Rio Property Development Sales Suffer in Pre-Olympics Dip

By Georgia Grimond, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – Host countries can expect a fall in demand in the property market after they have put on big sporting competition, but usually after the event has taken place. Rio de Janeiro, suffering with the rest of Brazil from a failing economy and the effects of a country-wide scandal at Petrobras, the state-owned oil company, is struggling already, according to reports.

In Barra da Tijuca, a wealthy neighborhood in the city which will host much of the Olympic Games, the new high-rise accommodation built for athletes has failed to sell well. Only 230 of over 3,600 units have been sold. Many of them have now been taken off the market.

Known as Ilha Pura (or Pure Island), the development will be turned into luxury apartments after the Games, adding to criticism that the Olympics are only benefiting the rich and little affordable housing is being built for those less well off.

Recently Carlos Fernando de Carvalho, a Brazilian property magnate who owns swathes of Barra, as well as Ilha Pura, and who has just been named the thirteenth richest person in Brazil, spoke about the development to the press.

“I have the impression this will be controversial. Since the work isn’t finished, they have the idea that everything is fine just because the buildings are ready. But they haven’t been able to see what will happen from now until the end. The gardens that are planned for the inside will be at a level that only kings have previously had.”

The infrastructure projects that have come with the Olympics have been a huge boon to the area, he added, advancing the neighborhood by thirty years. “The most difficult part of the development plan was the service infrastructure and the Olympics has brought that. It’s a billion-dollar jump.”

However, house prices in Rio, at an average of R$10,491 per square meter, are the dearest in the country. As unemployment and inflation rise and the economy struggles, many people cannot afford to live in areas like Barra.

Real-estate companies are slashing prices and offering incentives and freebies to entice buyers to the market. Online sales portal VivaReal, in partnership with a number of construction companies, has expanded Black Friday (November 27th) to include the whole of November marking down properties throughout the month.

Elsewhere in the city, projects are failing to materialize. A building in Flamengo once earmarked by Eike Batista, a fallen Brazilian tycoon, as a hotel for the Olympics has been taken over by squatters as it lies empty. Another of his projects, the nearby Hotel da Glória, has also been abandoned having been gutted before work stopped. Plenty of others have ground to a halt, too.

The port area in the centre of the city, which has been undergoing extensive regeneration, has a number of new offices that stand empty. Buildings, a property research firm, says almost a quarter of office space in the area is tenantless.

“We imagined this crisis would occur only after the Olympics in 2016, but it’s happening now, calling into question the aggressive bets made on projects in the lead-up to the Games,” Leonardo Schneider vice president of Secovi, a housing syndicate, explained.