Brazil’s EXAME-Loft index points to speculation trends with real estate in São Paulo

RIO DE JANEIRO, BRAZIL – Good news for Brazilians looking to buy property in São Paulo in the last few months. The average difference between the owner’s asking price and the value effectively established in the contract showed a stable or downward trend.

This is shown in the latest edition of the EXAME-Loft Speculative Index, which combines EXAME with Loft, one of the leading startups dedicated to the real estate market in Brazil and one of the leaders through its digital purchase and sale platform.

In 6 of the 12 neighborhoods surveyed in the city of São Paulo, the trend was for stability in the gap between the initial asking price and the price of the property’s notarized sale. In another 5 neighborhoods, there was a downward trend. The difference increased only in Vila Nova Conceição, from 23.17% to 26.32%.

The period analyzed comprised the quarter ended in May, compared with the percentages in the 3 months through April.

The greatest difference was registered in properties in the Campo Belo neighborhood: 26.49%, although lower than in the quarter ended in April, 28.36%. Next was Jardim Paulista, with a difference of 26.40%. The percentage showed a stability trend in relation to the previous period (26.64%).

“Demand is so high for higher-priced apartments that these products are in short supply in the market. Consequently, the remaining apartments are pushing the average down to a slightly lower level, especially in neighborhoods with this profile, such as Jardim Paulista,” explains Loft’s director of Engineering and Data Science Daniel Scalli.

The Speculative Index was launched in early July and by means of an intelligent pricing tool developed by Loft measures the percentage difference between the announced price by the owner on its platform and the closing value of the contract between the parties, registered in the land register.

The base of EXAME-Loft’s Speculative Index covers properties offered and traded in 12 of the largest neighborhoods around downtown São Paulo, Brazil’s largest market.

To mitigate the seasonal effects, the methodology considers the price difference in a quarterly rolling average, with reference to two months in advance because of the time it takes for the notary offices to provide the information.

In practice, such a double-digit difference harms not only potential buyers but also owners, since the average negotiation time is extended until the two parties reach an agreement. In other words, it shows the inefficiency of the Brazilian market.

According to Scalli, price differences are natural, but not in the magnitude found in the Brazilian market, where 8 of the 12 neighborhoods reached 20% or more.

“We understand that the main factor is precisely the lack of precise information, which causes the average difference in Brazilian cities to remain at these levels,” he says.

Despite the good news in the data through May, Scalli says that new information is needed to be able to more accurately forecast scenarios. “The historical series is still recent and as such we are waiting for it to consolidate to enable more precise forecasts in the coming months,” he said.

Source: Exame