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The rental index adjustment falls for the first time in 53 months: how much is it reduced and what is due - Infobae
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www.infobae.com
October 27, 2024
Applies to tenants with current contracts signed under the Rental Law repealed at the end of 2023. What is the new percentage and when could it be reduced the most?
By Jose Luis Cieri
The decrease in the adjustment values for current contracts of the repealed Rental Law has to do with a change in the behavior of the ICL, influenced by the reduction in inflation and salary expectations (Illustrative image Infobae)
The Rental Contract Index (ICL), which is used to adjust rental values in current contracts signed under the Rental Law (repealed at the end of 2023), registered a 10% year-on-year decrease for November 2024, the first such reduction in 53 months.
Although still high, with a year-on-year adjustment of 227.14%, this decrease marks a slowdown in the rise in rents since the ICL began to decrease in August, accumulating a fall of 20% in the last three months.
Those who must adjust their price in November, for example, from $100,000 will pay $327,138 per month until October 2025.
Alejandro Braña , a real estate expert and member of the Buenos Aires Real Estate Association, explained to Infobae : “We are coming from a prolonged period in which the ICL was setting records month after month due to the escalation of inflation and the adjustment of salaries. However, in September 2024, the first drop in 50 months occurred, motivated by the drastic reduction in inflation, and this was repeated in October. Now, in November, the year-on-year adjustment falls from 237% to 227.14 percent.”
This decline is directly related to the fall in inflation: “The ICL is an average between inflation and wages, and with inflation more controlled, the index finally began to decline,” Braña added.
12/17/2019 Rental resource image. POLITICS SPAIN EUROPE MADRID RENTAL
Although it is difficult to predict exactly when this point will be reached, experts agree that it could happen between February and March 2025, provided that inflation and wage negotiations maintain their trend in line with the Consumer Price Index (CPI).
Celia Molina of Century 21 said that while it is difficult to make exact predictions, the ICL could break through 200% if the economy follows the budget forecast for next year. “If wage negotiations continue to be aligned with the CPI and inflation remains stable, we are likely to see a more considerable reduction in rent adjustments in the first months of 2025.”
However, the sector emphasises that macroeconomic conditions must remain stable for this forecast to become a reality.
“The stabilization of the dollar and the decrease in inflation allowed owners to be more flexible when negotiating. The wide supply of available properties also had an influence, since tenants have more options to choose from, which moderates prices,” said Molina.
The repeal of the Rental Law was key for the real estate sector. The law had distorted the market with restrictions that harmed owners and tenants. With the DNU, the market began to recover.
Braña said: “The 2020 law was a mistake that broke a balanced market between landlords and tenants. The repeal was key and now contracts are signed with more reasonable values, with adjustments for CPI or ICL, allowing for lower prices to be negotiated, especially at the start of the agreement.”
Between Zonaprop, Cabaprop and Argenprop, among other portals, there are an average of 15,000 apartments in CABA. Near historical highs in the number of available properties (they have almost always been around 16,000), which expands the options for tenants.
A one-bedroom apartment in CABA costs more than $400,000 a month
Molina said that the stabilization of inflation and the dollar created a more favorable environment for negotiations. “Owners are more open to listening to offers and closing deals based on the market. The stability of the exchange rate reduces uncertainty and provides greater security in contracts both in dollars and pesos.”
Braña stressed that “the drop in rents in real terms is evident, especially in comparison with the increase in expenses, which in many cases have risen almost threefold so far this year.”
Current ICL-adjusted rental prices:
These figures do not include expenses. Driven by the labor costs of the doormen, they are a key factor affecting the cost of living in these buildings.
“In buildings with permanent doormen, expenses increased more than rents. In buildings with outsourced services, costs are much lower, making a difference. It is crucial to have mechanisms to control these expenses,” concluded Molina.
www.buysellba.com
Source:
El ajuste por el índice de alquileres baja por primera vez en 53 meses: cuánto se reduce y a qué se debe
Aplica para inquilinos con contratos vigentes firmados bajo la Ley de Alquileres derogada a fines de 2023. Cuál es el nuevo porcentaje y cuándo más podría reducirse
www.infobae.com
October 27, 2024
Applies to tenants with current contracts signed under the Rental Law repealed at the end of 2023. What is the new percentage and when could it be reduced the most?
