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By Georgia Grimond, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – The price of real estate in Brazil rose on average only 0.53 percent over the twelve months to March, according to the FipeZap index. It is the smallest increase registered since the index began in 2008. The high rate of inflation in the country means that the property market experienced a fall in real terms of 8.10 percent.

Brazil, Brazil News, Rio, Rio de Janeiro, Real Estate, Housing, House prices, Sao Paulo, Fipezap
The price of real estate in Brazil is falling because of uncertain political and economic conditions and a contraction in the market, photo Wikimedia Creative Commons Licence.

Of the twenty Brazilian cities surveyed, all of them apart from Florianópolis experienced variations in the price of real estate below the rate of inflation, measured by the IPCA, an index.

Over the past twelve months, the prices in real terms in Florianópolis had been equal to the rate of inflation. The cities of Rio de Janeiro, Belo Horizonte, Federal District (Brasilia), Recife and Niterói, however, all experienced a nominal reduction in absolute prices from March last year to March this year.

There has been almost no change to the average price of housing from month to month: a 0.03 percent increase was recorded between February and March. Fortaleza, Recife, Niterói, Contagem, Santos and Rio de Janeiro all experienced a nominal drop in price over the period.

Property in the twenty Brazilian cities surveyed cost on average R$7,615 per square meter to March 2016. The country’s two biggest cities, Rio de Janeiro and São Paulo, are home to the most expensive real estate. The average cost of per square meter in the cities is R$10,371 and R$8,617 respectively.

Two smaller cities, Goiânia and Contagem, have the cheapest real estate of the twenty cities included in the index. A square meter in Goiânia costs on average R$4,244 and the price in Contagem is R$3,542.

Widescale scandal and political manoeuvring are affecting Brazil’s government and its economy. The value of the real continues to fluctuate, unemployment has risen and banks have become reluctant to lend to potential buyers. As a result the housing market has contracted.

“If at first, in a growing economic cycle mortgages were cheaper and in high demand, now there is a reversal of these factors, as interest rates are high and credit scarce,” says Eduardo Zylberstajn, the Fipezap index coordinator.

“Unemployment and inflation are high, and we must remember that a mortgage is for the long term and with any instability people tend to postpone home projects. The industry relies on the country’s situation and you can not talk about improvements in the economy. Instability in politics also contaminates confidence,” adds Zylberstajn.

The FipeZap index is compiled using research from the Economist Research Institute Foundation (Fipe) and data from the adverts placed on property search site, Zap, usually more than 290,000 units per month. Fipe also uses data from the IBGE, the Brazilian Institute of Geography and Statistics, on household income.

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