Property price growth ongoing across Brazil despite economic challenges
House prices in Brazil have in recent years been one of the biggest drivers of economic performance in Brazil and despite the recent slow-down in the economy, house prices across Brazilian cities have continued to rise.
The Knight Frank Global House Price Index (Q3 2014) recorded a robust 9.2% year-on-year house price growth in Brazil, placing the Latin American nation at the eighth fastest growing market in the world. The previous two years, 2013 and 2012, demonstrated remarkable 12.7% and 13.7% year-on-year growth respectively. Going back to 2011, Brazil was the number one fastest growing residential market in the world. And although the growth in house prices has eased somewhat and Knight Frank reports on the current global house price slowdown, Brazil is still seeing positive price increases albeit at a slower pace. In Q4 2014, the latest Knight Frank Global House Price Index recorded a 6.8% increase in Brazil over a 12-month period, and 2.7% over a 6-month period.
Furthermore, according to Fipe Zap Index, a well-known national Brazilian house price index, prices have continued to rise, particularly strongly in Rio de Janeiro and São Paulo. The two largest cities have seen the highest house price increases in Brazil, and one of the highest in the world if we look back some years ago. In Rio de Janeiro, house prices soared with 266.4% rise from January 2008 to February 2015, with a 10% increase since six months ago alone. São Paulo, not lagging far behind recorded a staggering 220% increase over the same time period, and an incredible 12% over the last six months, again defying Brazil’s economic downturn.
In the North East, Fipe Zap Index measured that the three largest cities, Recife, Salvador and Fortaleza also recorded very strong growth. Recife is leading with 102.2% growth between Q3 2010 and February 2015; a 7.2% rise since October 2014 alone. Fortaleza and Salvador recorded 78% and 43.7% over the same period; making 5.6% and 5.1% increases over the last six months. This demonstrates a continuingly impressive house price growth across Brazilian cities, clearly defying the wider economic picture in Brazil.
Finally, Fipe Zap’s Composite Index, which includes the seven largest cities in Brazil (Belo Horizonte, Brasilia, Fortaleza, Recife, Rio de Janeiro, Salvador and São Paulo), shows that the average house price growth across the cities has been astonishing. Between October 2010 and February 2015, the total house price growth amounted to 89.7%, which equals an average growth of 20% per annum.
Although the economy last year grew by +0.1%, avoiding a technical recession, Deloitte’s Latin America Economic Outlook March 2015 highlights that Brazil is taking the first steps towards the economic recovery.
There are many issues that remain to be resolved, such as falling export prices which are hurting the trade balance and higher than Central Bank target inflation rate. Nevertheless, fiscal and monetary measures are being taken to bring Brazil back to economic growth. Deloitte’s analysts believe that economy in 2015 is likely to grow by around +0.5%, primarily due to a rise in taxes and increases in the benchmark interest rate to combat the inflation. However, from 2016 onwards it appears more likely that we will see better and more noticeable improvements in the Brazilian economy. Particularly considering that in 2016 Brazil will host the Summer Olympic Games in Rio de Janeiro, a first for any South American country.
The Summer Olympic Games in Rio next year should reap many economic rewards for Brazil including global brand awareness for the nation due to hosting this mega-sporting event, job creation, infrastructure investments and new hotel construction, a significant boost to domestic and foreign tourism (giving a rise to consumer spending) and a general uplift of a ‘feel-good’ factor in Brazil and its population. Naturally, some concerns have arisen in the past due to the expense required in Rio for organising and building large infrastructure projects however, the majority of the infrastructure investments will continue to benefit the country after the event and Brazil is looking to enjoy the Olympic legacy for many years to come.
For more information on the Brazilian housing market, contact the experts at Ritz-G5 on +44 207 183 7565 or visit www.ritz-G5.com.