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Rentals: Why landlords are now looking to sign much shorter contracts
Source:
www.infobae.com
July 31, 2024
As the DNU allows it, several property owners prefer terms of less than two years to ensure future availability and take advantage of sales opportunities in a market with fewer regulations.
By Jose Luis Cieri
Experts say that the real estate market is going through a turning point and that changes in trend are being generated by new mortgage loans (Illustrative Image Infobae)
Three years into the Rental Law, which required three-year contracts, thousands of properties were taken off the property market. Restrictions imposed by the repealed law meant that contracts were too long amid economic instability and mandatory updating clauses.
With the DNU that freed up the rental market, landlords can now adapt contractual terms to their needs and sales expectations. In addition, the reintroduction of mortgage loans and the money laundering process led to a preference for shorter-term agreements as a market trend.
Marta Liotto , former president of the Buenos Aires Real Estate Association and head of Liotto Properties, said that “with the reintroduction of UVA mortgage loans, offered by more than 18 banks in Argentina, rental contracts for 6 months or 1 year are spreading in the market. Owners looking to sell their properties see these short contracts as an opportunity to complete the purchase-sale transaction and reinvest the money in other areas.”
The current economic context, characterised by low rental profitability (averaging 3%) and high demand for housing, is leading landlords to opt for shorter contracts.
Taking advantage of the current regulatory framework, which does not impose a minimum term and allows the duration of the contract to be freely agreed, it is now common to sign 24-month contracts. However, 18- or 12-month agreements are also seen, which are residential and not temporary.
Enrique Abatti (h.) , a real estate lawyer and director of the Chamber of Property Owners of the Argentine Republic, said that it is common in 24-month leases to incorporate clauses that allow early termination of the contract by the owner in the event of a sale of the property, as provided for in art. 1189 inc. b of the Civil and Commercial Code of the Nation since 2015. “With the legislative reform introduced by the DNU, the parties can also establish in the contract specific assumptions for which the owner can terminate the rental relationship, normally including compensation in favor of the tenant,” he said.
Short-term contracts are becoming popular due to the high expectations in the real estate market. Owners, after receiving advice, opt for this strategy to remain flexible and prepared. Although having an empty apartment is not very profitable, they also do not want to commit to long contracts of two years or more due to changes on the horizon.
Sebastián Cantero , from TBSA and director of Toro Real Estate, said that the reintroduction of mortgage loans is awakening the market. “The arrival of these loans allows more people to access a property, which generates an increase in demand and stabilizes prices upwards. This situation motivates owners to prefer short contracts, hoping for a possible increase in sales prices and, consequently, a stabilization in rental prices,” he said.
From January to June 2024, prices rose below inflation and tenants' counteroffers were frequently accepted (Illustrative Image Infobae)
Furthermore, the current inflationary context and the government's measures to control it generate an expectation that more reasonable contracts can be made regarding future increases.
Cantero added that the possibility of inflationary adjustments and the expectation of a more dynamic market are driving owners to not make long-term commitments, “opting for short-term contracts and staying alert to opportunities.”
“The possibility of short-term rental contracts and early termination clauses provides peace of mind to property owners, increasing the supply of properties and preventing prices from skyrocketing,” said Abatti (h.).
The Real Estate Market Statistical Observatory of the Buenos Aires Real Estate Association reported that rents fell by an average of 39.8% in June .
Despite this, a three-room apartment in CABA averages $550,000 and a two-room apartment $400,000, complicating the tenant's financial equation.
Abatti (h.) stressed that the owners, aware of the current low value of the properties, see this as an opportunity for replacement, either to expand the surface area or move to smaller units and rent another property.
“Retirees who rent to supplement their income may opt for 24-month contracts. The growing demand for new mortgage loans will influence rental and sales strategies, forcing owners to reconsider their investments,” Liotto said.
The advantage of short-term contracts is the security of the future availability of the property and the rental value upon renewal.
The existence of mortgage loans impacts the decisions of property owners, who must decide whether to sell or maintain rentals and under what terms.
“The role and purpose of each investor will determine their course of action; some will seek to keep properties, while others will take advantage of opportunities to exchange them. These loans are not limited to the purchase of the first home, allowing for more investments,” concluded Abatti (h.).
www.buysellba.com
Source:
Alquileres: por qué los propietarios ahora buscan firmar contratos mucho más cortos
Como el DNU lo permite, varios dueños de inmuebles prefieren plazos menores a dos años para asegurar la disponibilidad futura y aprovechar oportunidades de venta en un mercado con menos regulaciones
www.infobae.com
July 31, 2024
As the DNU allows it, several property owners prefer terms of less than two years to ensure future availability and take advantage of sales opportunities in a market with fewer regulations.
