September 29, 2022

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Rent: Values ​​Go Up Again

Rent: Values ​​Go Up Again

After a wave of renegotiations, during the most severe phase of the pandemic, housing rental values ​​accelerated again in Brazil. Looking at four of the country’s largest capitals – São Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre – the average adjustments accumulated in January and February are already close to 5%. The The general inflation rate for the period, as measured by the IPCA, was 1.56%..

The advance in rent values ​​is determined by the Ivar (Residential Rent Variance Index), which is calculated by the Ibre FGV (Brazilian Institute of Economics Fundação Getúlio Vargas). The data shows that the index rose in the first two months of the year by 4.84%. The percentage considers the four capitals. One reason for the increase is homeowners’ desire to recoup the damage inflicted by the two years of the pandemic.

Belo Horizonte in its own right is the capital with the highest rent increase this year. see proportions:

Rise in rents in January and February 2022

  • Sao Paulo: +4.88%
  • Rio de Janeiro: +3.88%
  • Belo Horizonte: +5.96%
  • Porto Alegre: +4.70%

Using the methodology used by the FGV, every time a residential lease in these cities is revised – either up or down – Ivar captures the information. This applies to new leases and contracts already in progress, which are subject to amendments in the month of the anniversary.

When the tenant negotiates with the landlord to reduce the amount paid on an ongoing contract, the change is also accounted for by the Ivar.

Why are rents getting more expensive?

Economist Paolo Pechetti, responsible for Ivar and researcher at Ibre FGV, says the recent increase is justified by three factors.

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In the first place, there is a movement to rearrange the rent values ​​of houses and apartments by their owners after their approval. Apply discounts In the past two years due to the epidemic.

January and February readings show an acceleration in rents, but still recover the result they ended up in the past two years even below inflation. On the one hand, landlords now see scope for reconditioning, and on the other hand, tenants are more able to pay.
Paolo Pechetti, Economist at Ibre FGV

In 2020 and 2021, unemployment and lower incomes caused by COVID-19 triggered a movement Renegotiation of residential rents in Brazil. Recently, with the onset of economic recovery, values ​​rose again.

In the 12 months to February this year, Ivar posted a 4.76% increase. The increase in rents in some capitals was even greater:

Lease settlement due within 12 months to February 2022

  • Sao Paulo: +2.83%
  • Rio de Janeiro: +4.90%
  • Belo Horizonte: +9.32%
  • Porto Alegre: +5.46%

Families return to the capitals

The second factor for the recent rise in residential rents, according to Piketty, is the return of families to the capitals.

According to him, in the most dangerous stage of social isolation, many people started working from home and chose to live in the countryside. “They have worked remotely outside the capitals, and now they have to go back,” says the economist.

The third factor is related to seasonal aspects. According to Piketty, rent adjustments usually end up being slightly higher at the beginning of each year, compared to other months.

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“It is difficult to weigh each of the factors, but a good interpretation of the data is specifically to see the increase in rents, in the first two months of 2022, as a result of the resumption of the economy, the return of people to the capitals and, to some extent, seasonality at the beginning of the year,” he said. Says the economist at FGV.

Adjustments must continue: what to do?

As the process of restoring jobs and income tends to continue, the FGV’s forecast is that rent values ​​will continue to accelerate in 2022, albeit in a “moderate manner,” says Bechetti.

For those who will close or renew a contract in the coming months, the recommendation is to assess the impact of rent on the family budget, taking into account other expenses.

Financial planner Anna Hatz, a professor at PUC-SP (Pontifical Catholic University of São Paulo), says rent is taking its toll on families. In addition, it is difficult to reduce expenses if the need arises.

You cannot change the rent overnight. In addition, there is an increase in electricity and fuel, which puts pressure on budgets. Housing has become a heavy weight, especially for families C and D. If you are looking for a property to rent now, the convenient thing is to keep the cost down to 30% of the family income. If you can stay below 20%, that’s even better.
Anna Hatz, Professor at PUC-SP

Anna Hatz also notes that, traditionally, leases in Brazil are adjusted by the IGP-M (General Price Index – Market), an indicator that is also calculated by the FGV.

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Since it reacts more directly to changes in the dollar, the price of the IGP-M has increased in recent years: in 2020 the rise was 23.14% and In 2021 the increase was 17.78%.. The IPCA (Broad Consumer Price Index), which is measured by the IBGE (Brazilian Institute of Geography and Statistics), rose 9.26% in 2020 and 10.06% in 2021.

Although this is uncommon, nothing prevents the IPCA from being the reference for readjusting leases, as long as there is negotiation between the landlord and tenant.

“There is no indication that the lease agreement should be modified by the IGP-M,” says Ana Hutz. “At this point, it would be nice if the tenants exercised a little pressure not to put the IGP-M as a reference.”