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Javier Milei would allow rental contracts in dollars: How much an apartment would cost - La Nacion Propiedades
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Javier Milei permitiría los contratos de alquiler en dólares: cuánto costaría un departamento
Los rumores de un decreto inminente que podría permitir legalmente la dolarización de los contratos de alquiler prende las alarmas
www.lanacion.com.ar
December 15, 2023
Rumors of an imminent decree that could legally allow the dollarization of rental contracts set off alarms
By Mercedes Soriano
In the last few hours, it emerged that Javier Milei is preparing a Decree of Necessity and Urgency (DNU) to allow the dollarization of rents
Dollarized rents. As controversial as it sounds to tenants, it seems sensible to landlords. Days after knowing that the interannual inflation in November was 160.9%, the rumor emerged that a Decree of Necessity and Urgency (DNU) that the new president's cabinet is preparing is about to fall Javier Milei to deregulate the economy.
Yesterday the rumors were of possible repeal of the rental law, today they are of dollarization of prices.
Rents are a constant concern for tenants and landlords
The rentals are part of this plan, and it emerged that this decree would seek allow housing rentals to be published and signed in foreign currency and eventually would prohibit judges from converting the price to pesos.
Something about this initiative was revealed when the presidential spokesperson, Manuel Adorni, expressed that “The rental law has done a lot of damage to the real estate market, and everything that we understand that hurts people will be corrected and corrected”, and that it was possible that “there is news” in this regard.
What is the value of a rental in dollars
Automatically, the question tenants ask is how much rent costs in dollars today. It is difficult to know exactly, since the modification that was sanctioned to the rule this October on the rental law enacted in 2020 only allows contracts to be publish in legal tender: the peso.
A decree of necessity and urgency would allow rental contracts to be made in dollars
This is how a few days after this decision was made official, many rentals that were offered in dollars eliminated the reference value and were supported by option B: the phrase “check price”. That is to say, when someone who wants to rent inquires about a property under this label, it is highly likely that the owner will ask for a value in currency.
“Or what is even worse, prices were pesified to the value of blue and there are publications of one million pesos, two million, which ends up inflating the market even more”, analyzes Germán Gómez Picasso, founder of Reporte Inmobiliario.
At what value are rents published in dollars?
One way to analyze how much rentals would cost if they were published in dollars would be to take as a reference the temporary rental publications that are legally advertised in currency today. “They should not be more expensive than those because these include equipment, services and are short-term,” says Soledad Balayan, owner of Maure Inmobiliaria and sector analyst.For example, a two-bedroom apartment in Recoleta is listed for US$350 per month and a newer one-bedroom apartment in the same area is listed for US$375. To mention other cases, in Palermo, a 22 m² studio apartment is published at US$400 per month, as is a new 38 m² one in Almagro. All for temporary rental and equipped.
One way to analyze how much rentals would cost if they were published in dollars would be to take as a reference the temporary rental publications that are legally published in currency today.
According to a Zonaprop report carried out after the PASO and recently disseminated, the neighborhoods with the greatest rental offer in dollars were Puerto Madero ( 98%), Recoleta (83%) and Palermo (81%). Of these, the second and third are the most consulted neighborhoods for renting. However, this modality not only extended through the northern corridor, but the trend was replicated in other neighborhoods -although to a lesser extent- such as Monserrat (40%), Villa Crespo (41%) and Microcentro (41%).
The exercise can also be done the other way around, that is, how much the apartments that are currently offered in pesos would cost in dollars. For example, a studio apartment in Palermo that is published at US$400,000, converted to pesos according to the official dollar today, Friday, December 15 ($839.48), would cost US$476.50 and according to the blue it would cost US$412.37, per month.
An incomplete formula
As for the possible measure that will allow the dollarization of contracts, for Balayan it is not enough to rebuild the market but it is necessary to know what happens with the rest of the terms, such as the term of the contract.Beyond the contracts, it is encouraged to take a step further and analyze how this measure would be combined with the rest of the economic panorama. He points out that with a restriction that allows - a minority of Argentines - to buy up to US $ 200 per month and rents are above that, “demand would decline”
A fundamental factor is that salaries in the country are not dollarized and there are few sectors that accompany or exceed inflation. “During hyperinflation there was no conflict because rents were indexed but so were salaries. In this case the salaries are not adjusted so they will not be able to pay them. The owner can ask for what he wants but sometimes it is an expression of desire and since it is outside the tenant's reality it is not achieved”, he adds.
In reality, the specialist joins the chorus of real estate agencies and other experts in the field who for months have been asking to repeal the law and return to the previous regime under the current Civil and Commercial Code. A few days after being elected as president, Javier Milei himself expressed his willingness to repeal the norm .
Market players think that repealing the law would decompress demand
Under those rules, the dollarization of contracts was a legal gray matter. Some lawyers defended tooth and nail that rental contracts must be made in pesos, and managed to get the judge to pesify the contract in the official dollar at trial. On the other hand, other lawyers and real estate agencies promoted rentals in dollars, with the risk that the hammer in Court would eventually disfavor the owner.
Today, the tenant whose rental value is frozen is the one in the best place, says Balayan. Tenants who are looking for a place to live are those who are waiting for the repeal, since this could decompress demand a little and "They would find a little more availability in logical terms," he says.
Accustomed to the crisis?
Since Argentines earn their salary in pesos, the natural reaction is for potential tenants to look for rentals in local currency. However, perhaps the person who is looking to rent today has become “accustomed” to the crisis and gives in to the notices and contracts in dollars, if their wallet allows it.At least that's what the numbers would indicate: “In the third quarter of 2023, rental notices in pesos receive 7.4 times more queries than notices in dollars, below the 2018-2020 period when ads in pesos received 13.6 times more contacts than ads in dollars,” details a recent Zonaprop report.
According to Zonaprop, ads in pesos received less interaction in relation to those in dollars compared to the 2018-2020 period.
For Soledad Balayan, the ulterior motives are several. “Either those who are searching have resigned, or they are not searching on that portal or they are looking to rent from acquaintances,” she says. Likewise, the exorbitant prices in pesos of those that were dollarized can also scare away the tenant and push them to consider the market in dollars.
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