By Carlos Graffigna, Contributing Reporter
RIO DE JANEIRO – A World Cup and a Summer Olympics bid directly affects a host city’s Real Estate market, a pillar of any economy. When Brazil received the honor of hosting the 2014 World Cup, the impact on cities involved was immediate. Local governments of those cities have had to reassess and plan for new infrastructure, submit new development plans and make sure their city is up to the task of hosting such event.
For Rio de Janeiro, the scale is immense. Not only will it serve as one of several cities for the World Cup in 2014, but it will have the honor of hosting the 2016 Summer Olympic Games. The huge investment which is about to flood the city will have a direct impact on land and home value. Already companies linked to real estate are identifying the added demand for land, homes and apartments.
The Urban Land Institute, a publication specialized in urban development states, “for property, the value of hosting the Olympics is less the new venues, or even the new infrastructure, and more the enhanced perception and branding for the host city. This “legacy effect” can enhance property value long after the medals are counted.” (Olympic Cities are the Real Gold Winners).
Steve Gallagher, owner of Brazil Overseas Property, whom works with national and international investors, reaffirms such tendencies “demand for investments in Rio has increased, especially from the United States”.
Not that real estate has become all of the sudden good business in Rio, for the most part, it has been for years, but it is reasonable to expect that it will be even more attractive in the short future. Mr. Gallagher also states that, even though high season from December through February brings a lot of foreign tourists, he continues to rent apartments all year to local Brazilian tourists.
La Salle Investment Management a large global real estate investment company, working out of Chicago, created an in depth study on the impact of Olympic Games on the real estate markets (Reaching Beyond the Gold). They state “Arguably the greatest impact of the Olympics is not on the local economy, but on the urban form …, the creation of Olympic Villages which often serve as new neighborhoods; improvements to city infrastructure; the increasing emphasis on the environment sustainable development; and growth in the tourism and convention industries.”
Furthermore, they conclude, “there are two potential impacts of the Olympics on the residential market. A short-term boost to rentals and prices in certain localities and a longer-term impact in terms of new centers and the upgrading of housing stock.” According to La Salle, Barcelona’s residential market grew in values between 250 percent and 300 percent between 1996 and 2003. Sydney and Athens reported an average of 150 percent increase.
Dr. Georgios Kavetsos, a professor at Cass Business School in London, gives us an insight on how the London market reacted after his city was announced as host for the 2012 Olympics “the statistics from this are undeniable – the impact of hosting the Olympics in London has had a substantial impact on the valuation of property prices”.
According to Dr. Kavetsos’ article (House Price Values Jump £1.4 billion As A Result Of Hosting London Olympics) on Real Estate pricing in areas planned for future Olympic infrastructure, he finds that “those properties within a three mile radius of the stadium have observed a five percent increase, with those three to nine miles away seeing an increase of two percent in the valuation of their property since London was announced as the host city of the 2012 Games”.
The Real Estate implications of Rio hosting the World Cup in 2014 and the Summer Olympics in 2016 is still to be seen, every market behaves differently and reacts according to present circumstances and variations. But there is no indication that Rio will not follow the trends and provide opportunities for growth and improvement.