Buenos Aires, Argentina Real Estate Rental Profits
Real Estate rental profits deflate, yielding only 3% profitability
At a steady decline since 2006, the decrease in rental property profitability continues to haunt landlords throughout Buenos Aires, leaving many of them more and more worried with each coming year. In 2005 rental profitability fell to 3.22%, the profitability percentage reported in 2009 was reported to be even lower, as figures show a disappointing 3.00% profitability gain for landlords. It is not surprising that the gross annual return figures display similar trends for the following years, 2010 (5.16%), 2005 (5.32%), 2009 (5.26 %). A brief study of the loss of profitability in the rental property in Buenos Aires over the last few years can assist in understanding the declining trend that has so many landlords worried.
There are many distinct reasons behind the steady decline in rental profitability. The most daunting reason is the difficulty to increase the tenants rent. Frankly, many tenants are just not in the financial position to afford to pay more for their apartments. Many landlords value their good tenants and would prefer to work with them through their financial difficulties rather than lose them and gain a tenant that might cause problems in the long run. Generally, if the landlord renews the tenants renters contract the price of rent increases by 10%, however, if the tenant decides to move, the rent falls by 15%. There are financial and social/environmental benefits in maintaining existing renters. Therefore, in many cases, landlords would prefer to temporary freeze profit, if it means keeping a client.
Last years’ numbers show, depending on location and the size of the apartment, that there was a profitability range between 10% and 15%, which was noted to be well below the inflation rate prediction for 2010. As a reference mark, this study was based on an apartment of 85 m2 apartment located in the Barrio Norte borough of Buenos Aires. The market value of the apartment is U$S 159,000.00. This particular apartment would be rented out for $2,700, not including expenses which are $900 a month. Raising the rent for larger apartments, which are bigger than 80 m2, is a bit tricky. Increasing the rent should not solely be grounded in the size of the apartment, as there are more important factors that should be considered.
While there are disputes over the low 3% profitability yield, some claiming that it is actually 5%, many landlords would admit that they are experiencing a substantial loss in profit. Luckily, specialists predict that in the next upcoming years rental profitability should remain steady. This is good news for landlords, due to the fact that in the last few years profitability has fluctuated quite a bit. In 2001, annual net profit for rental property hit an all time high of 4 %. After the 2001 economic crisis, profitability drastically fell to a jaw dropping 1%. In 2006, the annual net profit hit 3.91% making a very important rebound; this was the second highest after 2001. While profitability is not expected to increase, refuge can be found in the 10% increase with rental contract renewals.
The proven Buenos Aires – Argentina lawyer professionals at the Kier Joffe law firm have experience working with foreign clients involved in all kind of cases in Argentina. Buenos Aires Argentina attorney professionals are knowledgeable in almost all the practice areas of law, to service its international cases in Buenos Aires Argentina. International clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires lawyer in Argentina.
