In the last year, rents kept pace with inflation

September 24, 2018 - By Arturo Altman

In the last year, rents registered an average rise close to 35%, according to different measurements. The increase is barely above inflation, which, up to August, accumulates an annual increase of 34.4%, according to INDEC data. On the other hand, compared to the movement of wages (they grew around 25%), the expenditure of tenants was much more disadvantageous.

There are different measurements on the variation in the price of the locations. For example, according to the index produced by the Properati real estate company with the Oikos consultancy firm, in the last 12 months (between August 2017 and this one), rents registered an increase of 32%. That is, according to this indicator, the rise would be 2.2 percentage points below the CPI, and well below the appreciation of the dollar.

But, according to the records of the site Real Estate Report, in the City of Buenos Aires the rents have increased over 30% for 5 years. And, in the last 12 months, also measured until August, the 2-room apartments increased 37.54%.

According to this measurement, the average value, in the city of Buenos Aires, for 2-room apartments was $ 10,922 last month, while the 3-room units reached an average of $ 14,212 in the same month.

On the other hand, according to the measurement of the Directorate of Statistics and Censuses of the government of the City of Buenos Aires, rents climbed on average 36.7% in that area. Meanwhile, inflation for that same area stood at 33.6% in August.

Juan Fernández, from Oikos, explains that “the latest escalation in the exchange rate has generated and will continue to generate a lot of noise in the real estate market, mainly through a mortgage retraction, which could last for long months, until well into 2019,” he said. .

The first impact in the rental market comes from the disincentive of potential borrowers for the purchase of homes, due to the sudden depreciation of the exchange rate. Thus, the virtuous circle that was occurring during 2017 and the first quarter of 2018 was interrupted.

Specifically, the acts of purchase and sale in CABA made through mortgage loans showed a fall of 46.3% in year-on-year terms in the month of July. Meanwhile, the total of the acts of purchase and sale closed in CABA fell 17.1%, also in year-on-year terms.

The number of potential owners, who can no longer buy because they do not access mortgage loans, continues to add to the demand for rents and reinforces the pressure on prices. However, the monthly payments that the owners intend to charge have a ceiling: the capacity of the tenants to pay. Something that impacts profitability.

“Due to the differential increase between the sale prices due to the devaluation and the locative values, the annual profitability of apartment rentals in the city of Buenos Aires, was reduced almost 2 points compared to last year when it reached 5, 38% on average for 1,2 and 3-room apartments, currently this average rental yield is only 3.41% per year, “explains Fernández.

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