How Pandemic Changed Residential Real Estate Markets in Cities Near São Paulo

RIO DE JANEIRO, BRAZIL – Despite the pandemic and its economic impact, the real estate market in Brazil has been experiencing this atypical year with a positive balance driven by the SELIC (Treasury base lending rate) at its lowest record level, which results in cheaper financing rates, but also in part due to social distancing, which has made people reflect on their spaces and seek new property after forced confinement.

In search of a better quality of life and larger living space, an urban exodus trend was noted. “People are looking for larger properties and more open air in less dense cities as a reflection of the confinement period,” says Pedro Tenório, Zap Group economist who manages brands such as ZAP, Viva Real and Conecta Imobiliário.

According to data from Imovelweb, a real estate advertising platform, the search for properties in the interior has increased by 28 percent between March and September this year, as compared to the same period last year. And in June alone it rose by 60 percent, over the same month last year.

“People wanted an escape from confinement after one, two months in isolation. And there is still demand: in September there was a 19 percent rise in the search for properties in the interior compared to the same month last year,” explains Angélica Quintela, marketing manager of Imovelweb, a platform for real estate listings.

Price increase

In the wake of the increase in searches, the prices of properties for sale in some interior cities have increased, particularly for high-end homes.

Jean Caridá, owner of the real estate agency Caridá Gestão Imobiliária, says that the increase in the search for condominium homes for sale in the Itu region, 75 kilometers from São Paulo, has increased by 400 percent between April and September compared to the start of this year, and the price of high-end properties has climbed at least 40 percent.

“The growth in the search for condominium houses was surreal. But the buying public have money and most of them come from São Paulo: 90 percent of the sales were made to clients from  the state capital,” he explains.

Even closer to São Paulo, Alphaville in Barueri is also experiencing a growth in its real estate market.

“The demand was overwhelming. Some properties increased 50 percent in price in the pandemic. The region was already coming from a good pre-pandemic moment and after the first shock had passed we saw a tremendous increase in demand. The prices went up and there is still room to rise. Even the oldest properties increased in some cases,” explains Gilberto Deodato, executive director of Next Alphaville, a real estate company specialized in high-end condominiums.

Trend is not widespread

According to Welerson Lira, owner of Lira Consultoria Imobiliária, in cities such as São Roque, there was demand for the purchase of properties and even more for the renting of houses, but in both cases, the prices did not rise as in other regions. He works with medium and high-end condominiums.

“The demand for houses increased between ten and fifteen percent in the pandemic compared to the start of the year, but prices did not change significantly,” says the broker.

However, he noted that in some high-end condominiums in the region, such as Bella Roma and Quinta das Videiras, some properties saw sharp valuations this year. “You find houses for sale at prices well above the market, but there are few available. High-end properties are still expensive,” he says.

In Campinas, the state’s third-most populous city, comparing the period between April and September 2020 against the same period in 2019, the increase in the average purchase price was only three percent, according to data from Zap Group, which gathered the average square meter variation of some cities in the interior of São Paulo.

The city of São Paulo also showed a similar behavior in the same period, with average purchase prices rising by only three percent, according to Zap Group data.

Piracicaba, another large city not far from Campinas, is yet another example: between April and September this year, the city showed an average one percent drop in prices compared to the same period in 2019.

Condominium houses recorded the highest increases

Tenório explains that, although the search for properties in the interior has grown, the trend has not necessarily translated into increased purchases and, consequently, prices.

“Many people may have searched, but not everyone bought or rented. We don’t have a price hike in all regions and this migration to the interior is not as significant as it was thought to be at the start of the pandemic. It’s an option limited to a specific population class that isn’t by far the majority,” explains Tenório.

Therefore, what can be observed is that the price increase in the interior occurred for some specific property types, such as homes in closed condominium communities, in regions and neighborhoods with features aligned to what people were looking for in the pandemic: quiet locations, outdoors areas, with more space.

Alberto Azjental, coordinator of the Real Estate Business Development course at the Getúlio Vargas Foundation (FGV), also believes that the urban exodus is a micro-trend.

“Could there have been a migration to the interior? Yes. But in Brazil, who can afford a second property or even pay two rents? Considering society’s upper classes, a demand for a second property, a country weekend or summer home, may have occurred. But no one sold the house where they live,” says Azjental.

He adds that not everyone has moved to home office work; among those who are, few know with certainty whether the remote work will be maintained and for how long.

