Real estate market shows improvement in sales and talks about resumption in “V”

June data is still being computed, but a preliminary survey conducted with members indicates that sales have already reached 85% of the expected for the month

Brazil returned to the list of the 25 countries most selected for foreign direct investment (FDI), according to an indicator produced by the North American consultancy A.T. Kearney, released on Tuesday (16).

After leaving a list last year, the country is a single nation in Latin America or compares a list in the 2020 ranking. For the eighth consecutive year, the United States leads as the most attractive country for foreign investments, followed by Canada, Germany , Japan and France. Complete a list of the first ten tests, in order: United Kingdom (6th), Australia (7th), China (8th), Italy (9th) and Switzerland (10th).

The Kearney Foreign Direct Investment Confidence Index (FDI) is an annual survey of executives from the 500 largest companies in the world since 1998. Surveys are calculated based on questions about the probabilities of companies interviewed who make a direct investment in market in the next three years. A variable score on a scale of 1 to 3. In the case of Brazil, the score was 1.65.

“After leaving the 2019 ranking, Brazil resumes a position this year, ranking 22nd. Among the factors that drive or the investment feeling are passing the pension reform and government investments to expand as privatizations, which should stimulate the growth of the economy “, says the Kearney report on Brazil’s performance.

A consultancy defines foreign direct investment as investing capital for a foreign company in a company in a different country. It is the same concept defined by the United Nations Conference on Trade and Development (Unctad), which deals with “an investment that involves a long-term relationship and shows an interest and duration control by an entity resident in an economy (foreign direct investor) or parent company) of a company resident in another economy (IDE) company or affiliated company or foreign company) ”

See a complete list of the Foreign Direct Investment Confidence Index (FDI) 2020.

Effects of the pandemic
The Kearney survey was carried out between January 27 and March 3, before the pandemic exclusion of new coronaviruses, and the effects of the global crisis were partially captured, without final interviews.

The “V” recovery (falls fast, rises fast), so dreamed of by various sectors in the midst of the coronavirus crisis, may be on the way to becoming a reality in the real estate market in São Paulo, the most thriving in the country. So far, sales in April and May have been declining, but they have slowed down in June, arousing optimism among businessmen and analysts.

“The feeling is that there was more delay than abandonment of purchases”, reports the president of the Housing Union (Secovi-SP), Basílio Jafet. “After the reopening of the stands, the movement started to rise,” he amended. Secovi-SP recorded sales of 1,923 new properties in April and 2,405 in May, which represents falls of 27.7% and 26.7%, respectively, compared to the same months last year. The size of the drop was considered mild compared to other sectors, says Jafet.

June data is still being computed, but a preliminary survey conducted with associates indicates that sales have already reached 85% of what is expected for the month. “It is a spectacular result for this moment when there is still fear of leaving home and the service has restrictions on hours and flow”, evaluates Jafet. “Launches and sales are lower than before the crisis, of course, but activities improved in May and June. For me, this was a big surprise ”, says BTG Pactual analyst Gustavo Cambaúva.

There are some hypotheses that explain business improvement. The main one is that the average interest rate on real estate financing in Brazil is at the lowest level in history, according to data from the Central Bank. In May, it reached 7.16% per year. At the beginning of 2019, it was 8.31%, and at the beginning of 2017, 10.90%. The sector estimates that the reduction of each percentage point in interest represents a discount of 8% in the financing portion, which means that it will fit in the pocket of more and more consumers.

A survey carried out by the bank Credit Suisse this month points out other factors that reinforce the optimism with the market. One of them is that sales of residential properties were around 60% of their historical level in the last crisis, between the years 2015 and 2017. This generated a pent-up demand, which helps to explain the good movement in the stands.

Another factor is that the properties are relatively cheap, since the price increase has not kept up with inflation. According to the bank’s calculations, this resulted in an average devaluation of 25% in the last five years of housing in the capitals.

“Depressed demand, coupled with record low interest rates and the weak performance of house prices, created a unique environment for the sector,” described analysts Daniel Gasparete and Eduardo Costa, responsible for the Credit Suisse study.

In addition, property rental has again become an attractive investment. The yield is around 5% per year, not bad compared to a basic interest rate (Selic) of 2.25% per year.

There is also a behavioral issue, points out MRV co-chairman Eduardo Fischer. “The property started to gain more importance in people’s lives, because they spend more time at home and want to have a pleasant place to stay”, he comments. This point of view can lead many people to exchange rent for their own home or even seek an “upgrade” for a better home explains.

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