1 – Prices rose sharply but are not absurd
Prices were wrong until the mid-2000s – and not now. The valuation of last year represented just a correction after a period of almost 20 years of lagging behind inflation. From the moment that the Brazilian economy took a leap and moved to a new level, it was natural that real estate prices appreciate.
2 – The demand for housing goes strong
In July, a developer called Brookfield launched the One World project Offices (photo) in Barra da Tijuca, Rio de Janeiro. All 830 rooms and business offices were worth 220 million dollars and were sold in just five days. In recent years, it hasn’t been rare real estate being sold at an astounding rate, such is the current demand. In addition to the interest of investors for commercial property, the appetite of all social classes for better houses also goes much higher than the previous two decades. For the American Turtzo Peter, vice president of Sotheby’s International Realty, the governmental program “My House, My life” would be behind this phenomenon. Government subsidies coupled with credit facilities allowed many people to have access to buying the first home.
3 – There is space for housing credit growth
Real estate loans have grown very fast in Brazil, but is still small compared to other countries. In Brazil, loans for the purchase of property amount to about 5% of GDP – 11% against 18% in Mexico and Chile.
4 – Insufficient commercial real estate in Brazil
The supply of homes is small to meet demand in virtually all segments of the Brazilian market. However, among commercial real estate, there are plenty of numbers that support the vision of scarcity. According to Andrew Rose, director of sales and investment consultancy Jones Lang LaSalle, the entire stock of office buildings, upscale housing for the large companies in Sao Paulo sum to 2.6 million square meters. This is only a small fraction of the inventory of New York (22 million meters), Washington (16 million) and Boston (8.6 million).
5 – The construction costs are also rising fast
Not only the land prices put pressure on property prices. Rental equipment, construction materials and hiring of labor were much more expensive in recent years