Residential Rental Price in Brazil Closes First Semester With Nominal Increase

RIO DE JANEIRO, BRAZIL – The FipeZap Residential Rental Index closed June 2019 with a nominal variation of +0.36 percent — the seventh consecutive increase. The percentage observed in the month once again exceeded inflation as measured by the IPCA/IBGE (+0.01 percent), pushing up the average price of residential property rental in the last month (+0.35 percent).

Among the eleven capital cities monitored by the FipeZap Index, Florianópolis was the one showing the highest price increase in June (+1.27 percent), while conversely, Belo Horizonte was the city showing the most significant drop in the price of residential rental in the period (-0.52 percent).

In the first half of 2019, the FipeZap Index accrued a nominal increase of 3.45 percent, a result that exceeded inflation of 2.23 percent, as calculated by the IPCA (IBGE), but remained below inflation of 4.38 percent, as measured by the IGP-M (FGV).

The comparison between the accrued variation of the FipeZap Index and the accrued IPCA results in a real increase of 1.19 percent in the average price of residential rentals in the period, underlining the positive trend observed in previous periods.

In the last twelve months, the FipeZap Residential Rental Index accumulated a nominal increase (+3.85 percent), once again an intermediate variation between inflation as measured by the IPCA (3.37 percent) and that calculated by the IGP-M (6.52 percent).

Based on the IPCA variation in the period, the index accrued a real increase of 0.47 percent in the last twelve months. Among the cities monitored, Florianópolis leads with the largest nominal increase in residential rental prices in the period (+11.88 percent), followed by Curitiba (+11.16 percent) and Brasília (+7.47 percent). On the other hand, the city of Rio de Janeiro is the only capital city showing a decline in the average price of residential rent in the last twelve months (-1.32 percent).

The average residential rental price in June 2019 was R$ 28.90/m² among the 25 cities monitored by the FipeZap Index. Among the eleven capital cities, São Paulo remained as that  with the highest price per m² (R$ 38.50/m²), followed by Rio de Janeiro (R$ 30.64/m²), and Brasília (R$ 28.95/m²).

Among the capitals showing the lowest average value of residential rent in the last month, the following stood out: Goiânia (R$ 16,54/m²), Fortaleza (R$ 16,63/m²), and Curitiba (R$ 19,02/m²).

The ratio between the average rental price and the average sale price of real estate is the profitability indicator for the investor who chooses to invest in the property to earn rental income. Therefore, the index can be used to assess the attractiveness of the real estate market compared to other available investment options.

With a slight increase compared to the percentage calculated in December 2018 (4.43 percent), the average (annualized) return on residential leases rose to 4.60 percent in June 2019, exceeding the average return on reference financial investments.