By Sarah de Sainte Croix, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – The astronomical rise of Rio’s property value continues. The city’s most desirable post codes now far outstrip their equivalent neighborhoods in São Paulo in terms of price per square meter, making Rio’s real estate far-and-away the most expensive in Brazil and certainly in South America.
According to market statistics provided by Agente Imóvel, the average price per square meter of real estate in Rio reached R$5,610 (US$3,620) this week, an increase of 3.2 percent compared to the same period last month, while São Paulo’s average price lagged behind at R$5,149 (US$3,323), an increase of just 0.7 percent on last month.
In Rio, this equates to a 16.1 percent increase compared to last year, and a 19.8 percent increase in São Paulo. Reports in Rio’s Zona Sul (South Zone) suggest that the most desirable beach neighborhoods in Leblon, Ipanema and Copacabana have increased even more though, as much as fifty percent.
While many speculate the market is over-heating and due to burst, Hakan Olsson from Rio Apartments has a different opinion. “I don’t see any risk of [a bubble] occurring in Brazil given the very conservative lending environment and the fact that the demand is driven by a true desire to purchase a home as a primary residence as opposed to a speculative investment,” he comments.
Olsson remarks on Rio’s outloook, “As with any other highly desirable beach front area, there will always be a high national and international demand for properties. Even with the crisis in the US, areas such as Newport Beach, Santa Barbara and other highly desirable beach-front areas did not experience the same dramatic declines in value and prices remained fairly constant throughout.”
The market shows no sign of slowing, the average listing price on Agente Imóvel for properties in Rio de Janeiro for June 25th to July 27th was R$883,112, based on 13,868 listings. Compared to one month ago, the average home sales price has increased by 24.3 percent, or R$172,488, and the number of homes listed increased 4.4 percent.
The average listing price for properties in São Paulo during the same period, however, was R$1,105,241, based on 57,296 listings. The average home sales price has increased by 4.5 percent, or R$47,605, and the number of homes listed increased 2.8 percent compared to last month.
An explanation for the apparent discrepancy between the comparative prices per meter and the average listing price between the two cities could be that the higher end of the market is more mobile at the moment in São Paulo.
Furthermore, the higher number of properties listed for sale in São Paulo is most likely down to a simple matter of geography – where Rio is hemmed in on all sides by mountains and the sea, São Paulo is free to sprawl outwards and grow. There is simply more real estate available in the São Paulo market than in Rio’s.
But it is precisely this geography that allows Rio to remain the more desirable of the two cities in terms of real estate. The supply of property is limited, and the demand for the scenery and lifestyle that comes with Rio is high and increasing with the 2014 World Cup and 2016 Olympics on the horizon.
The statistics demonstrate that the Brazilian property market is continuing to boom, while many countries in the developed world are still struggling to restore their markets after the economic crisis.
According to the research by the Scotiabank Group, home prices in the UK were down by an average of four percent from last year, and prices in the US were down five percent, representing a decline of almost 35 percent from peak prices in 2007.