“And that also relates to the rent. In general, manual jobs are face-to-face and usually pay less than administrative positions, for instance,” adds the FGV professor.

In fact, the home office is a reality for only a small portion of the country’s professionals. The most recent survey by the Inter-Union Department of Statistics and Socioeconomic Studies (DIEESE) shows that 8.4 million people were working in home-office in July, which represents only ten percent of the 81.4 million employed in the country.

Tenório believes it is an exaggeration to believe that this urban exodus trend will gain momentum and become a reality for more people next year.

“The pandemic will pass and, for many people, the more flexible routine will not become a reality, and living away from work can make no sense. You don’t find the same amount of jobs as there are in the (high-end commercial) Faria Lima-Berrini axis in other cities easily and that attracts people to São Paulo. Theoretically, there aren’t as many job opportunities in less crowded locations,” Tenório points out.

Below is a study by the Zap Group in five large cities in the countryside for purchasing: Campinas, Jundiaí, Piracicaba, São José dos Campos and Sorocaba. The survey considers all property types and provides an overall assessment of the real estate market in these cities.

Purchase

Variation of the average square meter price for purchase

The table shows that, overall, prices have increased, but have not shown significant variations.

In Campinas (3%) and Jundiaí (1%), for instance, one can perceive a positive variation in prices. “At the height of the crisis, in April and May, the cities recorded an increase, which could have been the effect of the urban exodus, with people seeking homes in cities close to São Paulo and that have good infrastructure,” explains Tenório.

In fact, the trend was observed by the Jundiaí Association of Real Estate Companies and Professionals, an arm of Secovi-SP (real estate syndicate) in the region, but on a much broader scale considering the start of the year and the post-Pandemic months.

José Pedro Menten, the association’s director, says that the increase in the search for two, three, and even four-bedroom houses for purchase grew by 40 percent in the region between April and September, compared to the pre-pandemic period. The association’s real estate agents attend high, medium, and low standard segments.

The study also shows the positive evolution of prices since the first quarter this year in Jundiaí. “There was a significant demand since April and, in the case of purchase, two main factors spurred the trend: the pandemic, with people wanting to escape from the big city and low interest rates,” he says.

He also mentioned that there was a supply issue. “A lot of people came looking for a house, but there were no options available, so there were clients buying apartments anyway. Properties between R$400 and R$600 thousand were the best sellers. And the prices increased by around 15 to 20 percent overall,” he says.

In Sorocaba, the study shows a shy one percent increase in the price per square meter between 2019 and 2020, but when analyzing the city’s real estate market with a larger magnifying glass the scenario also changes. Broker Fabio Maranhão, owner of Padrão Negócios Imobiliários, says that the prices of condominium houses in the city rose by 20 percent compared to the start of this year.

“The search for this type of property has increased by 40 percent with many higher purchasing power clients looking for homes in condominiums to escape from São Paulo and make their home office here,” he said.

Eduardo Zylberstajn, head of research and innovation at the Institute of Economic Research Foundation (FIPE), says that the fact that some cities in the survey have much smaller variations than those mentioned by brokers proves the argument that the urban exodus trend may be happening in niches, and it is not widespread.

Is it time to buy property in the interior?

A report by Credit Suisse assesses that the real estate sector in Brazil is experiencing one of its best moments, driven by low interest rates, and says that the positive dynamic should extend to further years, but real estate market prices, in general, should increase in 2021.

According to Tenório, even if the price variation, on average, was not high, it did occur and, by observing specific typologies and regions, the increase may have been significant.

“In general, it is a good time to buy a property not only in the interior but also using the SELIC at its lowest level. The rate may go up again before expected, so it may be a good opportunity. But choosing the city requires further consideration. Campinas, Sorocaba, Jundiaí have prices on the rise. So, Piracicaba may have opportunities for lower prices”, says the economist.

Along the same lines, Dario Ferraço, partner of SF Consultancy, also believes that it can be a good time to invest in the purchase of a property. He says that many clients preferred to defer purchasing thinking that prices would drop because of the crisis, but that was not the case.

“There wasn’t a boom, but prices were maintained and even increased somewhat. The scenario is different from what was observed in the 2015 crisis when construction companies had to burn stock and sell cheap to reorganize the cash flow. This time, construction companies don’t have a lot of stock, those are isolated cases. The price of launches will increase and, consequently, this price increase will last for some years,” he explains.

Source: InfoMoney