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Rents are still high for many Argentines, but prices have dropped: the reasons - Infobae
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www.infobae.com
September 04, 2024
New contract values have slowed down. What factors are influencing this dynamic and why have they remained below the inflation rate over the past two months?
By Jose Luis Cieri
A couple visits an apartment. The offer increased and prices began to slow down at the starting point of new contracts (Illustrative Image Infobae)
Although the rental offer expanded rapidly in the city of Buenos Aires after the Rental Law was repealed, it was not until a few months ago that a decrease in the prices of new contracts began to be observed.
Currently, to access a three-room apartment in different neighborhoods of the city, it is necessary to pay between $450,000 and $810,000 per month , figures that continue to represent a significant challenge for the budget of tenants. Three months ago, the same property cost more than 1 million pesos.
Several studies have revealed a slowdown in rent increases from December 2023 to August 2024. Although the year-on-year figures are still high, they are already below the general inflation rate, indicating a change in the price trend in the real estate market.
What are the reasons for the slowdown in prices at the start of new rental contracts?
Germán Gómez Picasso , from Reporte Inmobiliario, explained to Infobae that “rental prices clearly slowed down after the repeal of the Rental Law through the Government's DNU, which generated an increase in confidence in owners and the consequent entry of new supply to the market.”
In addition, initial rental prices should not be so high, since it is now possible to make updates in shorter periods, according to the sector. On real estate portals such as Cabaprop, Zonaprop and Argenprop, apartments in CABA and Greater Buenos Aires are already being seen with advertisements indicating “their price has dropped.” For example, the price of a three-room apartment of 90 m2 in Villa Pueyrredón was reduced from $700,000 to $640,000 per month.
The inflationary context of the period analyzed (July 2023 vs July 2024) showed a general rate of 285.9%, while rents for used apartments increased by 184.25% on average for one-bedroom apartments and 174.28% for two-bedroom apartments according to Real Estate Report.
The average value for one-bedroom apartments in August 2024 was $439,629 and $588,808 for two-bedroom apartments.
A one-bedroom apartment averages $400,000 in CABA
Although the housing supply has expanded, it is not uniform across the country. In cities with more than 100,000 inhabitants, there is still disorganized expansion, often towards rural areas, due to the lack of adequate urban planning. In addition, in these localities, the turnover of units is low and renewals of existing contracts predominate, unlike in larger areas such as CABA and Córdoba capital, where turnover is higher.
“The ICL adjusts the value of rents taking into account inflation and the evolution of salaries. Unlike the Consumer Price Index (CPI), which only measures the variation in prices of goods and services, the ICL also takes into account the income of workers,” explained Mariano García Malbrán , president of the Chamber of Real Estate Services Companies of Argentina (Camesi).
The sector stresses the importance of these indices, pointing out that in several countries around the world, the adjustment of rental contracts was tied to various indices that reflect inflation and other economic factors.
García Malbrán added: “In Spain, for example, a temporary 2% cap on annual rent increases was implemented to protect tenants from inflation. France uses the Index de Référence des Loyers (IRL), combining the CPI with the cost of construction and maintenance, while in several states in the United States there are rent controls that limit annual rent increases.”
In Argentina, thousands of rental contracts are updated quarterly using the CPI as a reference since the DNU came into force. This model, based on inflation, is preferred by landlords. However, by ignoring variations in tenants' income, it can generate imbalances in the rental market.
In the province of Buenos Aires, one-bedroom apartments range from $300,000 to $700,000 in luxury buildings with amenities. For two-bedroom apartments in AMBA, prices range from $400,000 to $1,000,000, varying according to the city, location and extra services.
“Houses start at $550,000 and can reach up to $1,500,000 per month,” said García Malbrán.
In the medium term, stability in rental prices will depend on inflation and the labour market. If wages grow less than inflation, tenants may opt for smaller, cheaper properties due to limited ability to pay.
“A steady slowdown in rent adjustments could foster stable and equitable policies, increasing market predictability and confidence, which would encourage investment in new properties,” said García Malbrán.
The future of the rental market in Argentina will depend on the ability to adapt to economic changes. Current decisions are crucial for the stability and growth of the sector.
“According to projections, demand will remain high and values will probably increase. It is essential to promote mortgage loans and the construction of affordable housing. Otherwise, the situation will persist,” concluded Gómez Picasso.
www.buysellba.com
Source:
Los alquileres siguen siendo altos para los bolsillos de muchos argentinos, pero bajaron los precios: las razones
Los valores de los nuevos contratos se desaceleraron. Qué factores están influyendo en esta dinámica y por qué se mantienen por debajo del índice de inflación en los últimos dos meses
www.infobae.com
September 04, 2024
New contract values have slowed down. What factors are influencing this dynamic and why have they remained below the inflation rate over the past two months?
