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Rentals: Two unexpected phenomena that owners try to accept - La Nacion Propiedades
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Alquileres: dos fenómenos impensados que los propietarios tratan de aceptar
Los precios de los alquileres reflejan una reconfiguración del mercado inmobiliario: los inquilinos pueden negociar más y los propietarios se adaptan al nuevo escenario para llegar a un acuerdo
www.lanacion.com.ar
April 17, 2024
Rental prices reflect a reconfiguration of the real estate market: tenants can negotiate more and owners adapt to the new scenario to reach an agreement
By Candela Contreras
The repeal of the rental law showed significant changes in the market
In just three months, the rental market registered notable changes and new rules of the game : increases of 134% in the supply of publications , 94% corresponding to apartments -taking data from the Real Estate College of the City of Buenos Aires-; contracts that began to be closed for two years, in pesos and with quarterly or quarterly adjustments ; advance payments and in dollars ; and there was even a slowdown in monthly price increases: in February they were 2.9% and in March 1.3% (the lowest since January 2019) after increases of 21% in January and 18.6 in December. , according to the latest Zonaprop report .
Regarding this last point, the platforms and real estate companies observed how the values of the published apartments decreased abruptly between January and March of this year: the increases were well below inflation , which was 13.2% - taking the data from February -, and, according to the Real Estate Association, as a consequence real values fell by 30% .
In March, the increase in the average rental price continues to slow down
This phenomenon was recorded after the repeal of the rental law - on December 29, 2023, when the Decree of Necessity and Urgency (DNU) came into effect -. A key moment that 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, president of the College.
In concrete numbers, the average rent for a single-bedroom was $365,546 per month in March, while a two-bedroom cost $422,502 and a three-bedroom $567,747 per month. If these prices are compared with those of February, the average rent for a studio apartment, a two-bedroom apartment and a three-bedroom apartment cost $354,568, $416,991 and $568,314, respectively. The increase is very low from one month to the next, unlike what happened until January with large monthly jumps .
Until its repeal, the regulations established that contracts signed between July 2020 and October 2023 were for a period of three years and were updated once a year under the Lease Contract Index (ICL) . 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 on its most relevant points: duration, type of currency, index chosen for adjustment, adjustment periods, among others.
The repeal of the rental law showed significant changes in the market
Adjust prices
The big question that arises is: was this slowdown in the increase in rental prices due to a resignation on the part of the owners on key points of the new contracts, which were not even discussed before ?Real estate market specialists respond with two possible explanations : one is that all the new published offer is cheaper and the other is that the greater the offer, the lower the price.
Soledad Balayan, owner of Maure Inmobiliaria, points out that, before the repeal of the law, it was common to experience monthly increases in published rental prices above inflation : in the city of Buenos Aires the increase in 2023 was 260% , 2.65 times more than the previous year, while inflation was 211.4% annually -. However , currently, owners are forced to reconsider their rates due to greater supply on the market . This increase in the availability of options allows tenants to be more selective and negotiate more reasonable prices. Most homeowners have had to adjust their starting prices to accommodate this new dynamic . “Before the repeal of the law, you valued a rent and from one month to the next there was a notable increase, now you can maintain or even lower the same price that you left with in February or even in January,” says the specialist.
For his part, Enrique Abatti , president of the Chamber of Owners of the Argentine Republic, explains that the repeal of the regulations allowed greater contractual freedom between the parties involved. Although the law , when it was passed, was intended to protect tenants, in reality , it generated a shortage of supply and inflated prices . Now, with a greater supply and fewer requirements from the owners, tenants have the ability to negotiate more favorable prices.
Rental signs were not posted on properties last year when supply was low and everything was booked in minutes
“Last year, there were people who rented without looking at the apartment because they had nowhere to live . But now if the tenant is not satisfied with the property, he can find another one quickly,” explains Abatti, and maintains that landlords have to reduce their demands because “we are already starting to see empty properties because they are not rented .”
Diego Migliorisi, managing partner of Migliorisi Properties , agrees with the other experts and highlights that competition in the market led to a more realistic price adjustment , owners can no longer impose excessive rates. Previously, the lack of options forced tenants to accept unfavorable conditions , but now, the situation has changed in their favor. “Currently, an owner who asks a lot for an apartment that is not worth it is not going to rent it today. Before (the repeal of the law) , in order to get a home, tenants reserved a property without seeing it, it was a very distressing situation because there were no options,” he adds.
On the other hand, it stands out that profitability improved significantly compared to previous periods: it stood at 4.67% annually in March. This decline is due to the slowdown in the increase in rental prices. Today it takes 21.4 years of rental to recover the investment , 4.2% less than what was required a year ago.
Specialists agree that the lack of options forced tenants to accept unfavorable conditions
A twist
For his part, Federico González Rouco , an economist specializing in housing and author of the recently published book The Dream of One's Own House, shares a different view from that of other specialists regarding the drop in publication prices compared to the high inflation: emphasizes the importance of analyzing the entire contract, not just the first month's rent . He notes that the design of the contracts evolved , with lower initial prices and adjustments for inflation throughout the deal. This new dynamic contributed to greater transparency in the market and a redistribution of bargaining power between landlords and tenants . “Today, owners do not have to think about a rental that lasts a year or six months and is adjusted by ICL or Casa Propia, but rather they must think about values that will be adjusted within the following three or four months and by inflation,” he explains.“Now there is no need for the initial price to be high , because it will increase in a few months and by CPI. Much of this price drop is actually a reconfiguration of the contracts, because the price stabilizes throughout it,” he says.
Furthermore, he considers that one of the causes of the excess supply that exists in the market today is because many publications were made public with the DNU. “ They are the same units that were there before, but possibly they had them 'hidden' ,” he says and adds that “the market with the law was very socially unfair and unequal, because if you didn't have someone you knew to rent to you it was difficult to achieve it.” .
Changes in the rental market
The most expensive neighborhoods also reduce their price
“Before the supply increased, people rented wherever they could find. Today they can choose and migrate to other neighborhoods because there is supply in all areas, which generates greater competitiveness,” says Diego Frangella, new president of the Real Estate College of the City of Buenos Aires .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 that raises the question of where are the tenants who until last year closed contracts by telephone and made the decision of which apartment to rent in minutes and without seeing it, is that there is no longer desperation on the part of tenants. “Today, if the conditions they are offered do not suit them, they can look for another alternative because there is more offer, there was not before and they kept what was offered in the conditions they asked for,” concludes Francisco Altgelt, president of the real estate company of the same name.
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