After rising for nearly a decade and by as much as 700%, house prices in the city of Rio de Janeiro, Brazil, are showing signs of slowing down, according to Union City Housing.
According to the survey “Overview of the Real Estate Market in Rio de Janeiro” carried out by that institution, the result of real estate in 2011 compared to 2010 was price stabilization, however, with an upward trend. After the most unprecedented real estate appreciation in the history of the city, values have stabilized but without lowering the level. The significant increase in values in the last decade was caused by the low activity of real estate in the years prior to the boom (a period of more than 20 years of inertia).
Other factors that influenced the exacerbated growth were the projects aimed at public safety, such as the Pacifying Police Units (UPP) in the marginal neighborhoods of the city and the projects aimed at improving the city’s infrastructure, in areas such as transportation. (with the expansion of the metro) and sanitation. Many of these projects aim to prepare the City to host two major events, such as the FIFA World Cup in 2014 and the Olympic Games in 2016.
Despite substantial growth in property sales value, rental value has not kept pace. According to the survey, the average price per square foot increased 42.1% in 2010, while the average rent per square foot increased 29.1% during the same period.
Despite the slowdown in housing prices, María Teresa, research coordinator, believes that there will be no retraction in these values, since in her opinion the growth was due to the long period of stagnation immediately prior.
The mayor of Rio, Eduardo Paes, considers that one of the causes of the increase was the investment of his administration in the city, in the order of R$ 20 billion (approximately US$ 10 billion). He called this growth “crazy” and hopes prices will stabilize to prevent a housing bubble in the city.
This growth has not only been registered in the city of Rio de Janeiro, but also throughout the State, especially on the north coast, where there is a booming oil industry (due to the discovery of new oil fields in the region) and also in the south of the State due to the automotive companies that settled in the region since the end of the 1990s.