By Jose Luis Cieri
A couple visits an apartment. The offer increased and prices began to slow down at the starting point of new contracts (Illustrative Image Infobae)
Although the rental offer expanded rapidly in the city of Buenos Aires after the Rental Law was repealed, it was not until a few months ago that a decrease in the prices of new contracts began to be observed.
Currently, to access a three-room apartment in different neighborhoods of the city, it is necessary to pay between $450,000 and $810,000 per month , figures that continue to represent a significant challenge for the budget of tenants. Three months ago, the same property cost more than 1 million pesos.
Several studies have revealed a slowdown in rent increases from December 2023 to August 2024. Although the year-on-year figures are still high, they are already below the general inflation rate, indicating a change in the price trend in the real estate market.
What are the reasons for the slowdown in prices at the start of new rental contracts?
Germán Gómez Picasso , from Reporte Inmobiliario, explained to Infobae that “rental prices clearly slowed down after the repeal of the Rental Law through the Government's DNU, which generated an increase in confidence in owners and the consequent entry of new supply to the market.”
In addition, initial rental prices should not be so high, since it is now possible to make updates in shorter periods, according to the sector. On real estate portals such as Cabaprop, Zonaprop and Argenprop, apartments in CABA and Greater Buenos Aires are already being seen with advertisements indicating “their price has dropped.” For example, the price of a three-room apartment of 90 m2 in Villa Pueyrredón was reduced from $700,000 to $640,000 per month.
The inflationary context of the period analyzed (July 2023 vs July 2024) showed a general rate of 285.9%, while rents for used apartments increased by 184.25% on average for one-bedroom apartments and 174.28% for two-bedroom apartments according to Real Estate Report.
The average value for one-bedroom apartments in August 2024 was $439,629 and $588,808 for two-bedroom apartments.
A one-bedroom apartment averages $400,000 in CABA
Although the housing supply has expanded, it is not uniform across the country. In cities with more than 100,000 inhabitants, there is still disorganized expansion, often towards rural areas, due to the lack of adequate urban planning. In addition, in these localities, the turnover of units is low and renewals of existing contracts predominate, unlike in larger areas such as CABA and Córdoba capital, where turnover is higher.
ICL dropped
This month, rental contracts governed by the Rental Contracts Index (ICL) will have a year-on-year increase of 243.16%, a lower figure compared to the 247.56% in August .“The ICL adjusts the value of rents taking into account inflation and the evolution of salaries. Unlike the Consumer Price Index (CPI), which only measures the variation in prices of goods and services, the ICL also takes into account the income of workers,” explained Mariano García Malbrán , president of the Chamber of Real Estate Services Companies of Argentina (Camesi).
The sector stresses the importance of these indices, pointing out that in several countries around the world, the adjustment of rental contracts was tied to various indices that reflect inflation and other economic factors.
García Malbrán added: “In Spain, for example, a temporary 2% cap on annual rent increases was implemented to protect tenants from inflation. France uses the Index de Référence des Loyers (IRL), combining the CPI with the cost of construction and maintenance, while in several states in the United States there are rent controls that limit annual rent increases.”
Demand and immediate future
As for tenants' expectations, Gómez Picasso stressed that "demand is very high but many do not meet the prices currently being requested," and mentioned factors such as natural growth and immigration, which exceed the rate of construction of new homes in Argentina. A situation illustrated by one figure: 2.5 million young people up to 35 years of age live with their parents .In Argentina, thousands of rental contracts are updated quarterly using the CPI as a reference since the DNU came into force. This model, based on inflation, is preferred by landlords. However, by ignoring variations in tenants' income, it can generate imbalances in the rental market.
In the province of Buenos Aires, one-bedroom apartments range from $300,000 to $700,000 in luxury buildings with amenities. For two-bedroom apartments in AMBA, prices range from $400,000 to $1,000,000, varying according to the city, location and extra services.
“Houses start at $550,000 and can reach up to $1,500,000 per month,” said García Malbrán.
In the medium term, stability in rental prices will depend on inflation and the labour market. If wages grow less than inflation, tenants may opt for smaller, cheaper properties due to limited ability to pay.
“A steady slowdown in rent adjustments could foster stable and equitable policies, increasing market predictability and confidence, which would encourage investment in new properties,” said García Malbrán.
The future of the rental market in Argentina will depend on the ability to adapt to economic changes. Current decisions are crucial for the stability and growth of the sector.
“According to projections, demand will remain high and values will probably increase. It is essential to promote mortgage loans and the construction of affordable housing. Otherwise, the situation will persist,” concluded Gómez Picasso.
www.buysellba.com
