Boom in Brazilian High-End Real Estate Market

RIO DE JANEIRO, BRAZIL – The Brazilian luxury real estate market has some peculiar characteristics. It is independent of the country’s growth and, from time to time, shows sharp growth – even if economic indicators are in the opposite direction. This is seen at the moment.

A few days ago, Coelho da Fonseca, one of the main real estate agents in this segment, sold a 900 square meter apartment in the Jardins neighborhood, in São Paulo, for R$31.5 million (US$6.3 million). As impressive as the figure is for the overwhelming majority of Brazilians, deals of this kind are not exactly uncommon, at least not in 2020.

“The market is overheated,” says private broker Renata Firpo, one of the country’s leading specialists in the high-end real estate market. “We sell high value properties virtually every week”.

The executive reports that there are sellers rejecting offers that were once seen as irrefusable. “The owner of a R$15 million house is not as interested in negotiating it, because he feels that later he won’t have anywhere to invest the amount”, says the specialist.

This is one of the reasons that justify the intense search for very high standard properties. With the Treasury’s SELIC rate at its lowest levels in history, traditional fixed-income investments are no longer attractive. Regarding variable income, the risk is high, particularly in a pandemic scenario and with uncertainties about the economy’s capacity to rebound in the near future.

With nowhere to turn, the very wealthy therefore buy real estate. The closed borders, which have blocked travel and made investments abroad difficult, have also spurred the segment. A third factor is the unbridled advance of the home office. With the perspective of working from home, successful professionals – those who obviously earn more – decided to invest in residences. Altogether, the result is a market on the rise as seldom seen in Brazil.

The home office has triggered another phenomenon: the search for inland cottages or even houses on the coast. According to Lopes, a strong presence in the luxury segment, the demand for such properties accelerated 63 percent during the pandemic. Recently, the company closed its largest sale during the coronavirus crisis, a R$14 million mansion located in the paradisiac Jericoacoara beach town in Ceará.

Brokers report that in the region of Campinas, Valinhos, and Indaiatuba, cities close to São Paulo, it is almost impossible to find available homes in luxury condominiums. “The coronavirus has awakened the need for comfort,” says Matheus de Souza Fabricio, executive director of Rede Lopes.

“This trend has intensified even more in the high standard”, emphasizes Basílio Jafet, president of the São Paulo’s Commercial and Residential Real Estate Union (SECOVI). “It is the executive, or entrepreneur, who barely stayed home before, who today has found that he can enjoy the domestic area and even work there.”

Consolidated data show that the trend towards larger houses began in 2019 when 3,300 units were negotiated above R$1.5 million in the city of São Paulo, well above the 2,200 the year before. In 2020, the market as a whole grew. According to SECOVI-SP, in July 4,300 new residential units were sold in São Paulo, a result 45.5 percent above the preceding month.

In Brazil, according to information from the Brazilian Association of Real Estate Developers (ABRAINC), closed contracts increased by 10.5 percent in the second quarter compared to the same period in 2019. The significant increase in demand results in the valuation of real estate. Depending on the region, prices climbed between five and ten percent.

Companies like Coelho da Fonseca and Lopes are expecting positive balances in the third quarter. Luxury is sophisticated, provided it is handled with modesty and respect, but above all, it can be extremely profitable.

Source: Veja