RIO DE JANEIRO, BRAZIL – A survey released by the Zap group pointed out the neighborhoods in the city of São Paulo with the highest and lowest rental profitability.
The indicator, called rental yield, is the ratio between the annual price of rent (sum of 12 months of rent) and the property purchase price. The rental yield is one of the indicators considered by those wishing to buy a property for investment purposes.
In an interview with Exame, Pedro Tenório, an economist from the Zap group, stated that the interest of Brazilians in investing in real estate has been growing in recent years. The main reason is the SELIC’s drop, which ultimately had an impact on the profitability of fixed income investments and led investors to seek other options.
In addition, with the cycle of interest rate cuts, real estate financing rates have been reduced with a consequent greater search for credit. Finally, real estate prices remain attractive and appreciation is expected to continue.
In August, the FipeZap index pointed out that real estate prices in the city of São Paulo had an increase of 0.47 percent. In the year-to-date, the high stands at 2.46 percent and 2.83 percent in 12 months.
Finally, the rent readjustment in São Paulo is yet another attraction for landlords. Contracts are readjusted based on the IGPM (General Market Price Index), which accumulates a 9,64 percent increase in the year and 13,02 percent in 12 months.
Rental Profitability
When analyzing the neighborhoods of the city of São Paulo, the Sé region is the most profitable in terms of rent, at 7.42 percent. On the other hand, the Anhanguera neighborhood, in the North Zone, offers the lowest profitability of 3.96 percent. The data were disclosed exclusively by Exame.
The economist explains that the rental profitability indicator is historically higher in the neighborhoods in São Paulo’s central region, such as Sé and República. The reason is the high demand for real estate in the region: “Real estate is sought by those who come from abroad to work or study in the capital,” says Tenório.
In addition to the central neighborhoods, rental profitability is also typically high in the capital’s eastern region. Five of the ten largest rental yields registered in 2020 are found in the East Zone, such as the neighborhoods of São Miguel, Cidade Tiradentes, Parque do Carmo, and Arthur Alvim, which are featured in the survey.
In this case, the economist says that profitability is influenced not by high demand, but by possible default on rent. “The residents of the region are more vulnerable to the economic shock, which ultimately impacts the tenant’s income. The potential default impacts on rent value. In this case, profitability is almost like risk insurance”.
In terms of rent prices, the data point that the ten neighborhoods with the highest rental yields have average rental prices that vary considerably, for instance, R$829 (US$166) in Lajeado and R$1,953 in República.
Check below:
Highest Rental Yields of the year 2020
| Neighborhood | Rental Yields |
|---|---|
| Sé | 7.42% |
| São Miguel | 7.23% |
| Cidade Tiradentes | 6.94% |
| República | 6.85% |
| Lajeado | 6.71% |
| Parque do Carmo | 6.65% |
| Bras | 6.56% |
| Campo Limpo | 6.56% |
| Vila Curuca | 6.50% |
| Arthur Alvim | 6.26% |
Lowest Rental Yields in 2020
| Neighborhood | Rental Yields |
|---|---|
| Anhanguera | 3.96% |
| Santana | 4.26% |
| Consolação | 4.54% |
| Vila Formosa | 4.58% |
| Perdizes | 4.61% |
| Santa Cecília | 4.62% |
| Água Rasa | 4.69% |
| São Domingos | 4.69% |
| Casa Verde | 4.74% |
| Brasilândia | 4.77% |
2019
The survey also reported higher and lower rental yields in 2018 and 2019.
Check below:
| Neighborhood | Rental Yield 2018 | Rental Yield 2019 |
|---|---|---|
| Jardim Ângela | 4.09% | 6.07% |
| São Rafael | 4.45% | 5.90% |
| Jardim Helena | 4.36% | 5.55% |
| São Miguel | 6.29% | 7.23% |
| Sé | 6.70% | 7.42% |
| Cambuci | 5.37% | 6.01% |
| República | 6.22% | 6.85% |
| Pari | 5.02% | 5.61% |
| Jardim São Luís | 5.40% | 5.97% |
| Jaçanã | 4.79% | 5.34% |
Source: Exame