Cooling property prices in Rio set to attract more foreign buyers

Property prices in Rio are cooling and some sellers are even accepting offers below the asking price but that means that foreign buyers are seeing the city as a real estate investment opportunity, according to experts.

Property prices in the popular Brazilian city have rocketed in recent years with demand coming from domestic buyers eager to own their own home and also invest in property.

Brazil’s strong economic performance prompted a very strong Real and increased confidence, encouraging Brazilian banks to lend money to consumers like never before. Combined with increased security and a growing international interest due to the FIFA World Cup and the Olympics, Rio rapidly turned into both one of the most desirable, and most expensive, cities to live in.

As the bubble of confidence expanded, property prices have increased by 140% on average since 2008. But by the end of 2011, there was the feeling among experts that things may have gone too far. China’s voracious appetite for Brazilian commodities showed signs of slowing, while a worryingly drop in Brazilian productivity, lower than expected GDP, significant loan defaults and higher inflation caused the government to embark on a currency war to ensure Brazilian exports remained competitive. 

While not long ago regarded as one of the world’s most over valued currencies, the Brazilian Real last week broke its psychological bench mark, by rising to above two Reais to the dollar, the highest it has been since the beginning of 2009.
Currency experts predict that this is where the Real will stay for the foreseeable future and for foreign investors this equals a 22% increase in spending power since this time last year.

This currency drop is coupled with recent data showing property prices in Rio cooling off for the first time since 2008. Zona Sul’s coveted beaches have registered the most significant drop in interest, with owners looking for an immediate sell forced to accept offers below the asking price.
Rubem Vasconcellos, the president of real estate agent Patrimovel predicts that prices in real estate will fall between 25% to 30% over the course of the year as demand cools off and agents are forced to lower prices to stimulate the market.

‘The market is entering a new phase, and for foreign investors, it is looking more attractive than it has done in years,’ said Samantha Mortner Flores, director of bi-lingual property consultancy InTown Group.

One of the benefits of the market becoming so hot in recent years is that it was forced to mature as it adapted to cater to the top level international and Brazilian investor, both in terms of the level of client services and the properties themselves on offer.

A one stop property shop combing a bi-lingual property brokerage with a Brazilian architectural team, InTown Group was created in response to a growing number of discerning international clients looking for a first rate service.

‘Even as prices cool off, everything that made Rio so attractive from a buyer’s point of view remains the same,’ added Flores.