Rio de Janeiro Housing Market in a Decline

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Rio de Janeiro Housing Market in a Decline

June 03, 2016

 Brazil is in a crisis! There’s no question about it. President Dilma Rousseff was forced to step down recently because of her alleged role in the Petrobras corruption scandal. Brazil has never been more politically turbulent and if you are looking to sell your property in Rio de Janeiro, Brazil, ahead of the 2016 Olympics, we can’t really blame you for it.

The FipeZap index records all data related to the latest property prices in 20 Brazilian cities. The FileZap index found that the real estate market in Brazil wasn’t as affected as the rest of the economy by the crisis in the country, but it had suffered a great deal indeed.

Rio’s real estate market grew by just 1.32% in 2015. If one considers the massive increase in inflation in the country, Rio’s property market actually fell by 10.58 percent, in terms of the real value of the property.

The reasons for such poor display are not hard to see – political uncertainty, massive rise in inflation and high rate of joblessness.  FileZap said in its report, “The drop in activity, the rapid deterioration of the labour market and the deterioration in financial conditions, fuel concerns about the health and sustainability of the property market.”

João da Rocha Lima, the professor of real estate at the University of São Paulo says that there can still be a recovery in the property market in Brazil, but the political scenario has to change for the better. There has to be a stable government in the centre and a President who carries the whole nation along with him or her.

That’s not likely to happen any time soon as the new President of Brazil, Michel Temer has an approval rating of just 2 percent, even lower than of Dilma Rousseff, who at least had a 10 percent approval rating.

Professor Rocha Lima explains that buyers could expect to see a further fall in real estate prices in Rio de Janeiro. He says, “This year is the year to buy and, unless the country enters into a brutal economic depression, prices in 2017 will tend to be higher, considering a degree of any recovery. If the person needs to sell, then there’s no other way, but if he can wait for the market to recover it will be better.”  

Rio de Janeiro will be hosting the Summer Olympics soon, and a number of apartment complexes were constructed between 2011 and 2015 in anticipation of a massive demand for homes in the city. But that hasn’t happened yet. Indeed, most of the new developments look like ghost cities because of the lack of buyers.

Charlie Crocker, a British expat who owns the Van West Property in Rio says that this is actually a great time to buy property in Rio de Janeiro: “If you are a foreign buyer-investing in Rio right now, the exchange rate is great. The week BRL [Brazilian Real] is throwing up a lot of opportunities. As with any investment or purchase, go as close to prime as you can afford. A little bit of outside space or a sea view always goes a long way.”

Mr. Crocker adds, “If you are looking to sell a property right now, it is not a good time to repatriate funds. I happen to be selling my apartment which some might consider poor timing but I will not be pulling the money out of Brazil. I intent to capitalize on the week BRL and invest a small amount more in order to get something larger, closer to prime and with some outside space!”

Even so, home prices in some of the priciest neighbourhoods in Rio such as Leblon and Zona Sul continue to be high. Rio will always attract buyers as it is the #1 city in Brazil and South America, where the rich and famous live. Some of the locations in Rio such as Leblon, Ipanema and Copacabana are as posh as the most fashionable neighbourhoods in London or New York.