By Jose Luis Cieri
Experts say that the real estate market is going through a turning point and that changes in trend are being generated by new mortgage loans (Illustrative Image Infobae)
Three years into the Rental Law, which required three-year contracts, thousands of properties were taken off the property market. Restrictions imposed by the repealed law meant that contracts were too long amid economic instability and mandatory updating clauses.
With the DNU that freed up the rental market, landlords can now adapt contractual terms to their needs and sales expectations. In addition, the reintroduction of mortgage loans and the money laundering process led to a preference for shorter-term agreements as a market trend.
Marta Liotto , former president of the Buenos Aires Real Estate Association and head of Liotto Properties, said that “with the reintroduction of UVA mortgage loans, offered by more than 18 banks in Argentina, rental contracts for 6 months or 1 year are spreading in the market. Owners looking to sell their properties see these short contracts as an opportunity to complete the purchase-sale transaction and reinvest the money in other areas.”
The current economic context, characterised by low rental profitability (averaging 3%) and high demand for housing, is leading landlords to opt for shorter contracts.
Taking advantage of the current regulatory framework, which does not impose a minimum term and allows the duration of the contract to be freely agreed, it is now common to sign 24-month contracts. However, 18- or 12-month agreements are also seen, which are residential and not temporary.
Enrique Abatti (h.) , a real estate lawyer and director of the Chamber of Property Owners of the Argentine Republic, said that it is common in 24-month leases to incorporate clauses that allow early termination of the contract by the owner in the event of a sale of the property, as provided for in art. 1189 inc. b of the Civil and Commercial Code of the Nation since 2015. “With the legislative reform introduced by the DNU, the parties can also establish in the contract specific assumptions for which the owner can terminate the rental relationship, normally including compensation in favor of the tenant,” he said.
Short-term contracts are becoming popular due to the high expectations in the real estate market. Owners, after receiving advice, opt for this strategy to remain flexible and prepared. Although having an empty apartment is not very profitable, they also do not want to commit to long contracts of two years or more due to changes on the horizon.
Sebastián Cantero , from TBSA and director of Toro Real Estate, said that the reintroduction of mortgage loans is awakening the market. “The arrival of these loans allows more people to access a property, which generates an increase in demand and stabilizes prices upwards. This situation motivates owners to prefer short contracts, hoping for a possible increase in sales prices and, consequently, a stabilization in rental prices,” he said.
From January to June 2024, prices rose below inflation and tenants' counteroffers were frequently accepted (Illustrative Image Infobae)
Furthermore, the current inflationary context and the government's measures to control it generate an expectation that more reasonable contracts can be made regarding future increases.
Cantero added that the possibility of inflationary adjustments and the expectation of a more dynamic market are driving owners to not make long-term commitments, “opting for short-term contracts and staying alert to opportunities.”
Enthusiasm
The announcement of UVA mortgage loans generated enthusiasm in more than 250,000 individuals and families, improving the real estate sales market. Although disbursements are slow, loans are expected to become more active after August.“The possibility of short-term rental contracts and early termination clauses provides peace of mind to property owners, increasing the supply of properties and preventing prices from skyrocketing,” said Abatti (h.).
The Real Estate Market Statistical Observatory of the Buenos Aires Real Estate Association reported that rents fell by an average of 39.8% in June .
Despite this, a three-room apartment in CABA averages $550,000 and a two-room apartment $400,000, complicating the tenant's financial equation.
Abatti (h.) stressed that the owners, aware of the current low value of the properties, see this as an opportunity for replacement, either to expand the surface area or move to smaller units and rent another property.
Perspectives
The final decision will depend on each owner and their situation. Some will prefer to sell to gain liquidity and opt for short contracts.“Retirees who rent to supplement their income may opt for 24-month contracts. The growing demand for new mortgage loans will influence rental and sales strategies, forcing owners to reconsider their investments,” Liotto said.
The advantage of short-term contracts is the security of the future availability of the property and the rental value upon renewal.
The existence of mortgage loans impacts the decisions of property owners, who must decide whether to sell or maintain rentals and under what terms.
“The role and purpose of each investor will determine their course of action; some will seek to keep properties, while others will take advantage of opportunities to exchange them. These loans are not limited to the purchase of the first home, allowing for more investments,” concluded Abatti (h.).
www.buysellba.com
