Rio Property Prices Beat São Paulo

By Doug Gray, Senior Contributing Reporter

RIO DE JANEIRO – The booming real estate industry in Brazil remains untouched by the economic fall out of the 2008 credit crunch. Partly due to foreign speculation as a result of the forthcoming 2014 World Cup and 2016 Olympics on these shores, partly due to the boost in domestic demand amongst increasingly affluent Brazilians, housing prices have risen in a manner never before witnessed in the country.

While Viera Souto (Ipanema) and Delfim Moreira (Leblon) are the two beach front roads in Rio with the greatest values per square meter, even behind these highly prized addresses the neighborhood costs dwarf those of São Paulo. Waterfront new-builds in Rio’s two most affluent neighborhoods can fetch anywhere up to R$25,000 per square meter, unmatched anywhere in South America let alone São Paulo, but even several blocks from the beach the average price remains around R$12,000 per square meter compared to R$7,000 in Jardins, considered São Paulo’s most desirable region.

The obvious reason for this is little more than a combination of geography and supply and demand. Hemmed in by mountains and the sea and with little room to expand but upward, planning constraints limit the number of apartments that Rio can physically hold. What few spare corners of land remain are being slowly developed, and a building under four stories is a rare sight indeed throughout most of Zona Sul.

São Paulo on the other hand is sprawling but spacious, with less competition for each square meter despite a population in excess of twenty million. In that respect, the real estate market is more comparable to that of Barra da Tijuca, the long stretch of beach to the west of Rio, and prices reflect this. With a great deal more space and a huge amount of competition between developers and vendors, prices in Barra have held more in line with those of their metropolis neighbor. A new build here will cost between R$5,000-R$10,000 per square meter depending on the location (proximity to beach and Zona Sul), whilst Consolaçao, another of the more desirable parts of São Paulo, is likely to cost between R$4,000-R$8,000.

Of course there are far more affordable options to be found. Flats in Rio Branco in Central São Paulo range from R$100,000-R$150,000 for a fifty meter square apartment, whereas well-located Avenida Paulista and Bela Vista start at R$270,000 for two bedrooms. Other areas, such as Vila Madalena, Pinheiros and Bexiga, are worth considering as an affordable alternative remaining central to the city, and, of course the jobs.

The slightly more affordable alternatives in Rio remain the infamous Copacabana district, where prices plunged with the growth of Ipanema and Leblon, but are set to recover as it becomes the focus of Olympic activity in 2016. R$350,000 will get you that same fifty meter square apartment here, over double a comparable neighborhood in São Paulo, but still potentially a sound investment. Indeed, what is being paid for is not simply the land per se, but the lifestyle associated with the area; beautiful beaches, nightlife, restaurants and quality of life.

Other choices in Rio include Botafogo and Flamengo, with both offering the convenience of being close to Centro and Zona Sul, where you are likely to pay up to R$5,000 per square meter for a property in good condition. This is more or less directly comparable with Vila Madalena, São Paulo’s equivalent of Botafogo with its bustling nightlife and vibrant arts and student scenes.

As such the prospects for Rio’s housing market still look brighter than their big cousin to the west despite incredible prices already being reached that even two years ago would have been unimaginable. The simple fact is that the limited space and huge demand will always keep the most desirable area codes well above their São Paulo equivalent. Whether the two will have a chance to level out after the Olympic bubble remains to be seen, but for now, the smart money resides in Rio.