In a recent interview (via Marcopolis), the successful businessman Mr. José Celso Gontijo, Director of JC Gontijo (the largest real estate developer in Brasilia) says that there is no real estate bubble in his home town (and we all believe it, of course!), though he admits that prices are at absurd levels.
Interview highlights below:
M: What are some of the specific characteristics we can see in the real-estate business in Brasília nowadays? Can you talk a little bit about your case – JC Gontijo?
JC: The price for a m2 of land is now very high. In the real-estate business I’m now building around 800,000 m2; if you turn that into 100 m2 apartments, you’ll get 8,000 homes. Most of the 800,000 m2 are for the final consumer and not for speculation.
M: What is the future for the residential and the commercial properties sectors?
JC: The price per m2 in Brasília is one of the highest in Brazil because the land is expensive. You can get less expensive land in São Paulo or Rio de Janeiro.
We buy our land from the government and the government sells it at high prices. The construction I’ve launched 10 days ago (private healthcare services offices building) costs around R$ 15,000 ($ 8,100) per m2, plus the parking place costs R$ 70,000 ($ 37,850). If you go a little further away from the centre, you can get the same size office for R$ 10,000 ($ 5,400).
In Rio de Janeiro, I’ve started building in Barra da Tijuca, which is a noble area. There, the price per each m2 is R$ 10,000 ($ 5,400). Also in Rio de Janeiro, I was made an offer of R$ 60 million ($ 32,5 million) for a 700 m2 apartment. That’s an absurd price!
I think the prices have reached their peak and they will not get any higher. The real-estate sector will not see much more growth in terms of prices.
M: Which are going to be the main events in Brasília in 2012 that will affect the real-estate market of Brasília? Which will be the main stimuli or deterrents for the real-estate market in Brasília?
JC: I’m going to launch 3 hotels. The hotel network in Brasília is weak and since one of the main cities for the World Football Cup will be Brasília, there is a great need for new hotels. I believe that investing in hotels can be a growing market.
Rio de Janeiro is growing rapidly so much that the hotel business will be of major importance there; more than here in Brasília.
I consider Rio de Janeiro to be the most beautiful city in Brazil. It’s the more known beyond Brazilian borders and it’s safer now thanks to the pacification of the “communities”. The tourist has now more than ever the will to come to Rio de Janeiro. São Paulo is not so beautiful, but it’s much more cosmopolitan; it has better restaurants, better hotels, etc.
M: Do you have any message for the foreign investors? There is information out there which is controversial: some say the Brazilian real-estate sector is a bubble, and on the opposite, some say it will grow. What would be your best advice to foreign investors who are considering investing in the Brazilian real-estate market?
JC: I’ve recently had a business dinner in São Paulo during which we also discussed the issue of the “bubble”. There were people belonging to a Fund present there. This Fund has $ 1 billion ($ 540,5 million) to invest into the real-estate sector in Brazil. In my opinion, the area which is the best for those investors is the corporate buildings. Office buildings in Brasília are built and all sold.
The government is very interested in renting commercial buildings for ministries, state secretaries, international organizations, etc.
In São Paulo we are renting commercial spaces for R$ 280 ($ 150) each m2.
Rio de Janeiro is also very good for that purpose. Many foreign companies are settling down there and they need space.
M: Which are your strong points regarding your competitors?
JC: I’ve been able to stay ahead of the competitors in Brasília. I have a great experience in the construction: in total, I’ve already built 18 million m2 and I like doing everything very well. For me, a building or a construction site is almost like a son: we have to make each of them beautiful. My advantage is exactly this: the client knows I’m going to deliver a very good, high quality product.
M: Which is the future trend for your company, in terms of drawing investment?
JC; I love big projects. It’s obvious that it would be interesting to draw a Fund to invest alongside with JC Gontijo.
There is a lot of land to be bought and a lot of buildings to be built. [after all, there is an infinite pentup demand!]. For big projects, it would be very good to have investors that would make it possible to build an entire project at once instead of taking it step by step.