By Jose Luis Cieri
The decrease in the adjustment values for current contracts of the repealed Rental Law has to do with a change in the behavior of the ICL, influenced by the reduction in inflation and salary expectations (Illustrative image Infobae)
The Rental Contract Index (ICL), which is used to adjust rental values in current contracts signed under the Rental Law (repealed at the end of 2023), registered a 10% year-on-year decrease for November 2024, the first such reduction in 53 months.
Although still high, with a year-on-year adjustment of 227.14%, this decrease marks a slowdown in the rise in rents since the ICL began to decrease in August, accumulating a fall of 20% in the last three months.
Those who must adjust their price in November, for example, from $100,000 will pay $327,138 per month until October 2025.
Alejandro Braña , a real estate expert and member of the Buenos Aires Real Estate Association, explained to Infobae : “We are coming from a prolonged period in which the ICL was setting records month after month due to the escalation of inflation and the adjustment of salaries. However, in September 2024, the first drop in 50 months occurred, motivated by the drastic reduction in inflation, and this was repeated in October. Now, in November, the year-on-year adjustment falls from 237% to 227.14 percent.”
This decline is directly related to the fall in inflation: “The ICL is an average between inflation and wages, and with inflation more controlled, the index finally began to decline,” Braña added.
When would you drill the 200% increase
If inflation continues to stabilise between 3% and 4% per month, the ICL is expected to break through the 200% barrier in the coming months.
12/17/2019 Rental resource image. POLITICS SPAIN EUROPE MADRID RENTAL
Although it is difficult to predict exactly when this point will be reached, experts agree that it could happen between February and March 2025, provided that inflation and wage negotiations maintain their trend in line with the Consumer Price Index (CPI).
Celia Molina of Century 21 said that while it is difficult to make exact predictions, the ICL could break through 200% if the economy follows the budget forecast for next year. “If wage negotiations continue to be aligned with the CPI and inflation remains stable, we are likely to see a more considerable reduction in rent adjustments in the first months of 2025.”
However, the sector emphasises that macroeconomic conditions must remain stable for this forecast to become a reality.
Dynamic
Since the DNU that repealed the Rental Law, the supply of properties in CABA has remained on the rise and fluctuates around 170% when compared to last January .“The stabilization of the dollar and the decrease in inflation allowed owners to be more flexible when negotiating. The wide supply of available properties also had an influence, since tenants have more options to choose from, which moderates prices,” said Molina.
The repeal of the Rental Law was key for the real estate sector. The law had distorted the market with restrictions that harmed owners and tenants. With the DNU, the market began to recover.
Braña said: “The 2020 law was a mistake that broke a balanced market between landlords and tenants. The repeal was key and now contracts are signed with more reasonable values, with adjustments for CPI or ICL, allowing for lower prices to be negotiated, especially at the start of the agreement.”
Between Zonaprop, Cabaprop and Argenprop, among other portals, there are an average of 15,000 apartments in CABA. Near historical highs in the number of available properties (they have almost always been around 16,000), which expands the options for tenants.
A one-bedroom apartment in CABA costs more than $400,000 a month
Molina said that the stabilization of inflation and the dollar created a more favorable environment for negotiations. “Owners are more open to listening to offers and closing deals based on the market. The stability of the exchange rate reduces uncertainty and provides greater security in contracts both in dollars and pesos.”
Current values
A concrete example of how the ICL impacted rents is the case of a two-room apartment in Parque Patricios, rented in February 2024 for $290,000; for the second quarter, the ICL adjustment brought the value to almost $500,000, an amount impossible to sustain in the area, where similar properties were rented for $400,000 or less. As a result, the owner agreed to a bonus and set the rent at $380,000, which will remain until vacancy in November, when the value rises to 400,000 pesos.Braña stressed that “the drop in rents in real terms is evident, especially in comparison with the increase in expenses, which in many cases have risen almost threefold so far this year.”
Current ICL-adjusted rental prices:
- Studio apartments: between $275,000 and $350,000 per month.
- One bedroom: between $400,000 and $450,000 per month.
- Two bedrooms: between $500,000 and $600,000 per month.
These figures do not include expenses. Driven by the labor costs of the doormen, they are a key factor affecting the cost of living in these buildings.
“In buildings with permanent doormen, expenses increased more than rents. In buildings with outsourced services, costs are much lower, making a difference. It is crucial to have mechanisms to control these expenses,” concluded Molina.
www.buysellba.com
