BuySellBA
Administrator
Rentals: the unexpected decision tenants make that worries apartment owners - La Nacion Propiedades
Source:
www.lanacion.com.ar
October 22, 2024
In a context in which three types of contract coexist at the same time, tenants are looking for new agreements with landlords
By Candela Contreras
Tenants are choosing to terminate contracts that were signed under the rental law in order to move and thus start new contracts with better prices and outside the law.Antonio Guillem - Shutterstock
In the midst of a real estate market that has seen notable changes in the last year since the repeal of the rental law, at the end of last year, rental contracts began to be negotiated freely by the parties, with adjustments every three or four months , in pesos and tied to inflation .
Despite these changes, there are still contracts registered under the repealed law because they were signed before its repeal : that is, three-year agreements with annual adjustments by the Rental Contract Index (ICL); and also others closed in mid-October 2023, with increases every six months with adjustments according to the Casa Propia index when the law was modified.
In this context, brokers acknowledge that they are beginning to see cases of tenants who are terminating their contracts under the old rule in order to get out of it once and for all and go in search of new agreements . One of the main reasons is the gap that was generated between the adjustment of the ICL and the rental prices of new contracts , which are being negotiated at lower initial values, but with more frequent adjustments.
In concrete numbers, rental listing prices in September 2024 increased by 124.7% compared to the same month last year, according to data provided by Zonaprop . Despite this increase, contracts adjusted under the ICL , which measures inflation and wages (with a two-month delay) rose by 243.16% annually . This increase is considerably higher than the Consumer Price Index (CPI) , which grew by 209% in the same period. The latter is the reference taken today to update rental values. In other words, it ends up being “cheaper” to start a new contract than to maintain the one that is adjusted with the ICL .
“The new dynamics of the market after the repeal of the law means that cheaper options can now be found on the market,” says Soledad Balayán, owner of Maure Inmobiliaria.
Rental listing prices in September 2024 increased by 124.7% Image Point Fr - Shutterstock
To better understand the impact of these figures on tenants' pockets, the following example is left: in September 2023 , the average rent for a one-bedroom apartment in the Autonomous City of Buenos Aires was $225,800 . When adjusted by the ICL , the rent reached $774,846 in September 2024, while with the CPI , the value would be $697,722 . However, the current average market price is $507,400 , 34.52% less than what tenants with old contracts would pay .
“With inflation on the decline, the ICL remains above current inflation , which creates a significant gap. This leads many tenants to evaluate whether it is worth it to terminate and sign a new contract, even assuming the economic and emotional costs of moving. But it may be worth it ,” explains Federico González Rouco, an economist specializing in housing at the consulting firm Empiria.
But another factor that drives tenants to think about terminating their contract is the increase in the number of rental offers , which has reached almost 200% since the beginning of the year . This has allowed the initial prices of new contracts to stabilise or even remain the same from one month to the next.
Despite the increase in supply, the market appears to be approaching equilibrium . Listing prices for rentals rose by 4.4% monthly in September, an increase above inflation: 3.5% in the same month, according to data published by INDEC.
Real estate market specialists agree that the market is looking for a balance point Daenin - Shutterstock
“The increase in rental prices is related to the evolution of inflation . Although the increase in September is above the inflation calculated by the REM (Market Expectations Survey), the price of new contracts is currently running at the same pace as the CPI (Consumer Price Index) data,” says Leandro Molina, director of the real estate portal ZonaProp.
“Furthermore, although there is a significant demand for rentals, the number of properties available is not sufficient to meet that demand. This creates pressure on prices, causing them to rise,” he adds.
But it is worth clarifying that, despite this increase above the monthly inflation, in the annual analysis, the increase is below the data collected by INDEC: in 2024 rental prices increased by 52% , half of the inflation recorded in the same period was 102%, which implies a real drop in prices of 50% .
“ The rental market is still looking for a balance and so far this year the price of listings has fallen in real terms,” Balayan shares.
Another alternative to moving to get a new contract or to stay with the current one until it ends, is to negotiate with the owner an agreement to terminate the contract under the rental law and start a new one to give continuity to the rental and the relationship but with a price that is the current market price with quarterly or four-monthly updates. It is very possible that the market price now is lower than what is being paid and the owner refuses to lower the price but if he knows that the tenant is capable of leaving, the apartment will be empty for a few months and the new tenant will have to be offered a market price. In this situation, it is very likely that he will prefer to negotiate with whoever is already paying the rent and occupying his apartment.
This situation has created a dynamic in which, when reviewing contracts that have already had two or three price increases, tenants may be paying more than for a similar apartment in the current market . “If the owner does not renegotiate the contract and does not adapt it to today's prices, tenants may decide to terminate that agreement and rent a new apartment now that there is more supply,” concluded Moretti.
“In these cases, we are seeing owners decide to renegotiate prices if they do not want to lose a good tenant ,” adds Balayan.
In short, price volatility and continuous changes in regulations are reconfiguring the real estate market , and for many tenants, moving seems to become the most convenient option in this uncertain scenario .
www.buysellba.com
Source:
Alquileres: la decisión impensada que toman los inquilinos y preocupa a los dueños de los departamentos
En un contexto en el cual conviven tres modelos de contrato a la vez, los inquilinos están buscando nuevos acuerdos con los propietarios
www.lanacion.com.ar
October 22, 2024
In a context in which three types of contract coexist at the same time, tenants are looking for new agreements with landlords
By Candela Contreras
Tenants are choosing to terminate contracts that were signed under the rental law in order to move and thus start new contracts with better prices and outside the law.Antonio Guillem - Shutterstock
In the midst of a real estate market that has seen notable changes in the last year since the repeal of the rental law, at the end of last year, rental contracts began to be negotiated freely by the parties, with adjustments every three or four months , in pesos and tied to inflation .
