Prices have jumped by 67% due to new housing reform and decrease in value of the peso

Rent prices in the Argentinian capital of Buenos Aires are being driven up due to rising inflation, combined with a new housing reform and the decrease in the value of the peso.

A report from Bloomberg says rent prices have now risen 67 per cent from a year ago. The newswire quoted a local real estate firm as saying, “this is the biggest increase on record”.

Tenants in the city of Buenos Aires are seeing apartment prices soar 67 per cent from a year ago to an average of about 35,000 pesos a month (US$377).

Rent is now rising twice as fast as paychecks, and well ahead of other prices in one of the largest cities in Latin America. The sudden rise is also blamed on the country’s latest housing reform, which allowed property owners to stretch rental contracts to three years but denied them the right to raise prices whenever they want.

Current rental agreements allow price increase every six months

Argentinian law states that the country’s Central Bank will publish an index, indicating how much rent the property owners can increase. The new law, set to come in place in July, also stipulates that rental contracts will be stretched out to three years with price increases limited to once a year.

Currently, a common rental agreement lasts two years, and landlords often increase prices every six months as part of the terms outlined in the contract. But with so much economic uncertainty in Argentina, landlords and tenants have traditionally negotiated how much rent would increase.

However, local realtors say, “since landlords in Buenos Aires don’t know how much they’ll be allowed to raise prices later on, they’re jacking up rents on new contracts now before the index takes effect”.

Some lawmakers are demanding that the law should be dismantled or amended, but analysts say it is less likely to be changed anytime soon.

While the real aim of the law was to curb prices, it is having a reverse effect. Rent prices have surged in Argentina after a housing reform became law.

Some of the reason for this is Argentina’s surging inflation, driven in part by the government’s excessive money printing last year to finance COVID social spending. But it’s also the unintended consequence of rental reform passed by the national government last year that was meant to stabilise prices and protect tenants.

Meanwhile, many wealthy Argentinians have left crowded Buenos Aires for the fear of contracting coronavirus, moving into plush, gated communities outside the capital city.