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Study reflects the distorting effects of the rental law on the real estate market in CABA - Ambito
Source:
www.ambito.com
October 27, 2024
This is a report by the UTDT that analyzed the period 2020-2023. It identifies the multi-causal phenomenon driven by the repealed law, the paralysis of the mortgage offer and the three-digit annual inflation.
A study carried out by Torcuato Di Tella University analyzed the impact on the real estate market as a result of the regulations of the rental law 27,551 (repealed by DNU 70/23), the suspension of mortgage loans and the inflationary phenomenon that reached a level of 211.4% in 2023.
One of the findings of the study – carried out by UTDT in the Autonomous City of Buenos Aires (CABA) – is that rent control measures and the collapse of the mortgage market, due to prohibitively high inflation rates, were the main drivers of significant market distortions. The 2020 rent control law, which extended the duration of contracts and implemented a new indexation mechanism, caused a substantial contraction in housing supply, with listings down 21.3% compared to the period before the legislation came into existence.
At the same time, the virtual disappearance of mortgage financing, with less than 0.5% of GDP in mortgage stock, forced potential home buyers to turn to the rental market, further straining supply.
Specifically, the UTDT study clearly identifies the negative effects of the rental law, which caused a drastic reduction in the supply of rental housing in CABA, with an increase in prices to cover inflation and a redirection of properties towards sale. All these variables were reversed and accelerated their normalization after the repeal of the law.
The city is a tourist center par excellence and a magnet for digital nomads, students and young professionals from around the world who consider the city not only a gateway to get to know the country, but also a place to settle temporarily for study, work and development of entrepreneurial activities of different kinds, all of which generates an important contribution in foreign currency and in the generation of local activity.
Even beyond the presence of foreigners and domestic tourism, one cannot ignore the fact that CABA necessarily requires a modern offer of temporary rentals for those who require long stays to carry out administrative, judicial, regulatory procedures and even for health care and medical treatments.
The study leverages a unique and comprehensive time-series dataset, combining detailed and granular information that allows disaggregating rental market dynamics in the long-run and short-run. To address potential endogeneity issues and strengthen causal inference, the study employs Bartik -style instrumental variable methods using a change-share approach.
This tool made it possible to isolate the causal effects of rent control policies and credit market failures while taking into account the influence of the emerging short-term rental market.
www.buysellba.com
Source:
Estudio refleja los efectos distorsivos de la ley de alquileres en el mercado inmobiliario de CABA
Se trata de un informe de la UTDT que analizó el periodo 2020-2023. Se identifica el fenómeno multicausal impulsado por la derogada ley, la paralización de la oferta hipotecaria y la inflación anual de tres dígitos.
www.ambito.com
October 27, 2024
This is a report by the UTDT that analyzed the period 2020-2023. It identifies the multi-causal phenomenon driven by the repealed law, the paralysis of the mortgage offer and the three-digit annual inflation.
A study carried out by Torcuato Di Tella University analyzed the impact on the real estate market as a result of the regulations of the rental law 27,551 (repealed by DNU 70/23), the suspension of mortgage loans and the inflationary phenomenon that reached a level of 211.4% in 2023.
One of the findings of the study – carried out by UTDT in the Autonomous City of Buenos Aires (CABA) – is that rent control measures and the collapse of the mortgage market, due to prohibitively high inflation rates, were the main drivers of significant market distortions. The 2020 rent control law, which extended the duration of contracts and implemented a new indexation mechanism, caused a substantial contraction in housing supply, with listings down 21.3% compared to the period before the legislation came into existence.
At the same time, the virtual disappearance of mortgage financing, with less than 0.5% of GDP in mortgage stock, forced potential home buyers to turn to the rental market, further straining supply.
The effect of temporary rentals
Regarding the potential impact of short-term rentals, often identified as the main distorting element in housing markets, their effect was found to be almost negligible, contributing to a reduction of only 1.5% in the availability of long-term rentals over a 4-year period. This contrasts sharply with the more significant distortions determined by rent control, dysfunctional credit market dynamics and the impact of macroeconomic volatility.Specifically, the UTDT study clearly identifies the negative effects of the rental law, which caused a drastic reduction in the supply of rental housing in CABA, with an increase in prices to cover inflation and a redirection of properties towards sale. All these variables were reversed and accelerated their normalization after the repeal of the law.
Not just tourism
The City of Buenos Aires is a major tourist destination, with 2.8 million tourists between the third quarter of 2022 and the second quarter of 2023. Short-term rentals have helped property owners maintain a source of income amid a challenging rental market environment. Of these tourists, 50% stayed in hotels and 22% in short-term housing, an increase of 7 percentage points over the previous year.The city is a tourist center par excellence and a magnet for digital nomads, students and young professionals from around the world who consider the city not only a gateway to get to know the country, but also a place to settle temporarily for study, work and development of entrepreneurial activities of different kinds, all of which generates an important contribution in foreign currency and in the generation of local activity.
Even beyond the presence of foreigners and domestic tourism, one cannot ignore the fact that CABA necessarily requires a modern offer of temporary rentals for those who require long stays to carry out administrative, judicial, regulatory procedures and even for health care and medical treatments.
Academic study
The study by Torcuato Di Tella University (UTDT) in collaboration with CIPUV (Urban Policy and Housing Research Center) and CEPE (Evidence-Based Policy Evaluation) was based on a multiplicity of sources available on the market and was led by Cyntia Goytia, Gastón Gertner, Ángeles Scetta and Guadalupe Dorna.The study leverages a unique and comprehensive time-series dataset, combining detailed and granular information that allows disaggregating rental market dynamics in the long-run and short-run. To address potential endogeneity issues and strengthen causal inference, the study employs Bartik -style instrumental variable methods using a change-share approach.
This tool made it possible to isolate the causal effects of rent control policies and credit market failures while taking into account the influence of the emerging short-term rental market.
www.buysellba.com
