But the commercial real-estate sector is still hot. But for how long?

From Itau’s Brazil Orange Book (our comments in bald):
“Home sales continued to slow, in line with the decline in consumer confidence (which curbs demand) and the perception of greater household indebtedness (which inhibits supply).

Sales performance in October was classified as reasonable to good. Overall, sales speed is lower than in 2010 but still higher than in 2008 and 2009. Additionally, the government program “Minha Casa Minha Vida 2” continues to boost the low-income housing segment. Many large companies in the industry already get, or intend to get, 50% of their revenues from this type of project. 

One reflex of demand contraction is the slower pace of launches scheduled for the coming months, so as to avoid high inventories. (in other words, the low-income housing development, which is fully subsidized by the government, is what will keep the real estate developers alive for the next few months, considering the overall housing market might be cooling down).

In the property sector, the significant real increase in prices seen in the first half lost momentum. According to industry reports, prices have tracked the construction-cost index INCC in the past six months, a pattern that is expected to continue. (the construction-cost index have been trending down recently, with construction material prices down 7% in October. Does this mean real estate prices might correct soon?)

On the other hand, the commercial real-estate segment is not feeling the slowdown, particularly regarding leases to logistics and retail companies. Industrial leases, especially in the auto sector, remain weaker. Demand by foreign companies remains firm, though these companies are taking longer to make decisions – likely an effect of the more difficult economic situation in their home countries.

The shopping mall segment is among the busiest in Brazilian commercial construction. Industry projections anticipate three times more shopping malls being launched in 2012 than in 2011. Notwithstanding the high number of launches, vacancy rates remain low, at around 1.5% (regarded as technical vacancy).” (in the US, the residential housing slowdown started first, and it was only followed by a commercial real-estate correction 12-18 months later).
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