Brazil Real Estate Prices Down in August for 8th Consecutive Month

By Jay Forte, Contributing Reporter

RIO DE JANEIRO, BRAZIL – In the last twelve months prices have fallen 0.32 percent across Brazil while inflation rose 4.29 percent in the same period, according to the FipeZap Index which monitors the listing and sales values in twenty Brazilian cities.

Rio de Janeiro recorded a decrease of 0.19 percent, with a cumulative decline of -4.24 percent in the last twelve months, and a reduction of -2.65 percent in 2018.

The average selling price of residential real estate, was practically stable, with a -0.06 percent change in August, according to the index. In the accumulated result of 2018, through August, the average residential sale price, in the whole country, decreased by 0.29 percent, which corresponds to a real decrease of 3.14 percent, considering accumulated inflation of 2.94 percent in the period (IPCA/IBGE).

According to Bruno Olivar, a Fipe economist, with a high price increase in previous years, a market slowdown was already expected. But, according to him, after the deepening of the crisis, there was a sharp reduction in the demand for real estate.

“In real terms, discounting the inflation of the period, real estate is losing value. The movements of banks are still not enough to reverse the dynamics of the market. It will be necessary to recover economic growth and improve the labor market. To be committed in the long run, the consumer has to be very safe.”

Despite the downward trend, between April and July 2018, new units hitting the market across the country reached 25,483, an impressive 120 percent increase from the the first quarter of 2018, and a twenty percent increase over the same period in 2017.

With respect to sales, new unit sales during the April and July period of this year climbed to 29,951 units sold, an impressive 33 percent more than last year’s second quarter. With sales outpacing new listings, the inventory of available units through June decreased by fourteen percent, or 124,715 available units.

The real estate prices in August varied among the cities monitored by the FipeZap Index. Only six of the twenty monitoring cities recorded a price increase above 0.1 percent. The most significant increases were observed in Goiânia (0.30 percent), Salvador (0.26 percent) and Santo André (0.16 percent).

On the other hand, the most significant decreases were observed in Florianopolis (-0.49 percent), Porto Alegre (-0.40 percent) and Niterói (-0.34 percent). In August, the average sale value of residential properties was $7,529 per square meter.

Rio de Janeiro remained the city with the highest square meter value of the country (R$9,494), followed by São Paulo (R$8,796) and the Federal District (R$7,788).

French expatriate Charlie Jonas of Rio Exclusive luxury real estate firm, explained the dynamics of Rio’s higher value, “The reason why prices are higher in Rio than anywhere else in Brazil is historical and due to the fact that Rio de Janeiro once was Brazil’s capital.”

Adding, “Since the days where all embassies were present in the Cidade Maravilhosa prices were higher than anywhere else. Another reason is also due to the difference of size between both cities, SP being so much bigger with so many more properties for sale is also a reason for a lower price per square meter.”

In terms of advise for foreigners interested in buying or selling in Rio, Jonas shares, “What I say to all foreign investors thinking about investing in Rio is ‘now is the time’. Today the dollar is worth R$4.10 and the euro is worth R$4.80.”

Continuing, “This happened before Dilma’s impeachment and can be explained by uncertainty in the country’s future. Once a new president is elected the real will most probably strengthen itself. […] Some wise investors have understood this and we have seen much more interest and movement in the last month or so.”