- Advertisement -

By Carlos Graffigna, Contributing Reporter

Officials receive Lula after Brazil won the bid to host the 2016 Olympics, photo by Fábio Rodrigues Pozzebom/ABr.
Officials receive Lula after Brazil won the bid to host the 2016 Olympics, photo by Fábio Rodrigues Pozzebom/ABr.

RIO DE JANEIRO – A World Cup and a Summer Olympics bid directly affects a host city’s Real Estate market, a pillar of any economy. When Brazil received the honor of hosting the 2014 World Cup, the impact on cities involved was immediate. Local governments of those cities have had to reassess and plan for new infrastructure, submit new development plans and make sure their city is up to the task of hosting such event.

For Rio de Janeiro, the scale is immense. Not only will it serve as one of several cities for the World Cup in 2014, but it will have the honor of hosting the 2016 Summer Olympic Games. The huge investment which is about to flood the city will have a direct impact on land and home value. Already companies linked to real estate are identifying the added demand for land, homes and apartments.

The Urban Land Institute, a publication specialized in urban development states, “for property, the value of hosting the Olympics is less the new venues, or even the new infrastructure, and more the enhanced perception and branding for the host city. This “legacy effect” can enhance property value long after the medals are counted.” (Olympic Cities are the Real Gold Winners).

Steve Gallagher, owner of Brazil Overseas Property, whom works with national and international investors, reaffirms such tendencies “demand for investments in Rio has increased, especially from the United States”.

Not that real estate has become all of the sudden good business in Rio, for the most part, it has been for years, but it is reasonable to expect that it will be even more attractive in the short future. Mr. Gallagher also states that, even though high season from December through February brings a lot of foreign tourists, he continues to rent apartments all year to local Brazilian tourists.

Barcelona's Olympic Village, photo by G. Scottie
Barcelona's Olympic Village, photo by G. Scottie.

La Salle Investment Management a large global real estate investment company, working out of Chicago, created an in depth study on the impact of Olympic Games on the real estate markets (Reaching Beyond the Gold). They state “Arguably the greatest impact of the Olympics is not on the local economy, but on the urban form …, the creation of Olympic Villages which often serve as new neighborhoods; improvements to city infrastructure; the increasing emphasis on the environment sustainable development; and growth in the tourism and convention industries.”

Furthermore, they conclude, “there are two potential impacts of the Olympics on the residential market. A short-term boost to rentals and prices in certain localities and a longer-term impact in terms of new centers and the upgrading of housing stock.” According to La Salle, Barcelona’s residential market grew in values between 250 percent and 300 percent between 1996 and 2003. Sydney and Athens reported an average of 150 percent increase.

London's new Olympic Stadium, photo by John Stillwell
London's new Olympic stadium, photo by John Stillwell.

Dr. Georgios Kavetsos, a professor at Cass Business School in London, gives us an insight on how the London market reacted after his city was announced as host for the 2012 Olympics “the statistics from this are undeniable – the impact of hosting the Olympics in London has had a substantial impact on the valuation of property prices”.

According to Dr. Kavetsos’ article (House Price Values Jump £1.4 billion As A Result Of Hosting London Olympics) on Real Estate pricing in areas planned for future Olympic infrastructure, he finds that “those properties within a three mile radius of the stadium have observed a five percent increase, with those three to nine miles away seeing an increase of two percent in the valuation of their property since London was announced as the host city of the 2012 Games”.

The Real Estate implications of Rio hosting the World Cup in 2014 and the Summer Olympics in 2016 is still to be seen, every market behaves differently and reacts according to present circumstances and variations. But there is no indication that Rio will not follow the trends and provide opportunities for growth and improvement.

- Advertisement -

9 COMMENTS

  1. I DONT THINK RIO REAL ESTATE MARKETPLACE WILL INCREASE IN VALUE IN THE NEXT 7 YEARS….WHY? READ ON:

    first, if you are a north american or european, you get very few real estate property for the money you will pay.

    HIGH PRICES LOW QUALITY

    real estate marketplace in rio de janeiro is already superoverpriced, brokers are dying to sell anyhting to keep then in business…why is that?

    well, because locals cant afford to buy property in rio de janeiro, banks finance with much higher rates then banks in europe or north america and 99% of the brasilians make money only to survive for the basic needs.

