Real Estate Market in Rio Increased By 15% in 2013

By Michela DellaMonica, Contributing Reporter

RIO DE JANEIRO, BRAZIL – The cost of real estate in Rio de Janeiro rose by 15.2 percent in 2013, according to the FipeZap Index announced the first week in January. The rental market increased by 8.3 percent, which is lower compared to 11.4 percent recorded in 2012. This percentage surpassed the the official inflation projection of 5.7 percent by the IPCA.

According to chief researcher, Eduardo Zylberstajn, despite the overall increase in the market, Rio’s vacation rentals continue to climb. “Though the rental market in Rio showed a deceleration in comparison to 2012, it is still at a high percentage. The variation of the owners market rose more than the renters market, but this does not mean, necessarily, that this scenario will continue over 2014,” says Zylberstajn.

Professor Robert Shiller, an American winner of the Nobel Prize for Economics in 2013, believes that the strong upward movement in the prices of the stock market of the United States and the real estate sector in some cities in Brazil can cause a dangerous financial bubble.

In an interview with the German publication Der Spiegel last month, Shiller warns “I am not sounding the alarm just yet. But, in many countries, the stock exchanges are at a high level and prices went up with strength in some real estate markets, which could potentially end badly.”

In a survey conducted by FipeZap, of sixteen major cities in Brazil and seven national capitals, the average high for the owners market during the period of January 2013 to December 2013, was at 13.7 percent. In the survey, Brasilia was the only one in which the selling prices rose less than inflation – at 4.2 percent.

The other results showed variation above inflation: between 9.5 percent in São Bernardo do Campo and the staggering increase of 37.3 percent in Curitiba. Vitória had a high of 16.9 percent; São Paulo, 13.9 percent; Porto Alegre, 14 percent, and Belo Horizonte, 9.7 percent.

With an average price of R$21,963 per square meter, the chic neighborhood of Leblon, located in Zona Sul (South Zone), is the most expensive area in Rio and the rest of the country, with Ipanema following second place with R$19,818 per square meter.

“I’ve seen this neighborhood change rapidly in the past six years with most of my neighbors moving away to less expensive neighborhoods with the same quality of life like Barra da Tijuca,” comments Mariana Gomes, who lives in Leblon.

The national average price per square meter announced in December 2013 was R$7,303. Rio de Janeiro continues with the highest value of R$9,937 per square meter, followed by Brasilia (R$8,670) and São Paulo (R$7,815). The lowest recorded value in 2013 was for Vila Velha in Espiritu Santo state with R$3,820.

The government is helping fuel the market with credit, and in December Caixa Econômica Federal, Latin America’s second largest government-owned bank (after Banco do Brasil) streamlined its home equity loan program. In the first half of November, Crédito Imóvel Próprio Caixa’s portfolio totaled a R$6 billion balance in contracted operations. In that same period, the number of contracts grew by 120 percent, going from little over 38 million to nearly 54 million contracts.

Another change in the landscape is a higher percentage of young Brazilians are buying property: Caixa granted some 57 percent of mortgages this year to customers less than 35 years old. The age of borrowers has declined in recent years and the total number of contracts for those under 35 has now reached a historic 44 percent.