The UBS Global Real Estate Bubble Index of 2023 states that home prices in São Paulo are fairly priced, reducing bubble risks.
However, residents find it costly due to Brazil’s double-digit interest rates.
Released this month, the report emphasizes that these elevated prices often steer São Paulo’s population toward renting.
Consequently, rental rates have seen a 10% increase in the past four financial quarters. Financial analysts issue caution, pointing out changing market dynamics.
With inflation declining and Brazil’s Central Bank reducing the Selic rate, lending conditions are improving.
These shifts could positively impact São Paulo’s real estate market in the upcoming quarters.
The index methodology involves assessing factors such as local housing market conditions, domestic economic indicators, and average income.
Compared with other cities, São Paulo has a low ranking, sitting just above Warsaw, Poland.
This suggests that São Paulo isn’t facing a housing bubble, which refers to inflated property prices that risk market instability.
This year’s version of the index also notes that only Zurich and Tokyo maintain a “bubble risk” status.
In contrast, cities like Miami, Geneva, and London have property prices categorized as overvalued.
Historical data indicate red flags such as a gap between prices, local income and rent levels, and economic imbalances like excessive lending.
Previously, cities like Toronto and Frankfurt, which scored high for bubble risk last year, have seen real estate prices decline by 15% in the last year.
Financially Accessible Living Apace Rare
However, cities like Madrid, New York, and São Paulo have experienced moderate increases in real estate prices.
Additionally, the index assesses housing affordability, indicating how long a skilled worker must work to purchase a 60-square-meter apartment downtown.
While household incomes continue to grow steadily, home ownership costs remain high.
Even with below-average unemployment rates and some price corrections, the affordability of housing has not significantly improved.
The report concludes that, on average, financially accessible living space is still 40% less than before the pandemic began.