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Rentals: The 5 phenomena unthinkable a month ago that changed the way contracts are negotiated - La Nacion Propiedades
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Alquileres: los 5 fenómenos impensados hace un mes atrás que cambiaron la forma de negociar los contratos
El mercado de los alquileres se adapta a una nueva realidad que cambió las reglas de juego cuando se derogó la ley sancionada en 2020 que rompió el mercado
www.lanacion.com.ar
March 9, 2024
The rental market adapts to a new reality that changed the rules of the game when the law passed in 2020 that broke the market was repealed
By Candela Contreras
The increase in rental supply allowed tenants to begin migrating to other neighborhoods
The Decree of Necessity and Urgency that repealed the Rental Law, kicked the board in a market with more demand than supply, and until then disproportionate prices. “ The deregulation of rents allowed the sector to regain vitality ,” says Diego Frangella, new president of the Real Estate College of the City of Buenos Aires.
Until its repeal, the regulations established that contracts signed between July 2020 and October 2023 were signed for a period of three years and were updated once a year under the ICL index. While in those closed since last October (with changes in the law) and until December 29, they had the update under the Own Home Index and with a semiannual adjustment. Now, post repeal, this is subject to free agreement between the parties.
The new rules changed the dynamics of the market with phenomena unthinkable a few months ago.
They changed the rules in the real estate market
1) The supply of rental properties increased
Since the end of the pandemic, rental supply in the city has seen a steady decline, reaching an all-time low in February 2023 of 4,700 listings. However, since the repeal of the law, the supply of rental properties in CABA increased by 106% : in January alone the increase was 68%, compared to December 2023, according to the Real Estate College of the city of Buenos Aires.The lack of properties on offer that the market experienced in recent years reflected a reticent attitude on the part of owners who chose to sell - even in a sector with collapsed prices - or kept them empty because the once-a-year update required by law, It left contracts outdated in a context of high inflation. This decision left tenants without options: in some neighborhoods, zero publications were recorded. Now, these landlords are returning to the rental market strongly.
The largest number of used apartments offered in pesos, according to the ads in Zonaprop , are concentrated in the two environments, with around 4,200 publications; then the three environments follow (2600); in third place the studio apartments (2400); and the largest apartments with four and five rooms or more are the units with the lowest availability, with 1,200 and 500 respectively.
Evolution of the supply of apartments for rent in CABA by number of rooms, from March 2013 to March 2024
2) Rental prices stopped increasing above inflation
In February, the average rental value in the city of Buenos Aires for a published property registered a month-on-month increase of 2.9% , representing the smallest increase since October 2021 . In contrast, in January, which had inflation of 20.6%, and December, with inflation data that reached 25.5%, they had been increasing by 21% and 18.6%, respectively.This suggests that going forward, rents will continue to rise below the rate of inflation. After the DNU, “the supply of rental properties increased considerably. This generated more competition in the offering portfolio, allowing the tenant to choose and negotiate equitable conditions,” explains Diego Migliorisi, managing partner of Migliorisi Propiedades.
In concrete numbers, according to the Buenos Aires Real Estate College that brings together real estate companies and which recently launched the CABAPROP platform for searching properties published by registered real estate companies, the average rent for a studio apartment was between $200,000 and $300,000 in February , while a two environments ranges from $260,000 to $400,000 and one of three from $350,000 to $500,000 per month.
The increases recorded by properties with an ongoing contract under the conditions of the repealed law deserve a separate analysis. In this case, the values adjusted with ICL registered an interannual increase of 147.11% in January 2024, below the CPI, which was 254.25% in January 2024 (292% expected in February 2024).
Rents could begin to rise in price below the inflation rate
3) The most expensive neighborhoods also reduce their price
“Before the supply increased, people rented wherever they could find. Today they migrate to other neighborhoods because there is supply in all areas, which generates greater competitiveness,” says Frangella.On the other hand, the neighborhoods that defended the most expensive prices are lowering them because with greater supply, the tenant has the option of migrating to similar nearby neighborhoods . Frangella shares a clear example: an apartment in Recoleta with an initial rental price of $550,000 ended up closing at $400,000. “The strong competitiveness of the market generates the possibility of negotiation between the parties,” the specialist explains.
Another phenomenon of these times is that there is no longer desperation on the part of tenants due to the lack of supply. “Today, if the conditions they are offered do not suit them, they can look for another alternative,” says Francisco Altgelt, president of the real estate company of the same name.
4) New contracts are closed for two years, in pesos with quarterly or quarterly adjustments
The new contracts are agreed for two years, in pesos and with quarterly or quarterly adjustment by CPI , "although there are still several agreements that are adjusted by ICL," they explain at the College.Real estate brokers agree that the owner's objective with the update is not to lose to inflation . “Today he prefers pesos with quarterly adjustment by CPI and the tenant is accepting it without conflict between the parties,” adds Daniel Salaya Romera, owner of the homonymous real estate agency.
New rental contracts are agreed upon by agreement between the parties.
5) Contracts are closed with advance payments and in dollars
Something that was previously prohibited and now becomes valid is the possibility of the owner asking the tenant or even the tenant to offer advance payments. “Before it was only possible if the tenant offered it willingly, for example to negotiate a discount, but the owner could not demand it and now he can,” summarizes Mariano Esper, a lawyer specialized in the real estate market.This point that could seem like a disadvantage became a way out for many tenants. “Some began to offer advance payment, thus obtaining a discount, and the owner is consulted as to whether he accepts it or not,” says Soledad Balayan, owner of Maure Inmobiliaria .
Salaya Romera explains that the advance payment is made in dollars, and one of the ways to calculate it is according to the annual profitability of the value of the sale of the property, which today is around 4%, although with a reduction in the final price.
This modality represents a great advantage for a tenant who has all the money together and can thus cancel the value of the contract for certain months, a year or even the entire agreement, in dollars and without adjusting in pesos for inflation . The foreign currency today remains below the increase in inflation, which is why “the profitability values improve, since inflation in pesos advances and the dollars were stuck,” says Salaya Romera.
But the owner also benefits in this way, because, “although there may be an arrangement that represents a discount on the rent, he receives the money all together and in dollars,” adds Enrique Abatti , president of the Chamber of Property Owners of Argentina. While for the tenant it also has its advantages: he has predictability and “is not affected by inflation,” he concludes.
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