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ECONOMIC CYCLES
How do Economic Cycles help to understand the real estate market?
Interest rates still have a strong impact on purchases and sales of real estate, but have a lesser effect on the residential rental market.
the year of 2022 The year 2022 was challenging. If, on the one hand, we had the full resumption of various activities affected by the restrictions of the pandemic period, we also faced a difficult economic situation, marked by international crises, wars and, internally, by high inflation. These phenomena undoubtedly affected the Brazilian real estate market, which is directly impacted by economic cycles. But what can we learn from this and how can we prepare for the year that has just begun?
At the outset, it is worth noting that the Brazilian economy surprised positively in 2022. The most recent projections indicate that the GDP grew something around the 3% in the last year, and the market expectation, six months ago, was approximately half of that rate. The result certainly has to do with the end of social distancing measures, which allowed the reopening of many activities, and with the injection of resources into the economy through public income transfer policies.
But inflation also grew a lot during this period – in the last twelve months, the IPCA (measured by IBGE) was more than 12%. Consequently, the basic interest rate, after a period of historical low, also grew, reaching the current level of 13,75%. As a result, the residential purchase and sale market retreated in 2022. If we take the volume of real estate credit granted to individuals, the decrease was approximately 6%.
This means that the sector's results are only behind those registered in 2021, marked, as you know, by a kind of ?boom? driven by low interest rates. In other words, the market remains heated in historical terms.
The numbers of 2022 The 2022 numbers still confirm the huge influence that the interest rate has on the real estate purchases and sales segment. This effect, however, does not seem to be so prevalent in the residential leasing market. With a relative improvement in employment, in addition to the aforementioned injection of resources into the economy, the rental sector absorbed delayed transfers during the pandemic and was able to adjust to the 2022 inflation. 2022.
That is, the economic situation affects the various segments unequally. The same occurs when we observe even more specific niches within the same segment.
at the turn of 2020 for 2021At the turn of 2020 to 2021, for example, when real estate financing conditions were particularly attractive, many people considered moving or acquiring a new property, with one caveat: the pandemic hit the poorest hardest. Therefore, this window of opportunity for low interest rates could basically be taken advantage of by the richest sections of the population.
This means that certain types of properties were more sought after than others. Houses in smaller cities, close to capitals, stood out; real estate in upscale neighborhoods of coastal cities; and houses in regions with more green areas.
in july 2021, the national average growth accumulated in the previous twelve months was 5,1%. In the city of São Paulo, this rate was below, in 4,5%. In Balneário Camboriú, for example, the registered growth was more than 12%. These are numbers that reflect choices consistent with the context of the pandemic: the search for more space, more green areas, more outdoor leisure options and a better quality of life.
They also reflect a buyer's profile: the price per square meter in neighborhoods nobles grew more than in other regions, which contributes to the idea that the richest layers of the population were able to take advantage of the financing conditions of 2020/2021.
This helps us understand what happened in 2022: last year, taking data from November as a parameter, the trend was reversed, and the less valued neighborhoods began to record greater growth in the price of the square meter. This happened due to the improvement relative to the labor market, which provided the less privileged sections of the population with income to invest in residential properties. Therefore, regions with options within their income range recorded higher price inflation.
This is a trend that has an expiration date, as the labor market should not surprise positively as in 2022. What might happen next is difficult to predict. nor we know what will happen to the national and international economic situation over the course of 2023. But the identification of these trends, especially after such atypical years for the real estate market, allows us to better prepare for the coming months and, in the face of possible turbulence, even if we don't have an answer for everything, at least we can ask the right questions.
*Pedro Tenório is an economist at DataZAP+
originally published: Exame.com, column Real Estate GenomeO. (on January 20, 2023, 08:57 am)