Sales of new homes in the city of Sao Paulo in 2011 was the lowest in five years, said news site Folha.
According to Secovi-SP, 31,000 units were sold, the lowest volume since 2006, when 28,300 properties were negotiated (see chart below). The survey looked at properties with up to three years old.
The question is: is the real estate bubble deflating or this is just a bump in the road?
Source: Folha
If you enjoyed this article, please consider sharing it!
Another factor in the Brazilian bubble is the vast quantities of cash that gets stolen through corruption every day. There is also a greed factor that is inflating prices where real estate agents conspire to raise prices in certain areas. I just returned from Brazil and most of the middle class people I talked to are very worried about a bubble and the economy. They say all they've gotten from the boom is a doubling of prices over the last few years. Sure real estate owners have seen a substantial rise is property values and many have been able profit from this. At the very least, I think the greed factor within the bubble (that is a bubble within the bubble) will have to collapse at some point.
"… the vast quantities of cash that gets stolen through corruption every day" feeding a supposed real estate bubble in Brazilian market? Somebody is leting his imagination going to far. It's easy put the blame of everything is going wrong on a long term disease, as corruption. I presume it turns a peculiar local reality smoothly understandable, on "global" terms. As a matter in fact, appeal to corruption spares the readers of know that the prices rose bc a sudden demand from families whose were buying their first homes to live – not to invest/speculate. The prices tend to accomodate, but it must bear in mind that a huge home deficit remains in Brasil.
"…the prices rose bc a sudden demand from families whose were buying their first homes to live – not to invest/speculate."
Yes but prices are inflating also with agents trying to hook the international investor – pricing out most Brazilian families in many areas. Hence the large numbers of properties sitting empty on the market at high prices. This is the greed factor.
Did corruption not play a role in the US housing bubble – and so you think it has no role in Brasil?
International investors started to buy before the current rally – mainly in northeast Brasil. When in France, four years ago, I met a LOT of people better informed on "Brazilian deals" than many of Brazilian locals.
Regarding Brazilian corruption, of course it's a factor which should not be underestimated in any event of economic local life. However, I have not seen data precising its role in the real estate rising of prices.
Finally, a bublle occured in America because of structural factors concerning laissez-faire style economies. Brazilian economy, on its turn, is highly regulated. It means that "vast quantities of cash" can be "stolen through corruption every day", but portfolios of unpaid debts can not be freely negotiated, as if conventional commodities.
Good points and I have not seen data on real estate agents falsely inflating prices – I have heard rumors from buyers in Brasil. FWIW I think this inflation will crash and is the bubble within the bubble.
Regarding the corruption – I think the extreme rate of growth in the property market is not sustainable without significant social progress – which right now is masked with credit and olympics. I remember not too long ago people were fleeing Rio due to the crime – and gorgeous properties were selling for dirt cheap. I don't see why this situation could not repeat itself before too long. Certainly there are choice areas that will always be highly desirable and price will remain in an uptrend over the long term but not at these levels and I'd expect to see a significant pullback – perhaps several.
i know 2 Portuguese investors who bought one 8 apartments and the other 15 apartments and one house in 2005 in rio de janeiro predicting a commodites boom ONLY, guess what!…. not only they got a commodities boom they got a currency boom + world cup + olimpics…they sold ALL PROPERTIES last year and return to Lisbon with average 500% profit on their pocket tax free…brasilian real estate market is at the top right now.