New Index finally brings more transparency to Brazil’s real estate market

RIO DE JANEIRO, BRAZIL – (EXAME/Loft) The Speculometer Index by newspaper EXAME and Brazilian unicorn Loft shows the difference between the price of the property sale announcement and that of the contract signing at the notary’s office; more transparency should lead to agility in negotiations between parties.

The real estate market in Brazil withstood the crisis triggered by the pandemic with double-digit growth in sales of new and used units. It is a structural process, driven partly by low-interest rates and advances in technology and actors that brought practicality and transparency to negotiations in a sector traditionally characterized by imbalance and lack of information between the parties involved.

In this context, the EXAME-Loft Speculometer Index was born, combining EXAME with Loft, one of the most important startups dedicated to the country’s real estate market and leader with its digital buying and selling platform.

Using a pricing tool developed by Loft, the Speculometer Index measures the percentage difference between the price announced by the owner on its platform and the contract closing value between the parties registered at the Land Registry.

“Anyone who goes to a trade show or car dealership knows that the asking price is very different from the final purchase price. Having this information about the difference in property values shortens the path to break-even price and negotiation time to close the deal for both parties,” Daniel Scalli, director of engineering and data science at Loft, tells EXAME.

“The buying and selling journey is challenging, and visibility into this hurdle to overcome can give both sides confidence that they are getting a good deal,” he adds.

The EXAME-Loft Speculometer Index base includes properties offered and sold in 12 of the largest neighborhoods around downtown São Paulo, the country’s largest market.

The platform currently has 15,000 active apartments in more than 130 neighborhoods in the cities of São Paulo and Rio de Janeiro.

To mitigate seasonal effects, the methodology considers the price difference in a moving quarterly average, referring to two months earlier due to the time needed by notaries to provide the information.

The first edition of the EXAME-Loft Speculometer Index shows that the difference between the announced price and the closing price in the quarter that ended in April reached 34.24% in Itaim Nobre, a region near Parque do Povo, in the western zone of the capital São Paulo. This is the largest difference among the 12 districts in the sample.

In 11 of the 12 neighborhoods, the price difference is in double digits, which shows how much the potential buyer has to negotiate to get the price they are able or willing to pay.

The historical series compiled by Loft for the index begins with the quarter ended in January of this year. It shows that the difference between the price asked and the price received ranges from 10% to 40%, which is significant. In the most extreme case, this means that a property offered for sale for R$1 million ends up selling for R$600,000.

The index also records the average price per square meter in each of these neighborhoods.

The Engineering and Data Science Director of Loft explains to EXAME that price differences are natural, but not to the extent of the Brazilian market.

“We understand that the main explanation is the lack of precise information, which means that on average in Brazilian cities, this difference is about 25%,” he says.

“In the United States, for example, where there is a system in which all market participants register transactions in a publicly available database, this difference is much smaller, under 10%.”

LOFT STARTUP, A BRAZILIAN UNICORN

Founded in 2018 by entrepreneurs Florian Hagenbuch and Mate Pencz, Loft is a startup that aims to facilitate the buying and selling of apartments through a digital platform, with verified prices and information and solutions that tend to make the negotiation easier and practical.

The average time to close a deal through the platform is four months, a third of the market average (one year).

The last funding round in April brought Loft’s valuation to US$2.9 billion (about R$14.5 billion at the current exchange rate), making it one of the most valuable startups in Latin America.

Source: exame