Exame Magazine has recently covered an article titled “The Insane Prices of Real Estate in Rio” (“Os precos insanos dos imoveis no Rio“). It says that the most coveted apartments in the area come to be negotiated by more than R$50,000 per square meter – an irrational valuation and a price completely decoupled from fundamentals. 
There is a lot of conflicting information in this market. Some say prices are still going up (probably the real estate agents), while others (a close friend trying to sell his Ipanema apartment) say the market has dried up and received not even one phone call back (even though last year he received weekly requests to sell when he was not interested). 
“O Globo” wrote another article about the insanity of rental prices of retail space in Rio, and its research has concluded that Ipanema has “the most expensive commercial real estate rental in the world”. Its main street had a 52% year-on-year increase in rental prices, surpassing top districts in New York and Los Angeles. The article (through google translate) goes on:
“According to analysts who did the research, these valuations stem from the heat in Brazil’s economy, higher income and the consumer’s will to spend. Moreover, Rio de Janeiro’s lack of space keeps a fierce competition for the retail space. Some experts say these high prices are just a speculative rental overvaluation, well above the fair value. It’s called real estate bubble, which has many risks.
“That, at some point will have to stop. There will be a moment when everyone will stop and will say: ‘My business can no longer afford these rental prices. “It will fade and settle“, says real estate consultant Alex Strotbek
.”
 
But the “hypers” say that this craziness is all because of the “housing discrepancy”, world cup and olimpics. They claim “This time is different”.

On another note, the singer Roberto Carlos (Brazil’s version of Tony Bennett) and Pao-de-Acucar (Brazil’s version of WalMart) are starting their own real estate development companies to compete with well-established builders (like Gafisa). Read here and here. This sounds somewhat crazy to us, and it is spelling “bubble” all over it. Can you imagine if Tony Bennett and Walmart decided to start their real estate companies to make money from a market they don’t even understand well…. and worse, at its peak (circa USA-2007)? 

To corroborate with this “bubble hypothesis”, real estate developers (like MRV, EZTEC) are desperate to sell their inventory by placing ads like buy an apartment and we’ll give you a motorcycle free! or buy an apartment and we’ll pay your rent for one year!.

If this is not a bubble, then we don’t know what it is…
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