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Rents that are adjusted according to the repealed law have increases that fall in line with inflation - Infobae
Source:
November 21, 2024
Contracts under the Rental Law will face a significant increase until November 2025. However, the indicator reported by the BCRA has already dropped 57% so far this year, compared to previous months.
By Jose Luis Cieri
The image of a miniature house on a calculator and coins reflects the current economic reality: inflation and its impact on property prices (Illustrative image Infobae)
The Rental Contract Index (ICL), used to adjust rental contracts established under the now repealed Rental Law, will register a decrease in its percentage in December. According to data from the Central Bank of the Argentine Republic, the year-on-year adjustment will be 208.67%, a drop compared to the 227.14% recorded in November . If the downward trend in inflation continues, it is estimated that the adjustment for contracts to be reviewed in January 2025 could be below 200 percent.
This slowdown in the ICL will only affect current contracts that are still adjusted under this regulation . For example, a rent of $150,000 will be adjusted in December to $463,300, with the new interannual percentage, which will be in effect until November 2025.
Alejandro Braña , a real estate expert and member of the Buenos Aires Real Estate Association, explained to Infobae that “the ICL has already had four consecutive months of year-on-year declines, marking a trend that had not been seen since the regulations were passed in 2020. Since September, the index has shown a constant decline, starting with 5% monthly, followed by a 10% drop in November, until reaching 18.47% in December. Since August 2024, the cumulative reduction is 40%, and even reaches 57% since the maximum recorded in July, when it reached 265% year-on-year.”
According to Braña, the uncertainty surrounding rental contracts and the constant changes in regulations have led several tenants to prefer other adjustments, such as the Consumer Price Index (CPI), to update their agreements, since the quarterly, four-monthly and half-yearly adjustments of the CPI exceed the percentages reported by the inflation index in all cases.
Currently, the quarterly update of the ICL is 14.24%, while the four-monthly update is 20.58% and the half-yearly update is 51.06%.
These percentages contrast with the quarterly, four-monthly and half-yearly CPI, which register 9%, 14% and 24%, respectively. This has led several tenants to seek contracts indexed to the CPI, something that, until recently, they did not consider viable.
Due to the drop in inflation, landlords and tenants tend to agree on adjustments based on the CPI in new rental contracts. The CPI is now used less for recent agreements (Illustrative Image Infobae)
Braña added that, although the value of the rents on offer has been adjusted to half of the inflation accumulated so far in 2024, many tenants continue to feel great pressure on their economies due to the instability of values and constant adjustments. The greater supply, which tripled compared to 2023 after the repeal of the Rental Law, has not been enough to completely alleviate tenants' uncertainty.
Verónica Pagola , CEO of Century 21 Argentina, highlighted that previous restrictions limited the freedom of contracting, reducing the number of properties available. However, with the elimination of this regulation, market players now prefer the CPI to update contracts, and avoid the ICL used before.”
Industry experts note that the increased supply of rental properties, after a period of scarcity, offers a beneficial balance for owners and tenants who enter into free and mutual agreements.
Since the implementation of the LCI, this index had been rising steadily. However, the recent slowdown in year-on-year inflation changed this trend, affecting the calculation of the LCI and encouraging more landlords to offer their properties for rent. This increase in supply relieved the pressure on initial prices that had been caused by the shortage of properties.
Pagola believes that, despite current fluctuations, the increase in the supply of more than 15,000 apartments for rent in CABA could indicate a future stabilization of the market.
“The growing availability, if it continues under these conditions, could continue its upward trend, reflecting renewed confidence in the local real estate sector,” he concluded.
www.buysellba.com
Source:
November 21, 2024
Contracts under the Rental Law will face a significant increase until November 2025. However, the indicator reported by the BCRA has already dropped 57% so far this year, compared to previous months.
By Jose Luis Cieri
The image of a miniature house on a calculator and coins reflects the current economic reality: inflation and its impact on property prices (Illustrative image Infobae)
The Rental Contract Index (ICL), used to adjust rental contracts established under the now repealed Rental Law, will register a decrease in its percentage in December. According to data from the Central Bank of the Argentine Republic, the year-on-year adjustment will be 208.67%, a drop compared to the 227.14% recorded in November . If the downward trend in inflation continues, it is estimated that the adjustment for contracts to be reviewed in January 2025 could be below 200 percent.
This slowdown in the ICL will only affect current contracts that are still adjusted under this regulation . For example, a rent of $150,000 will be adjusted in December to $463,300, with the new interannual percentage, which will be in effect until November 2025.
Alejandro Braña , a real estate expert and member of the Buenos Aires Real Estate Association, explained to Infobae that “the ICL has already had four consecutive months of year-on-year declines, marking a trend that had not been seen since the regulations were passed in 2020. Since September, the index has shown a constant decline, starting with 5% monthly, followed by a 10% drop in November, until reaching 18.47% in December. Since August 2024, the cumulative reduction is 40%, and even reaches 57% since the maximum recorded in July, when it reached 265% year-on-year.”
According to Braña, the uncertainty surrounding rental contracts and the constant changes in regulations have led several tenants to prefer other adjustments, such as the Consumer Price Index (CPI), to update their agreements, since the quarterly, four-monthly and half-yearly adjustments of the CPI exceed the percentages reported by the inflation index in all cases.
Currently, the quarterly update of the ICL is 14.24%, while the four-monthly update is 20.58% and the half-yearly update is 51.06%.
These percentages contrast with the quarterly, four-monthly and half-yearly CPI, which register 9%, 14% and 24%, respectively. This has led several tenants to seek contracts indexed to the CPI, something that, until recently, they did not consider viable.
Due to the drop in inflation, landlords and tenants tend to agree on adjustments based on the CPI in new rental contracts. The CPI is now used less for recent agreements (Illustrative Image Infobae)
Braña added that, although the value of the rents on offer has been adjusted to half of the inflation accumulated so far in 2024, many tenants continue to feel great pressure on their economies due to the instability of values and constant adjustments. The greater supply, which tripled compared to 2023 after the repeal of the Rental Law, has not been enough to completely alleviate tenants' uncertainty.
Scenery
The rental market in Argentina has seen a complete change following the repeal of the 2020 law that discouraged the supply of rental properties.Verónica Pagola , CEO of Century 21 Argentina, highlighted that previous restrictions limited the freedom of contracting, reducing the number of properties available. However, with the elimination of this regulation, market players now prefer the CPI to update contracts, and avoid the ICL used before.”
Industry experts note that the increased supply of rental properties, after a period of scarcity, offers a beneficial balance for owners and tenants who enter into free and mutual agreements.
Since the implementation of the LCI, this index had been rising steadily. However, the recent slowdown in year-on-year inflation changed this trend, affecting the calculation of the LCI and encouraging more landlords to offer their properties for rent. This increase in supply relieved the pressure on initial prices that had been caused by the shortage of properties.
Pagola believes that, despite current fluctuations, the increase in the supply of more than 15,000 apartments for rent in CABA could indicate a future stabilization of the market.
“The growing availability, if it continues under these conditions, could continue its upward trend, reflecting renewed confidence in the local real estate sector,” he concluded.
www.buysellba.com
