Residential Rents in Buenos Aires are soaring as landlords seek to stay ahead of inflation
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Residential Rents in Buenos Aires
Renting a house or an apartment this year will be between 25% and 30% more expensive. Locate experts and real estate brokers estate agree that the determining factor is inflation.
“Rents increased between November 2013 and March 2014, 28.5 percent; so today, if new residential rents are line with this trend continues, the increases for 2015 will could well exceed 30 percent with semiannual adjustments of 15 percent plus.
Besides inflation, Germán Gómez Picasso, co-founder of Real Estate Report, estimated that “prices also rise because the owners want to earn more against a return that is getting lower and lower. We have seen that the rental market is going through a dynamic moment, with lots of activity, but we expect more vacate properties, because of these higher prices. ”
Toribio Achával, director of real estate that bears his name, said that undoubtedly rents will go up. “People have nowhere to go because there is no real estate loans, so they rent. Then, in the segment of smaller properties of less than 70 square meters that has some shortages, so rentals may be overheating.
IMPACT ON TENANTS
In a commodity such as housing, price volatility is a constraint that tenants are not normally willing to endorse without some resistance.
Pilar Garcia, 22, a law student, had to leave his apartment in Recoleta, where he had moved in 2011 due to increases in rent and expenses. “When I got paid 2000 AR pesos per month rent and 300 AR of expenses; last year, I asked to renew the contract, I was informed that the new price would be 4500 AR pesos and 1700 AR expenses.
According to information from Real Estate Report, which condenses data from much of the property in the federal capital, the most sought after locations are: Palermo, with 15.8% of demand; Belgrano, with 11.1%; Barrio Norte, with 8.6%; Caballito, 8.5%, and Recoleta, with 6.8 percent.
With inflation over 30% and little new housing being built these trends are not surprising. It will take a new administration who can convince the market it is serious about managing the economy to see banks start lending and new residential developments started. We believe that over the next two years with a new administration that inflation will drop substantially and property prices will rise accordingly giving current purchasers tremendous leverage.
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An extract from the BA Herald on the same subject
Investment recovery
From the perspective of real estate investors, it will take almost 30 years to recover the investment made in purchasing a 50 square metre apartment, three years more than in 2013 when it was estimated to take 27 years. This worsening return on investment was confirmed by the real estate chamber’s president.
“The historical conception that the annual rent received on a property is 12 percent of the property’s total value, is history now… since net rent doesn’t go past 2 percent tops,” said Arévalo. In 2015, the market estimates that the average rent increase will be similar to last years’ at a 30 percent average. However, it could be even higher for many renters as many property owners have to started to adjust rent prices every six months.
“Palermo, Caballito, Belgrano, Recoleta and Almagro represent almost half of the units offered for rent,” notes the report.
Worst year for real estate
Real estate sales for the City and province of Buenos Aires was the worst in over decade in a report released last week by the Buenos Aires City and Provincial Notaries Public Associations. City property purchases decreased by 18.1 percent and province purchases fell 11.8 percent in November. Furthermore, the number of real estate transactions plunged in the City and province of Buenos Aires by 5.5 and 8 percent respectively in the first 11 months of 2014.
When comparing real estate sales with 2011, only 29,804 sales were made in the city in the first 11 months of last year, in comparison to 2011 when there was 57,700 property sales — an almost 50 percent decrease.