Brazilian Real Estate Companies Are Dealing With Falling Real Estate Values

November 24th, 2015

It’s hard to think about it now, but just two years ago the Brazilian real estate market was on fire. Values were increasing monthly and people all the country were buying properties because they had the money or were able to get a loan from a bank. But all of that has changed this year. Banks aren’t lending people money unless they have enough collateral to cover the loan, and the middle-class in Brazil has stopped spending. Inflation is taking their disposable income away, and all that’s left is enough to pay the bills.

One Brazilian company, Cabral Garcia Empreendimentos, is heavily invested in real estate demands of Rio, and they have no intention of getting out of the industry. Cabral Garcia Empreendimentos leases, sells and buys high-rise apartments, condos and townhouses all over the country. The company also buys other real estate, and right now it’s a buyer’s market in Brazil. The cost per square foot in Brazil dropped .012 percent in September, and that is on top of the previous monthly drops, which has led to more and more people looking for rentals according to Dino. Even with the recent drop, real estate analysts at Cabral Garcia Empreendimentos think the square foot price of real estate will still be higher than it was in 2014.

Companies like Cabral Garcia Empreendimentos are doing business with foreign investors that have U.S. dollars to spend in the West Zone. Anyone who can buy in dollars in Brazil is coming out on top this year. The Real, the Brazilian currency, has lost more than 30 percent of its value this year, and that means Brazilian real estate is a real bargain for foreign investors with dollars or Euros to spend. Cabral Garcia Empreendimentos has experienced a rise in townhouse sales and rentals to foreigners this year, and they expect that trend to continue next year. The economic forecast for Brazil is not that promising in 2016, and that means more foreign investors will come looking for bargains in real estate and other investments.

Anyone that knows Brazil the way Cabral Garcia Empreendimentos knows Brazil realizes that the current situation in the real estate market is temporary. Brazil has a history of bouncing back from economic downturns and they usually do it quickly. Some Brazilians expect a change in government next year, and they also expect the country’s exports to increase. If both of those expectations materialize, the economy will begin to recover. The most important factor in the recovery is inflation. The new government must get that under control in order for Brazilians to start spending on real estate again.

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