Not yet a bubble?  

Perhaps Curitiba is joining the list after we reported real estate slowdowns in Sao Paulo (Brazil’s largest city) and Belo Horizonte (third largest city).
According to newspaper Estado do Parana, this subject is a sort of taboo among real estate agents, investors and brokers: no one talks about it, no one mentions it. But this is a reality in Curitiba (Brazil’s 8th largest city), a capital that has become known as “the darling of real estate developers”.

Market sources say that homes with a “for sale” sign hung up outside the property now represent a universe of 9,400 units, between houses and apartments in inventory for over a year (in many cases, two years).

In the opinion of real estate experts, the main reason for this unsold inventory is the gap between list prices (what sellers are asking for) and fair market value. Although a price adjustment could solve part of the problem, other issues such as limited real estate financing for mid-to-high end houses forces the owner to wait a long time for a buyer to show up.

A lawyer cited in the article lives this drama it’s been two years. He put his two-story townhouse for sale – it has 400 m² of internal space and 575 m² of total area.

“I’m working now with the third real estate broker and still can not close a deal, even after reducing the price to BR$740,000 for a property that is valued at BR$1 million,” he said.
His dissatisfaction increases when he notes that in other similar neighborhoods a 40
apartment (10x smaller!) is being sold for BR$240,000. 
Our comment: So, where is the bubble? It seems like the bubble may be popping for the high-end housing… that’s where it usually starts anyway. But the real estate bubble for the low-end housing seems to be still up and running…
Still according to the article, Cresci-PR’s director and owner of real estate brokerage house Castegnaro Imoveis, Celso Luiz Castegnaro, confirmed that the low-end price range – up to BR$150,000 – is where most sales are concentrated… why? Because of real estate financing policy that encourages “affordable” housing. In this segment, there is an irrational spike in prices that does not match reality. 
“There is definitely an overvaluation issue. A property whose market price was previously BR$80,000 jumped to BR$140,000 in a few months because home financing of up to BR$150,000 is sponsored by the government, it covers a larger segment of the population, hence the spike in prices,” he explained.

Our comment: Just ask real estate developer Gafisa (actually its sub-division Tenda) what happens when you concentrate sales and efforts to the low-income population… soon you realize they are over-indebted, default rates start to increase, and you lose money.
Now, that famous part of the article where industry professionals defend the market:
However, the president of Redeimóveis, Luciane Nardelli, defends that there is no high inventory in Curitiba and not enough apartments for sale. “These are poorly evaluated properties or with documentation problems” she says. “The owner of an unsold property perhaps needs to reform it in order to boost sales price.”

Yes, Luciane, hopefully you are right… no bubble yet.

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