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New rent adjustment indicator: The residential rent variation index (IVAR)

18 de janeiro de 2022

On January 11, 2022, the Brazilian Institute of Economics of Getúlio Vargas Foundation (FGV IBRE) launched a new price variation index based specifically on residential rents – the “IVAR” -, or, Residential Rents Variation Index, which has the potential to become an important index for residential lease agreements. Unlike the IGP-M or IPCA, which are indexes based on certain products and seek to capture and demonstrate price variations, the IVAR is designed specifically for the real estate market. Its objective is to capture the variation in the values of residential rentals.

Instead of using the values advertised in the offers of lease properties, which comprise data from a preliminary phase of contracting and that usually do not reflect the prices actually practiced, the IVAR captures the prices directly from the lease agreements, which better reflects the supply and demand scenario of the residential lease market in the surveyed locations and thus seeks to mitigate the difficulty in measuring rent variations.

Although it was officially launched last week (January 11), the IVAR made use of recent data to calculate, retroactively, the values for the formation of the indicator month by month since 2018. The IVAR calculation is based on 10,000 property lease agreements in four of the country’s largest capital cities (São Paulo, Rio de Janeiro, Belo Horizonte, and Porto Alegre), but the goal is to add other cities and regions to the index over the coming months to make the sampling more comprehensive.

This constitutes one more very important reference for the values of residential rents, even though its scope is limited to the capitals currently surveyed or even that, among these capitals, there are different circumstances regarding the rental of residential properties.

The IVAR seems to us to be naturally more attractive to the tenant, whose immediate concern is the payment of the rent. To the landlord, perhaps the variation of the rental values in itself is not so attractive, since his interest may be based more on the variation of other products and, therefore, he may be more inclined towards traditional indexes. Nevertheless, it seems unquestionable to us that the IVAR will become a valuable tool also for landlords, since it will bring visibility to the variations of residential rents.

It is worth pointing out that, as with any other index, the IVAR is not mandatory and does not modify agreements in effect. For any contracts, it depends on the consensus between the parties for its application. Likewise, the IVAR does not represent an indicator that binds the judiciary. However, for any ongoing or future disputes, the IVAR can be used as an important reference.

Demarest’s Real Estate team is available for any clarification on this matter.


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