BuySellBA
Administrator
Javier Milei vs. UVA credits
November 24, 2023
Javier Milei vs. UVA credits: The debtors' advantage that is not talked about and the new stocks
The president-elect called on those who took a UVA loan to “pay the consequences”; the debtor advantage that no one talks aboutBy Mercedes Soriano
Javier Milei spoke about UVA credit debtors and said that "we must pay the consequences"
President-elect Javier Milei did not take even a week after winning the election to speak out regarding the housing situation. After saying that he intended to repeal the rental law , he rejected the possibility that the new Government would help UVA credit debtors (Unidad de Valor Acquisitivo). These were created in March 2016 during the presidency of Mauricio Macri and today almost 100,000 people pay for their home with this credit.
“If I decide to have a reckless life, I have to pay the consequences. They would have taken another type of credit,” he said on the program A Dos Voces , broadcast by TN , in the same interview in which he stated that he will maintain the profit reduction and the VAT refund . In that sense, he continued: “You made a decision in terms of income-risk, and now since the result is adverse, do you want someone else to pay for it? That is incorrect. If you made a wrong decision, you have to take responsibility for the decision.”
How much did UVA increase?
In 2016 it was established that the value of the UVA would be equivalent to one thousandth of the average construction cost of a witness square meter. At that time it was $14,053, so UVA's initial value was $14,053. At the beginning of this year the price was $185.32 and today the value rose to $412.84 , a fact that prompted many debtors to ask the Government for help.
This year, the Chamber of Deputies gave half-sanction to a project to mitigate debtors' payments , but the senators signed an opinion with changes to the original project and it was never discussed in the chamber. In short, the opinion proposes that the credits be indexed to salaries and no longer to the UVA, put a cap on the interest rate, that the fee paid by debtors cannot exceed 30% of their current income, suspend evictions for one year and that the Central Bank is the enforcement authority.
The B side of the credits
However, representatives of the real estate sector pointed out that the results are not “adverse” when contextualized in time and space. “ There are two big indicators to look at here: quota and debt ,” begins economist Federico González Rouco.Regarding the fee, he observes that it increased approximately in line with inflation, below rents and above salaries. “ Today, a UVA mortgagee of a two-room apartment pays $174,500 in rent and would pay $255,700 in rent. They would not be reckless, they are privileged ,” exemplifies and opines Daniel Bryn, mind behind the Invertire Real Estate Monitor. That is to say that if they had not taken out the credit and had to rent, today they would have to pay a higher fee.
María Emilia, a resident of the Florida neighborhood in Vicente López, experiences this firsthand. “Today I pay $250,000 per month while if I had to rent my house today I would pay at least double that ,” she says in dialogue with LA NACION.
Today a UVA mortgagee of a two-room apartment pays $174,500 in rent and would pay $255,700 in rent.I will invest.
The economist then emphasizes the other side of credits: debt . “Throughout the credit, each installment paid reduces the debt but does not modify the value of the property. That means that wealth increases. Generally, mortgage credit is seen as a way to save or accumulate capital for the same reason. So, if the installments are paid and the debt is reduced, less and less is owed and the debtor's assets increase,” he summarizes.
However, he proceeds to explain the particularity of UVA in Argentina: it is an asset in dollars and a liability in indexed pesos . He gives as an example a person who took out a loan for 75% of the value of the home. “But that 75% is calculated at the time they give you the credit. If, per month, the value of the property increases in relation to the debt, that percentage falls”, he details.
"The one that started owing 75% of the value of the home in 2017, due to the devaluation and increase in the value of the property, owed 25% in mid-2020. The debt-home ratio had fallen by two thirds in just three years."
Federico González Rouco, economist specialized in housing
The debt in relation to the value of the home today is 34%
He maintains that since there were no credits and the macroeconomic framework was plunged into a crisis, the value of the property depreciated, the debt increased and reached more than 40%, although today it is close to 35%. That is, in a loan that has many years left, the debt already represents a very small portion of the value of the home . All of this is the debtor's capital gain. That is, if you wanted to sell and cancel the loan, you are left with capital that you did not have before.
In short, “the UVA debtor who started out owing 75%, today owes less than half, close to 35%.” A little of the drop is due to having paid, but in six years that does not represent that much. The majority is due to the devaluation and variation of the square meter,” he concludes.
The new restrictions for debtors
On November 23, the Central Bank sent a statement stating that they were suspending the sale of dollars to purchase real estate with mortgage credit. Until now, the regulations of the same institution allowed those who had taken out a mortgage loan to have access to the exchange market to buy foreign currency and simultaneously allocate it to the purchase of real estate in the country for single, family and permanent occupancy housing.
They suspend the sale of dollars to purchase real estate with mortgage credit
This was allowed under the following conditions:
- As long as they are funds from mortgage loans granted by local financial entities and within the framework of the Procrear Program.
- If there are co-debtors, access will be registered individually in the name of each human person for up to the prorated amount that corresponds to them.
- Considering the total number of co-signers, access will be made for up to the amount of the loan or the equivalent of US$100,000, whichever amount is less.
- Each co-debtor signs a sworn declaration in which he or she agrees not to access the exchange market for operations corresponding to the formation of external assets, remittance of family help and operations with derivatives, within the limits that are applicable, for the time that is necessary until the amount acquired under this regime is completed.
- The total funds intended for the purchase, both in local currency and foreign currency, are deposited or transferred simultaneously to an account in a financial institution in the name of the seller of the property.
