Rent value drops 0.61% in 2021, points out new FGV index

The prices of residential rental contracts fell 0.61% in the accumulated of 2021. This is what an indicator released this Tuesday (11) by FGV Ibre (Brazilian Institute of Economics of Fundação Getulio Vargas) points out.

This is the Ivar (Index of Variation in Residential Rents), which evaluates data from four capitals in the country —São Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre.

The new indicator, says FGV Ibre, seeks to fill a gap in the real estate market. Ivar measures the evolution of prices negotiated in contracts between tenants and landlords, and not the values ​​of rental advertisements, as in other surveys.

According to economist André Braz, coordinator of the FGV Ibre price indices, the negative variation of 0.61% last year mainly reflects the renegotiations made between tenants and owners in the pandemic.

With the crisis generated by the pandemic, there was fall in labor income and increase in unemployment. Thus, tenants sought to renegotiate old contracts or tried to reduce the amounts initially set for new leases, says Braz.

“This is the revealing part of Ivar. In fact, there was a renegotiation”, says the economist.

The research analyzes about 10 thousand contracts per month signed in the four capitals, under the intermediation of property management companies. The data encompass both new agreements and readjustments of existing leases.

While Ivar fell in 2021, residential rent in the IPC-S (Weekly Consumer Price Index), also calculated by FGV Ibre, rose 4.45% in the same period.

The contrast, according to Braz, is explained by sampling and methodological differences. The CPI-S mirrors the variation of rental ads in seven cities. Ivar looks at contracts traded in four capitals.

“The big news [do Ivar] is the source of information. The new index is not based on rental listings. It is based on actual values”, comments FGV researcher Ibre Paulo Picchetti, responsible for Ivar’s methodology.

In the monthly cut, the new indicator rose 0.66% in December 2021. There was a deceleration compared to the rate recorded in the previous month, of 0.79%.

Between November and December, the monthly variation rate of Ivar decelerated in São Paulo (from 0.78% to 0.48%) and Rio de Janeiro (from 1.46% to 1.03%).

Meanwhile, Belo Horizonte (from 1% to 1.17%) and Porto Alegre (from 0.27% to 0.43%) had price acceleration in the same period.

In the 12-month period, the survey points out that São Paulo recorded a drop of 1.83% in residential rent values ​​until December. Porto Alegre also accumulated a reduction of 0.35% in the year.

On the other hand, the highest interannual variation was observed in Belo Horizonte, with a rise of 1.46%. Rio de Janeiro followed, with an increase of 0.46%.

During the pandemic, another index calculated by FGV Ibre, the IGP-M (General Price Index – Market), had soared in Brazil. The indicator accumulated a rise of 17.78% in the 12 months of 2021.

Because it often serves as a reference for adjustments to lease contracts, the IGP-M became known as rent inflation. However, due to the escalation in the crisis, it has been replaced in part of the contracts.

The IGP-M measures the prices of various items along the production chain – from agricultural and industrial raw materials, through construction, to services and final goods for the consumer.