“We are experiencing a mini-boom in the real estate market,” says CEO of luxury real estate company

RIO DE JANEIRO, BRAZIL – A favorable alignment of factors, such as low interest rates, availability of credit and revaluation of the role of housing that came with the pandemic, caused a mini-boom in the real estate market, according to Marcello Romero, CEO of Bossa Nova Sotheby’s International Realty, a real estate company specialized in luxury real estate.

In his evaluation, the movement was more accentuated in the high-standard segment. The executive believes that this mini-boom is sustainable, but warns that a risk factor is the strong inflationary pressure that exists in the sector and the effects on launchings. Below are the main extracts from the interview.

What is your evaluation of the market, in a general way?

What we are experiencing is a mini-boom. It is happening because we have very interesting conditions for the resumption of the purchase of real estate. In recent years, between 2015 and 2019, we went through a complicated period. The basic interest rate, the Selic, at double digits, made people leave their money invested in fixed income, with practically zero risk.

And the Selic rate determines the interest rates for mortgages, which were also high. Besides this, there was a lot of uncertainty, impeachment, and the truckers’ strike. All these factors held the market back during this period.

And what changed?

The basic interest rate fell to 2% a year, the historic low, and the housing credit followed suit. As a result, leaving the money invested in fixed income became not a good business. Even with low interest rates on mortgages, people have started to rethink whether it is worth renting or buying a house. Many times the mortgage payment is lower than the rent.

In this scenario of low interest rates, what was the effect of the pandemic?

The pandemic made people rethink their way of living and housing, even with all the uncertainty it caused. As a result, the demand for buying real estate started to prove greater than the supply. Besides this, there is real estate credit and interest rates are low. There was an alignment of factors that allowed the market to recover even in a pandemic scenario.

Was this movement accentuated for the higher value properties?

Yes, the supply has not grown in recent years for this segment. Because of the crisis, the developers focused the launchings in the intermediary segment. There is also a huge difficulty in the high standard segment to build areas. It takes two, three, four, even eight years to build a development of this size. There is a shortage of land.

In the case of high-standard country condominiums 100 kilometers from São Paulo, there are no new developments launched. In this case, it takes five, ten years to have a new development, because of finding the right area, buying the land, approving the project, and obtaining the environmental license. Because of the limited supply of this type of property, prices have risen frighteningly. The increase was 300% in the last year.

Can this mini-boom be sustained?

Yes. Even if there is a gradual increase in basic interest rates, the forecast is that the Selic rate will reach the end of the year between 5% and 6%. The housing credit should follow this rise gradually. We will not have back interest rates in the double digits. The average dollar should remain between R$5.20 and R$5.30. In this scenario, the real estate market will continue to be an opportunity and should remain heated, especially the high standard segment.

What is the risk factor?

A point of attention is the sector’s inflation. The index that measures civil construction inflation, the INCC, is under a lot of pressure. Because of this pressure, developers are reviewing their launching strategies, hoping that, with the advance of vaccination, the input industry will return to normality and inflationary pressure will decrease.

Source: Infomoney