Despite these changes, there are still contracts registered under the repealed law because they were signed before its repeal : that is, three-year agreements with annual adjustments by the Rental Contract Index (ICL); and also others closed in mid-October 2023, with increases every six months with adjustments according to the Casa Propia index when the law was modified.
In this context, brokers acknowledge that they are beginning to see cases of tenants who are terminating their contracts under the old rule in order to get out of it once and for all and go in search of new agreements . One of the main reasons is the gap that was generated between the adjustment of the ICL and the rental prices of new contracts , which are being negotiated at lower initial values, but with more frequent adjustments.
In concrete numbers, rental listing prices in September 2024 increased by 124.7% compared to the same month last year, according to data provided by Zonaprop . Despite this increase, contracts adjusted under the ICL , which measures inflation and wages (with a two-month delay) rose by 243.16% annually . This increase is considerably higher than the Consumer Price Index (CPI) , which grew by 209% in the same period. The latter is the reference taken today to update rental values. In other words, it ends up being “cheaper” to start a new contract than to maintain the one that is adjusted with the ICL .
“The new dynamics of the market after the repeal of the law means that cheaper options can now be found on the market,” says Soledad Balayán, owner of Maure Inmobiliaria.
Rental listing prices in September 2024 increased by 124.7% Image Point Fr - Shutterstock
To better understand the impact of these figures on tenants' pockets, the following example is left: in September 2023 , the average rent for a one-bedroom apartment in the Autonomous City of Buenos Aires was $225,800 . When adjusted by the ICL , the rent reached $774,846 in September 2024, while with the CPI , the value would be $697,722 . However, the current average market price is $507,400 , 34.52% less than what tenants with old contracts would pay .
Terminate or continue?
This disparity in prices has led many tenants to begin to consider terminating their contracts. If they choose to move, they can access lower initial prices , albeit with more frequent adjustments , every three or four months. Conversely, if they decide to remain in their original contracts under the old rental law , they will pay a higher price , but it will be frozen for a year .“With inflation on the decline, the ICL remains above current inflation , which creates a significant gap. This leads many tenants to evaluate whether it is worth it to terminate and sign a new contract, even assuming the economic and emotional costs of moving. But it may be worth it ,” explains Federico González Rouco, an economist specializing in housing at the consulting firm Empiria.
But another factor that drives tenants to think about terminating their contract is the increase in the number of rental offers , which has reached almost 200% since the beginning of the year . This has allowed the initial prices of new contracts to stabilise or even remain the same from one month to the next.
Despite the increase in supply, the market appears to be approaching equilibrium . Listing prices for rentals rose by 4.4% monthly in September, an increase above inflation: 3.5% in the same month, according to data published by INDEC.
Real estate market specialists agree that the market is looking for a balance point Daenin - Shutterstock
“The increase in rental prices is related to the evolution of inflation . Although the increase in September is above the inflation calculated by the REM (Market Expectations Survey), the price of new contracts is currently running at the same pace as the CPI (Consumer Price Index) data,” says Leandro Molina, director of the real estate portal ZonaProp.
“Furthermore, although there is a significant demand for rentals, the number of properties available is not sufficient to meet that demand. This creates pressure on prices, causing them to rise,” he adds.
But it is worth clarifying that, despite this increase above the monthly inflation, in the annual analysis, the increase is below the data collected by INDEC: in 2024 rental prices increased by 52% , half of the inflation recorded in the same period was 102%, which implies a real drop in prices of 50% .
“ The rental market is still looking for a balance and so far this year the price of listings has fallen in real terms,” Balayan shares.
Another alternative to moving to get a new contract or to stay with the current one until it ends, is to negotiate with the owner an agreement to terminate the contract under the rental law and start a new one to give continuity to the rental and the relationship but with a price that is the current market price with quarterly or four-monthly updates. It is very possible that the market price now is lower than what is being paid and the owner refuses to lower the price but if he knows that the tenant is capable of leaving, the apartment will be empty for a few months and the new tenant will have to be offered a market price. In this situation, it is very likely that he will prefer to negotiate with whoever is already paying the rent and occupying his apartment.
What happens to new contracts signed after the repeal of the rental law?
Many of the contracts signed in early 2024 started with high market prices due to the low supply of properties at the time as changes within the rental market had not yet fully settled. “Many contracts that were signed in January and February started with a much higher price because they were the first agreements made after the repeal of the law , but there was also not as much supply available as there is now. Then, as there was more supply, prices in the following months did not increase at the rate of inflation,” said Alejandro Moretti, member of the Colegio Inmobiliario Observatory.This situation has created a dynamic in which, when reviewing contracts that have already had two or three price increases, tenants may be paying more than for a similar apartment in the current market . “If the owner does not renegotiate the contract and does not adapt it to today's prices, tenants may decide to terminate that agreement and rent a new apartment now that there is more supply,” concluded Moretti.
“In these cases, we are seeing owners decide to renegotiate prices if they do not want to lose a good tenant ,” adds Balayan.
In short, price volatility and continuous changes in regulations are reconfiguring the real estate market , and for many tenants, moving seems to become the most convenient option in this uncertain scenario .
www.buysellba.com
