Where Are Brazilian Real Estate Prices Heading During Pandemic?

RIO DE JANEIRO, BRAZIL – One month after the enforcement of social isolation as a measure to prevent coronavirus (Covid-19), residential property prices have increased in the country. Data from the FipeZap index show a 0.20 percent increase in April.

As a result, the average cost per square meter in 50 Brazilian cities stood at R$7,28. The market’s behavior followed the trend of recent months. From January to April, property prices accumulated a nominal high of 0.69 percent. But could the increase continue?

The economic crisis, the rise in unemployment and the loss of consumer purchasing power should impact the real estate market. In addition, there was a contraction in the number of available real estate properties, with the suspension of launches by property developers and the abandonment of sales by owners in the secondary market (used properties).

Those who planned to sell a house or an apartment eventually gave up, either for believing that the price would drop or because visits to properties were suspended.

“With the pandemic, there was a shock both in supply and demand. When this happens we have a price inflexibility. We still don’t know what force will prevail,” explains Danilo Igliori, chief economist of the Zap Group.

The economist expects that with the economic recession, the impact on demand will be greater, so prices should drop at some point and will only increase again more significantly after the end of the crisis.

Tiago Galdino, financial director of Imovelweb, believes that prices should remain stable in the coming months and with the negative scenario, prices will cease to rise, but will not necessarily drop. “It’s like taking your foot off the gas and not stepping on the brake. Speed is maintained.”

He believes the scenario will become clearer from July onwards, with the end of quarantine relaxation. “The market’s turning-point will occur in July. Only then will we know whether prices will drop five percent or increase between one and two percent, for instance”.

Since experts are not sure about the market trend in the coming months, they advise those who wish to buy a property to conduct a detailed search and be patient. “Many people will not want to reduce on the listed price of the property. They would rather wait to sell. In July, there may either be a price cut or an increase,” Galdino adds.

Search for property

Despite the pandemic, consumers are still looking for homes. A survey conducted by Imovelweb showed that plans to buy or rent a property remained unchanged for 51 percent of respondents. For almost 30 percent, the reasons for looking for a property are related to marriage, the desire to own a home, moving to another city and investment. The answers also point to the search for a larger house (26 percent) or change of location (25 percent).

Concerning the time frame, 52 percent of respondents want to buy within six months, 29 percent in up to one year, nine percent in the next two, and only ten percent in over two years. The payment options most cited by respondents include financing or real estate consortium (24 percent), real estate exchange (19 percent), FGTS – Severance Indemnity Fund for Employees(12 percent), among other options.