By Jay Forte, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The real estate market across Brazil has been cooling quickly as the country’s economic indicators continue to contract, and it is being felt in Rio de Janeiro more than anywhere. Now according to the Fipe-Zap Index, rental prices have dropped in Rio almost a full one percent, as opposed to the national average of 0.18 percent.
Prices in the city were 0.99 percent lower in May compared to April, the largest reduction among the nine municipalities included in the Fipe-Zap rental index. In São Paulo the decline was much lower: 0.47 percent.
In the monthly comparison, the index had a nominal change of negative 0.18 percent (not considering inflation), while the IPCA was 0.74 percent. In this comparison, Salvador and Campinas recorded the biggest nominal increases, with 2.76 percent and 0.58 percent respectively.
According to O Globo, across Brazil, rental prices saw a fall in real prices (considering inflation) of 7.6 percent in twelve months. Economist at the Economic Research Institute Foundation (Fipe), Raone Coast, told O Globo, “In Rio the process is more pronounced.”
He added, “In one month, from April to May, the price of rents declined by almost one percent, this is without taking into account inflation in the period. The market of Rio is weak, and not just in the rent, but also in sales.”
Swedish expatriate in Rio, Johan Jonsson, who is the General Director of Agente Imóvel, feels the decline in Rio rental rates is even more pronounced. According to their data in the May 2014 to May 2015 the mean rental rates fell fourteen percent. “We do not publicly display rental statistics, but we do track on a monthly basis about seven thousand properties in Rio. I had a look that the past twelve months and ouch… Add ten percent, or so, inflation to that…”
Despite the drop, the rent in Rio de Janeiro continues to be the most expensive among the analyzed cities per square meter, with a rate of R$41, followed by São Paulo, with R$38 per month for square meter. The average price is R$34 across Brazil according to Fipe-Zap.
Concerning vacation and temporary rental rates opinions about price evolution differ. Charles Morphett of luxury real estate firm, Rio Exclusive, explained. “Fixed lease rental prices tend not to affect vacation rental prices all that much as prices are determined by different factors and driven by different markets. In the foreseeable future, we do not expect vacation rental prices to drop, especially in Zona Sul [South Zone].”
However Morphett adds, “For people arriving in Rio de Janeiro the real opportunity is the strength of the dollar (US$) against the real (R$). In addition many of the World’s Olympic committees will arrive in Rio de Janeiro in August 2015 one year ahead of the 2016 Olympic Games. This international influx of renters is likely to bolster long-term rental prices and restrict any further decrease.”
Jonsson had a different input on the temporary rental rates, saying “Speaking with three larger actors in the short-term rental sector, they all confirm that prices have come down substantially. Compared to last year the price decrease, in USD, for Ipanema, is around thirty percent.” Adding, “On a positive note, the lowering of the real (R$) seems to contribute to a larger portion of foreign tourism and the share portion of gringo renters has increased during the last twelve months.”