Low-interest rates spur demand for high-end properties in São Paulo

. Jun 04, 2019
real estate brazil

Amid the worst economic crisis in Brazil’s history and corruption scandals that interrupted infrastructure works in Brazil, the construction sector saw itself throttled by a lack of demand for residential and commercial properties and a scarcity of public building contracts. But although the sector’s overall situation remains bleak, one segment is blossoming: luxury residential properties.

</span></p> <p><span style="font-weight: 400;">According to </span><a href=""><span style="font-weight: 400;">Abrainc,</span></a><span style="font-weight: 400;"> Brazil’s property developers association, in the past 12 months there was a 20.2 percent increase in new medium and high-end residential properties. Net sales—the balance between sales closed and deals agreed—increased 17.2 percent in the same period. </span></p> <p><span style="font-weight: 400;">In São Paulo, the largest real estate market and the </span><a href=""><span style="font-weight: 400;">second most expensive place to buy a property in Brazil</span></a><span style="font-weight: 400;"> after Rio de Janeiro—3,020 medium and high-income units were launched in 2019’s first quarter, 89 percent more than Q1 2018, according to </span><a href=""><span style="font-weight: 400;">Secovi</span></a><span style="font-weight: 400;">, a Brazilian of association real estate companies.</span></p> <p><span style="font-weight: 400;">The steep decline of interest rates in the country is among the reasons for the performance. The Selic benchmark interest rate is at its lowest-ever level, 6.5 percent. That makes fixed income investments less attractive and reduces the cost of loans, which are conditions that propel real-estate markets, explains Celso Petrucci, chief-economist at Secovi-SP.</span></p> <p><span style="font-weight: 400;">“Until 2016, we had terrible years. Then, in 2017 and 2018 we saw a recovery of low-income properties, such as first apartments and units subsidized by My House My Live [federal government] program. Meanwhile, property values were stable or even decreasing, and high-income families could get a return of up to 15 percent with other investments. So it was a logical conclusion to wait for buying,” he told </span><b>The Brazilian Report.</b></p> <p><span style="font-weight: 400;">“As Selic has been very low for almost a year, financial assets are having lower returns. So, these people came back to the real estate market, as well as high-income investors,” he continues.</span></p> <p><span style="font-weight: 400;">Mr. Petrucci recalls that, as an attempt to balance the market, companies have worked on selling old units instead of focusing on launching new buildings, which has suppressed the demand.  </span></p> <p><span style="font-weight: 400;">Looking at national data by CBIC, the Brazilian Construction Industry Chamber, we can say that this trend is also starting to show all around the country. However, as Mr. Petrucci mentions, this trend is not as fast as in São Paulo, Brazil’s richest city. </span></p> <p><span style="font-weight: 400;">According to the CBIC, the sales of residential properties have increased 9.7 percent in the first quarter in comparison to the same period in 2018. Sales of new buildings rose 4.2 percent, but the total supply is down 8.6 percent regardless. </span></p> <p><span style="font-weight: 400;">That move also led to a decrease in the amount of new properties, which is now enough to supply the market for 11.6 months. According to CBIC, that number had reached 21 months previously.</span></p> <h2>Hot spots for luxury real estate</h2> <p><span style="font-weight: 400;">Within São Paulo, there are places with more to offer than others. </span><a href=""><span style="font-weight: 400;">A Bloomberg report </span></a><span style="font-weight: 400;">shows that a new high-end building by Even construction company, bearing the Fasano <a href="">luxury brand</a>, sold more than half of its units in less than a month.</span></p> <p><span style="font-weight: 400;">The building is located in Itaim Bibi, one of the most desired neighborhoods of São Paulo. Located close to some of Brazil’s most important companies, it is home to many executives, who are also the target market for this kind of property, says José Augusto Viana Neto, president of CRECI-SP, São Paulo’s association of real estate brokers. </span></p> <p><span style="font-weight: 400;">He also told </span><b>The Brazilian Report</b><span style="font-weight: 400;"> that realtors are beginning to see the effects of the luxury market boost. “There are reports of real estate agencies focused on the segment that are celebrating results not seen since 2014.”</span></p> <h2>Globally cheap</h2> <p><span style="font-weight: 400;">São Paulo neighborhoods such as Jardim Paulistano, Vila Nova Conceição, Itaim Bibi and Vila Olímpia may be too expensive for the overall Brazilian population (considering the </span><a href=""><span style="font-weight: 400;">selling price starts at BRL 12.500 per square meter</span></a><span style="font-weight: 400;"> in Itaim, reaching BRL 17.293 in Jardim Paulistano) but, looking abroad, they still have very competitive prices. </span></p> <p><span style="font-weight: 400;">A </span><a href=""><span style="font-weight: 400;">ranking</span></a><span style="font-weight: 400;"> by global real estate consultancy Knight Frank puts São Paulo as one of the most affordable cities for millionaires in the world. As of December 2018, USD 1 million could buy 200 square meters in São Paulo; in Miami—</span><a href=""><span style="font-weight: 400;">a hot spot for rich Brazilians</span></a><span style="font-weight: 400;">—the same amount would purchase less than half of that area. In Monaco, the most expensive place on the list, one could acquire a mere 16 square meters.</span></p> <p><span style="font-weight: 400;">For Mr. Petrucci, the real estate market in Brazil could be even more attractive, depending on the improvement of overall confidence in the country. “I don’t think that the economy will grow 3 percent right after pension reform approval because there’s a lot to do after that. But I think it is the first step to recover confidence for investors and foreigners in the country,” he explained.</span></p> <hr /> <p><img loading="lazy" class="alignnone size-full wp-image-18527" src="" alt="real estate são paulo" width="1200" height="1128" srcset=" 1200w, 300w, 768w, 1024w, 610w" sizes="(max-width: 1200px) 100vw, 1200px" /></p> <p>

Read the full story NOW!

Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at