    180 euros is the minimum salary in brazil….350 euros is the average salary in brasil… how can you afford to purchase a property in rio, which in most cases are even more expensive then north america and europe?! YOU CANT.

    rio real estate marketplace in rio, in my opinion will decrease in value or REAL CURRENCY WILL LOSE 100% OF IS CURRENT VALUE… otherwise the real estate markeplace will colapse and survive only from property changing business hands to hands…give yours i will give you mine.

    you cant predict the future of the real estate marketplace in rio, unless you know the local culture….inflation culture was maintained during this last 8 years ( lula government) but almost no inflation happen…prices have jumped 10 times higher based on a artificial inflation culture…plus the real currency artificialy increase in value during this last 8 years making the things even worst and distort completly the reality of the brasilian economy and real estate in particular.

    investing in rio its pure fantasy and nothing but only a marketing compaign well orquestreted by those in power.

    soon or later rio real estate marketplace will colapse and afect everybody… you and me included.

    sell now and get out.

  2. Ahhh :) forgot to mention in rio you pay OVERCHARGED SUPERHIGHER condominium fees and iptu which is a real estate tax, yes you pay MUCH MORE THEN IN EUROPE OU USA… do yourself a favor and make a small research…

    you will find thousands of condominuns fees like 100, 200, 300 euro and HIGHER PER MONTH.

    TOTALLY INSANE…

  3. Thank you for sharing your views.

    Concerning 99% of Brazilians making money only to survive. Statistics by the Getulio Vargas Foundation (FGV) shows poverty to be at 25%, which includes household incomes of less than US$489. The middle class has grown rapidly, it now represents over 52% of Brazil’s population.

    There can be a case made by pointing out that one can purchase thousands of hectares of land in the Amazon State for a million Dollars, so why buy a few square meters of apartment in Copacabana for the same amount? Because value is in the eyes of the beholder and perception of value is subjective. Some people’s perception of value leads them to conclude that a home or apartment close to the beach in a cosmopolitan city like Rio de Janeiro is worth the money current pricing dictates.

    With regards to Brazil’s current monetary policies and inflation, the Getulio Vargas Foundation predicts the Brazilian economy will grow between 4.5% and 7% in 2010. That is higher than the three percent estimated by the International Monetary Fund for the world in 2010. There is little chance the economy can grow to such extend and have the real estate devalue and the currency suffer the corrections described.

    Actually, one of the main reasons for the strong Real, besides a weaker Dollar, is the commitment of current Brazilian authorities to encourage exports, which floods the currency market with Dollars. Having a strong industrial base capable of competing in global markets is the sign of a surging economy and by not a collapsing economy.

    The Bank of Japan and the University of Pennsylvania discovered a relationship between real estate prices and GDP, finding that real estate, office and residential prices in particular, were found to lead GDP growth. Please take a look at the complete report on this link.

    Again we appreciate your comments and look forward to all our Readers participation.

  4. GRAFFIGNA… RIO IS PURE SPECULATION. PERIOD. BRAZIL CURRENCY IS PURE SPECULATION PERIOD. BOVESPA IS PURE SPECULATION PERIOD.

    Comunist PT political party, is going down on the next elections and a lot will change in brazil.

    if you think 5% growth is a lot, well just look at what some african and asian countries aree doing , 5% its nothing.

    also, brazil exports are just comodities puled by vale do rio doce and petrobras, you try to export other idem made in brazil to europe and america, try? EXPENSIVE AND POOR QUALITY.

    brazil cant compete with china, india … real is overpriced because of the high interest rates for gringos not because of the real value of the brasilian economy.

    BRASIL … LULA LAND …FANTASY LAND …WHERE EVERYTHING ITS NOT WHAT IT LOOKS LIKE.

  5. Thank you for your continuous participation. Although Vale do Rio Doce and Petrobras are large corporations with substantial exports, they are hardly the only products Brazil has been able to compete with in the international market. Food products, textiles, shoes, machinery, technology and many other items are part of the successful development of Brazil’s industrial base. Growth in countries which economies are underdeveloped can reach double digits, but those numbers are not a measure of competitiveness or industrial success. Brazil does not want to compete with China or India, those are countries characterized by less quality and inexpensive products, Brazilian governments over the last decade have envisioned exports of added value products through organizations like Design Brasil or through legislation, like the prohibition to export logs forcing timber companies to export added value or finished products. Regarding currency, the value of Brazil’s currency in hardly speculation, a quick recovery from financial crisis and an increasing demand for commodities have flooded the market. Now, Goldman Sachs qualifies the Real as “overpriced” which is different from speculation. Central Bank will has a rough road ahead keeping the currency exchange under control, no question, but there is common belief among bankers and financial institutions that the Real will remain at 1,70 for a long time, which throws away any theory that the increase in value suffered over the last few months is due to speculation. Remember that speculation characterizes for the lack of solid data or information leading to a conclusion, relying solely on the speculator’s opinion. With the Real and BOVESPA, we know exactly why their value is what it is today and which forces have driven those prices. Thank you again for your comments.

LEAVE A REPLY