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Effective from January: the annual rent adjustment index fell below 200% for the first time - Infobae
Source:
www.infobae.com
December 28, 2024
For the contracts involved, the adjustment will be 190%. The variation fell from a peak of 265% last July and will continue to do so. It mainly affects contracts under the 2020 law. Adjustments now predominate every 3 or 4 months.
By Jose Luis Cieri
From January 2025, the contract update will begin to reflect a more moderate year-on-year adjustment, although current figures still show a one-year lag with historic inflationary levels (Illustrative Image Infobae)
For the first time since the historic peak recorded last July, when adjustments reached 265% year-on-year, the Rental Contract Index (ICL) was below 200% for those who must annually update their rental contract in Argentina.
The index calculated by the Central Bank of the Argentine Republic shows a value of 190.69% for the beginning of January 2025. Those who adjust their lease agreement with respect to January 2024, and pay $100,000 per month until today, will pay $290,900 until December 2025.
While values remain high for renters, the figure reflects a sharp slowdown compared to mid-year levels.
This reduction in the ICL, which has already been 75% since last July, exclusively impacts current contracts that continue to be adjusted under the previous regulations.
Alejandro Braña , a real estate expert and member of the Buenos Aires Real Estate Association, highlighted that the ICL “has seen five consecutive months of year-on-year declines, a situation that has not been seen since the law was passed in 2020. Since September, the index has registered progressive declines: it started with a 5% monthly decline, fell 10% in November and reached 18.47% in December.”
The repeal of the Rental Law in December 2023 and the implementation of DNU 70/23 during Javier Milei 's government also influenced this fall in the ICL. The decree sought to deregulate the real estate market, allowed for more flexible adjustments and generated a change in the expectations of tenants and owners.
Braña added: “The uncertainty caused by the regulatory changes led many tenants to opt for other adjustment mechanisms, such as the Consumer Price Index (CPI).”
The quarterly, four-monthly or half-yearly updates based on the LCI are far superior to the figures reported by the inflation index, making the CPI more convenient," he added.
If inflation remains below 3% per month, its downward impact on the ICL adjustments, with the Rental Law repealed, will be increasingly greater (Illustrative Image Infobae)
The decline in the ICL is linked to the slower rate of inflation and the lag in wage increases recorded during the administration of Sergio Massa (at the head of the national Ministry of Economy) and the beginning of the administration of Javier Milei .
Federico González Rouco , an economist at the Empiria consultancy firm specialising in the real estate market, explained that “ICL values will continue to decline as inflation data and wage increases from the previous period lose their impact.”
He also stressed that "what we are currently seeing is a paradox between very high interannual adjustments and lower monthly values."
The drop in indices reflects a change in inflationary dynamics and its direct impact on rental contracts.
High inflation in 2023 put upward pressure on year-on-year adjustments, which are now beginning to moderate thanks to a slowdown in monthly increases.
When measuring the quarterly ICL, the adjustment in new contracts reaches 13.43% for those who signed in October and must update the price in January. In this case, if the initial amount was $300,000, it will be $340,290 by April.
“However, if the adjustment is quarterly and the contract was signed in September, the increase will be 19.34%. This means that, on an initial rent of $300,000, $358,020 will be paid from January to May,” explained Braña.
Recently signed contracts show minor increases due to the decline in inflationary inertia (Illustrative Image Infobae)
González Rouco explained that the performance of the indices will depend largely on the evolution of inflation in the coming months. “If the current deceleration trend continues, the adjustments will continue to decline and will generate a more predictable scenario for owners and tenants,” he said.
Although the adjustments hit tenants' pockets, the progressive reduction indicates a change in the trend that could be consolidated during 2025. The impact of the economic policies implemented in recent months will be key to defining the market's trajectory.
In this context, agreements between the parties take on a central role. The repeal of the previous regulations and the implementation of the DNU opened the door to more flexible agreements between owners and tenants.
"These negotiations allow for conditions to be adjusted to the needs of both parties, facilitating a more balanced market with greater predictability for tenants, while owners adapt to a scenario of more moderate adjustments," concluded the sector.
www.buysellba.com
Source:
Regirá desde enero: el índice de ajuste anual de alquileres cayó por primera vez debajo del 200%
Para los contratos involucrados, el ajuste será del 190%. La variación cayó desde un pico de 265% en julio pasado y lo seguirá haciendo. Afecta mayormente a contratos bajo la ley de 2020. Ahora predominan los ajustes cada 3 o 4 meses
www.infobae.com
December 28, 2024
For the contracts involved, the adjustment will be 190%. The variation fell from a peak of 265% last July and will continue to do so. It mainly affects contracts under the 2020 law. Adjustments now predominate every 3 or 4 months.
