By Doug Gray, Senior Reporter
RIO DE JANEIRO – ‘The Olympic Effect’ may already be well underway in Rio’s real estate market with prices expected to double in many of the city’s neighborhoods by 2016, but values in one of the most fashionable parts of the city will receive another significant boost later on this month.
Praça General Osorio in Ipanema will become the nineteenth stop on Line One of the Metro transit system, planned to open on December 21st when President Lula cuts the ribbon across its entrance to mark its inauguration. The greatest infrastructural development in the area for years is set to bring yet another spike in property prices as a result.
The link to the city’s most affluent neighborhood and its central business district will be making the daily commute a fifteen-minute air-conditioned breeze, rather than the current thirty-plus minute bus ride or crawl through the rush hour traffic.
For the rest of the city, the Metro will now link the neighborhoods to the north directly into Ipanema and close to the sun worshipers of Posto 9, whereas before few of the beach-seekers would make the extra journey beyond Copacabana, previously the last destination for the trains.
Real estate in Ipanema has already witnessed a 10 percent price increase in the two months since the victorious Olympic bid, equivalent to a strong full year’s growth, and with the Metro only the first step in another R$30 billion package earmarked for further improvements to the vicinity’s infrastructure over the coming years, this is clearly only the beginning.
From a commercial property perspective, rents in the area have also seen some hefty increases, as Mike Taylor, partner in the Shenanigans Pub on the northern side of General Osorio has witnessed recently. “After a period of extensions on our old contract, we have just agreed to new terms which have doubled the original rate, and we attribute that somewhat to the new subway” he says. “But over the last six months the area has been cleaned up and the park’s transients have gradually moved on, so the potential increase in business the subway will bring should offset the rental increase.”
According to Folha and figures from Secovi, the union of Estate Agents in Rio, average residential prices already increased by 23 percent in 2008 in the area, and with such limited space available, hemmed in as it is by hills, the ocean and the Lagoa, prices could go the same way as those seen in another famous landmark where expansion is limited by its geography – Manhattan.
Market website Ibiubi actually shows a slight dip in average two and three-bedroom apartment prices towards the end of 2009, but it is likely that the holiday period will see another surge in movement and as a result, prices.
The current market average of R$8,000/m2 looks likely to rise sharply in the blocks immediately around General Osorio in particular. The square itself was once one of the more dangerous quarters of the area, dimly lit and and unsafe after dark, but by the time of the Metro station inauguration, the face-lift makes it a far more appealing investment.
In many ways there are still some bargains to be found, but it depends how brave you are. The eastern ends of Rua Barao da Torre and Rua Nascimento Silva rub shoulders with the Cantagalo favela which not only raises security questions for some buyers, but also noise and waste can be an issue at the foot of the hill.
A spacious (130m2) three-bedroom apartment on Nascimento Silva is currently on the market for R$450,000, offering an excellent price-to-square-foot ratio, but the pay off is that the windows that run along the full length of the property look directly into the favela.
On Barao da Torre, one block further away from the hillside, agents are asking R$750,000 for a much smaller (95m2) three-bed, proving that location really is everything. However, with the pacification process underway in Cantagalo and neighboring Pavao now may be the time that some take plunge and grab that bargain just a 10 minute walk to the beach.