled in recent months, in June it was still 4.6%, over 270% annually. Small wonder, perhaps, that many Argentines prefer to keep dollars in safes or stuffed under the mattress. “I don’t trust banks,” said 31-year-old Feli Fernandez, a fintech sector worker who wants to buy a house but sees mortgages as too risky. Although she was then a child, she recalls the 2001 protests. “I remember that day clearly… My older brother was trying to explain why people were setting fires in the streets,” she said. Limited access to credit has forced people to get creative. Sandra Kattan, a 61-year-old teacher, managed to get on the property ladder with a credit card and some dollar savings. With her husband, they purchased land in Moreno, a Buenos Aires neighborhood, paying around $30,000 upfront in dollar savings, raising more money by selling their car and truck. In 2017, they used a credit card to pay for materials to start building and paid workers with Kattan’s teaching salary.