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Rents through the roof: One-bedroom rose 300% year-on-year and the shortage of units in CABA increased
November 28, 2023
One- and three-bedroom properties also rose with unprecedented strength. Why do values continue to rise so much in a critical situation for tenants who are looking for and must face increasingly higher costs?
By José Luis Cieri
A two-bedroom in CABA already averages $280,000 per month, a cost that unbalances any budget of a salaried person or family in Argentina.
A private analysis confirmed that the prices of two-room Buenos Aires apartments experienced an unprecedented increase and reached 300% year-on-year. This extreme situation also affects the studio apartments and the properties of three rooms, with a force that has no precedent.
On the other hand, the search for housing continues to be an impossible task in many areas of Argentina.
The shortage of units is taking hold and this is attributed, in part, to the reluctance of many owners to commit to three-year contracts. Demand far exceeds supply and today in CABA there are less than 550 apartments in pesos. In this context, the problem worsens as rental values continue to escalate, imposing increasingly higher costs on tenants seeking to guarantee a roof over their heads in the midst of this critical situation.
According to the Scalabrini Ortiz Center for Economic and Social Studies (CESO), studio apartments rose by 275% year-on-year and three-bedroom apartments by 261.9% in the last twelve months.
Although there is uncertainty about what will come, the president-elect Javier Milei announced that he would repeal the Rental Law, something that generated a lot of uncertainty in the sector and immediate impact on the market, stopping the celebration of new three-year contracts and semiannual adjustments to through the Own House coefficient until after next December 10.
After the reform of the regulations – which came into effect on October 18 – the supply fell even further. Pablo Houghton, from Houghton Properties, told Infobae that “this situation once again reflects an effect contrary to what was intended, highlighting that from the real estate sector we had already warned about this possibility recently during the meetings prior to the enactment of the reform of the law. sanctioned in 2020 in the national Congress. This scenario reveals the complexity and implications of regulatory decisions in the rental market.”
Values
In the current context of inflationary acceleration, setting values that will govern for six months is presented as a challenge, adding uncertainty to the process. This aspect, being a macroeconomic problem that transcends individual contractual conditions, is reflected in the imposition of high entry values. Although these amounts tend to dilute quickly with current inflation rates, they constitute a barrier for those seeking to enter into a new rental contract, according to CESO representatives.The average price of the studio apartments offered in CABA is $225,000; while those with two rooms were positioned at $280,000 and those with three rooms $380,000 per month.
Source: Scalabrini Ortiz Center for Economic and Social Studies (CESO)
In each category, prices vary depending on other characteristics (such as age, whether it has a garage, amenities, among other options) and its environment (infrastructure, availability of transportation, proximity to shopping centers and schools, for example).
The rental values do not include expenses, which reach on average 10% of the cost of the offer price of a rental.
The CESO confirmed that the monthly increases in November, compared to October 2023, were 25% in studio apartments, 21.7% for those with 2 rooms and 26.7% for those with 3 rooms. These data underline the upward trend in rental prices, providing a quantitative view of the current situation in different types of housing.
Source: Scalabrini Ortiz Center for Economic and Social Studies (CESO)
On the other hand, the latest inflation data corresponding to the month of October shows a year-on-year increase of 142.7% in prices according to the Consumer Price Index (CPI) prepared by Indec. The Index for Lease Contracts (ICL), which regulates the updating of rents within a contract already in force, shows an interannual increase of 119.5% as of the first business day of November.
How to get out of the problem
Experts maintain that both the ICL, applicable to agreements signed until October 17 and that will remain in force until their completion, and the Own Home index or other possible ones, represent two different but complementary approaches to control rental values. However, they argue that the real emphasis should be on allowing tenants to purchase their own homes.
Source: Scalabrini Ortiz Center for Economic and Social Studies (CESO)
Gonzalo Coira, lawyer and creator of Pedro te Compra, a system that facilitates access to the first home for low and middle sectors, highlighted to Infobae that the significant deregulation of rents could generate a greater supply of units. “This expectation, in turn, could drive the construction of homes and housing complexes.”
With a vision oriented toward the future, Coira advocates focusing this new stage on mechanisms that facilitate the transition from tenants to owners. It proposes the need to generate tax incentives for construction, motivate investors in housing matters, make the Rental Law more flexible and, above all, provide facilities in credit terms for the segment that currently faces high rental costs that already exceed $1,000,000 If the person or family must take out a private guarantee or surety insurance due to lack of guarantors.
“Ultimately, seek solutions that benefit both landlords and tenants, recognizing the current tensions in the rental market,” he concluded.
