The drama of renting in Buenos Aires: sky-high prices, 6-month agreements and lots of vacant properties
While a change in the law that has been in force since 2020 is being debated in Congress, the market reacts with higher prices, less available supply and lots of informal contracts.
Once again the Rental Law is at the centre of the controversy. While its modifications are debated in Congress, for now without definitions, the market continues to retract: today, the owners decide to extend the contracts for very short periods or even keep their properties empty, further reducing the number of properties on offer in the market locative.
“The market is expectant, there is a lot of cross information. Last year Personal Assets had been lowered, which had been good news. Then the agreement with the International Monetary Fund was added, which generated a real estate revaluation and, now, the debate on a new Rental Law. The owners want to protect themselves and that affects the rental price,” explains Fabián Achával, owner of a local real estate company.
WHAT ABOUT THE RENTALS
Today the available stock of rentals is reduced to historical levels. “There are no properties to rent,” says Marta Liotto, president of the Association of Real Estate Brokers of the City of Buenos Aires (Cucicba).
According to the registered, in the first quarter of the year, the situation worsened until reaching historical minimums of the available supply of real estate for rent.
According to data from Daniel Bryn, real estate advisor and owner of Inversiónre Real Estate, today there are 5,700 apartments for rent in the City of Buenos Aires, approximately 40% less than 6 months ago.
What is happening today is that many of the investors “pull out of the rental market because it is not profitable. Today, this type of investor is disappearing. The public is the final buyer,” explains Achával.
This generates a rise in prices. According to data released by Zonaprop, in the last year, the values rose by 53%. In the first quarter of the year, rents (new contracts) accumulate a rise of 14%.
“It is a very bad time for the sector. For owners and tenants there is great uncertainty about what the rules of the game are,” explains Achával.
In the midst of the controversy, the number of owners who decide to close the doors of their properties and leave them as vacant homes is growing. “Until the future of the new law is defined, many owners decide to remove their property from the market and this increases week by week,” Liotto remarks.
The biggest problem is for tenants whose contracts are about to expire. ” The owners who had agreements until March, what they did was an extension, which are agreements between parties, in most cases for six months,” explains Liotto.
The truth is that the extensions of expired contracts grew in the last six months, often with price abuses and excessive increases. The curious thing is that, although it was a practice that began to gain strength with the new Rental Law, as a mechanism to be able to continue with the old norm, the extensions that, at first, were made for two years -the same time that the norm provided-, today are made for one year and up to six months.
Another consequence generated by the debate on the Rental Law and the lack of decisions on the subject is that the number of properties that are turned over to the rental market is growing, but with values in dollars, as a way for the owners to cover themselves against unchecked inflation.
WHAT HAPPENS WITH THE SALE OF REAL ESTATE
The rental law also affects the buying and selling market. This is a consequence of the low profitability generated today by a rental properties.
According to the latest data from Zonaprop , today the profitability is 3.46% , but in some neighbourhoods such as Palermo or Caballito that sum barely reaches 3%.
The low profitability, added to the announcement of new taxes such as the real estate revaluation, discouraged the investor who was betting on buying a property to allocate it to the rental market. “Today these investors do not exist, which further reduces the number of operations”, explains Achával.
According to the latest data from the College of Notaries of the City of Buenos Aires, 1,558 deeds were carried out in February. This shows that only in the first two months of the year a total of 2,943 operations were carried out, the second-worst record after 2020, in the midst of a pandemic.
The biggest problem is for tenants whose contracts are about to expire. “The owners who had agreements until March, what they did was an extension, which are agreements between parties, in most cases for six months,” explains Liotto.
The Real Estate Radar, produced by Achával, shows that the current stock of properties for sale is 162,000 units and only less than 1% is sold. It takes between 5.6 and 5.8 years to absorb the demand only in Capital, when the historical average was two years.
REAL ESTATE REQUEST
On Monday, the real estate chambers presented a document to the National Congress where they express the need for urgent modifications to the current Law.
“This historical document for the sector was born after a great joint effort between real estate professionals from all over the country, putting together the knowledge that each one has of the reality of the market in their province or region,” explains Liotto.
“We line up behind the position of only modifying the contract term or period and the term and format for updating the values,” they indicate.
Today, the new law establishes contracts for three years and an annual update that takes as a parameter the inflation rate and the rise in wages.
“All the entities in the sector have made our technical teams available to Congress, and we trust that we will be able to start working immediately with the legislators in order to shape the Law that the market requires to recover its vitality “, concludes the registered.
“We believe that once again the State gets involved in private property issues and what it does is generate more confusion and discomfort. What we noticed is that the owners are already tired of this type of intervention, where they are told with taxes and rules how they have to manage their properties”, adds Matías Chirom, general director of Baigun Real Estate Operations.
“Everyone should be able to access a home, but not from the obstacles and obstacles, but from the incentive and benefits for this access. These regulations affect both parties involved; and those who were limited to accessing a home, now with these possible regulations, are more unable”, concludes the specialist.
Source: La Cronista