By Jose Luis Cieri
From January 2025, the contract update will begin to reflect a more moderate year-on-year adjustment, although current figures still show a one-year lag with historic inflationary levels (Illustrative Image Infobae)
For the first time since the historic peak recorded last July, when adjustments reached 265% year-on-year, the Rental Contract Index (ICL) was below 200% for those who must annually update their rental contract in Argentina.
The index calculated by the Central Bank of the Argentine Republic shows a value of 190.69% for the beginning of January 2025. Those who adjust their lease agreement with respect to January 2024, and pay $100,000 per month until today, will pay $290,900 until December 2025.
While values remain high for renters, the figure reflects a sharp slowdown compared to mid-year levels.
This reduction in the ICL, which has already been 75% since last July, exclusively impacts current contracts that continue to be adjusted under the previous regulations.
Alejandro Braña , a real estate expert and member of the Buenos Aires Real Estate Association, highlighted that the ICL “has seen five consecutive months of year-on-year declines, a situation that has not been seen since the law was passed in 2020. Since September, the index has registered progressive declines: it started with a 5% monthly decline, fell 10% in November and reached 18.47% in December.”
The repeal of the Rental Law in December 2023 and the implementation of DNU 70/23 during Javier Milei 's government also influenced this fall in the ICL. The decree sought to deregulate the real estate market, allowed for more flexible adjustments and generated a change in the expectations of tenants and owners.
Braña added: “The uncertainty caused by the regulatory changes led many tenants to opt for other adjustment mechanisms, such as the Consumer Price Index (CPI).”
The quarterly, four-monthly or half-yearly updates based on the LCI are far superior to the figures reported by the inflation index, making the CPI more convenient," he added.
Inflation and wages: key factors of adjustment
The real estate market acknowledged that the record value in the middle of the year reflected the impact of accumulated inflation and the lag in wages, which acted as a driver of the adjustments.
If inflation remains below 3% per month, its downward impact on the ICL adjustments, with the Rental Law repealed, will be increasingly greater (Illustrative Image Infobae)
The decline in the ICL is linked to the slower rate of inflation and the lag in wage increases recorded during the administration of Sergio Massa (at the head of the national Ministry of Economy) and the beginning of the administration of Javier Milei .
Federico González Rouco , an economist at the Empiria consultancy firm specialising in the real estate market, explained that “ICL values will continue to decline as inflation data and wage increases from the previous period lose their impact.”
He also stressed that "what we are currently seeing is a paradox between very high interannual adjustments and lower monthly values."
The drop in indices reflects a change in inflationary dynamics and its direct impact on rental contracts.
High inflation in 2023 put upward pressure on year-on-year adjustments, which are now beginning to moderate thanks to a slowdown in monthly increases.
When measuring the quarterly ICL, the adjustment in new contracts reaches 13.43% for those who signed in October and must update the price in January. In this case, if the initial amount was $300,000, it will be $340,290 by April.
“However, if the adjustment is quarterly and the contract was signed in September, the increase will be 19.34%. This means that, on an initial rent of $300,000, $358,020 will be paid from January to May,” explained Braña.
Impact on tenants and future prospects
The slowdown in the ICL represents a partial relief for tenants, who until mid-year faced year-on-year adjustments of more than 200 percent.
Recently signed contracts show minor increases due to the decline in inflationary inertia (Illustrative Image Infobae)
González Rouco explained that the performance of the indices will depend largely on the evolution of inflation in the coming months. “If the current deceleration trend continues, the adjustments will continue to decline and will generate a more predictable scenario for owners and tenants,” he said.
A change in the trend
The reduction in the ICL marks the beginning of a new stage for rental contracts in force under the repealed law.Although the adjustments hit tenants' pockets, the progressive reduction indicates a change in the trend that could be consolidated during 2025. The impact of the economic policies implemented in recent months will be key to defining the market's trajectory.
In this context, agreements between the parties take on a central role. The repeal of the previous regulations and the implementation of the DNU opened the door to more flexible agreements between owners and tenants.
"These negotiations allow for conditions to be adjusted to the needs of both parties, facilitating a more balanced market with greater predictability for tenants, while owners adapt to a scenario of more moderate adjustments," concluded the sector.
www.buysellba.com
