Bad news for those of you renting in Buenos Aires: according to a new study from the Buenos Aires City Government, rent costs increased at a faster rate than wages and inflation between August 2014 and August 2015, and the trend doesn’t look like it’ll be ending anytime soon.
The study showed that renting a one or two-bedroom apartment of 50 square meters has become 34.5 percent more expensive across the whole city. The neighborhoods of Núñez and Retiro saw the highest percentage hikes, with 45.7 percent and 44.9 percent increases, respectively. Palermo and Recoleta are still the most expensive areas to rent apartments in, with the average price for a month’s rent in Palermo being AR$6,427 in August 2015, compared to AR$4,784 a year prior.
But, and here’s where it gets ugly, over the same time period wages only increased by 29 percent. The Buenos Aires City Consumer Price Index (IPCBA), an index which measures the prices of a market basket of goods and services consumed by households across the city used to calculate inflation, increased by 24.8 percent. As a result, people renting accommodation are spending a higher percentage of their income on rent, leaving them with a lower disposable income to spend on Fernet or alfajores or whatever.
This large increase in rental costs is in part due to more and more contracts lasting only six months rather than a year. Over the course of a year, a biennial increase of 15 percent is a bigger increase than one annual increase of 30 percent. Additionally, the rate of returns for landlords is at its lowest-ever level, which is also forcing the prices to rise. This decline in potential income is reflected in the rate of returns on the investment, and on average it now takes 27 years of renting out a property to redeem the costs of buying a one-bedroom apartment in the first place.
Interestingly, only seven of the 48 neighborhoods in the city account for two thirds of rented accommodation, these being Almagro, Belgrano, Caballito, Núñez, Palermo, Recoleta and Villa Urquiza.