Falling interest rates and rising property values above inflation are driving the real estate market in the final stretch of 2023

With the 2nd consecutive cut and reaching the lowest level in the last 16 months, the continuous reduction of the Selic rate could accelerate sales and real estate appreciation in the final stretch of the year.

Amidst political and economic turbulence, both internal and external, Brazil has been seeking solutions to adjust to this challenging scenario, rebalance its accounts, restore investor confidence and revive the economy, aligning itself favorably with the most structural and urgent agendas, such as fiscal balance, tax and administrative reform, thus paving a more sustainable and virtuous path of inflation control, interest rate reduction and, consequently, economic growth that has, in the construction segment, especially in the real estate sector, one of its main pillars and one of the segments that reacts best and most quickly to changes in macroeconomic scenarios in the country.

The Monetary Policy Committee (Copom) adjusted the basic interest rate on the 20th, decreasing it from 13.25% to 12.75%. This is the second consecutive cut in the Selic rate, which reached its lowest level in the last 16 months, ratifying the decision to continuously reduce interest rates from now on. In the statement released after the meeting, the committee argued that the rate reduction is “compatible with the strategy of converging inflation around the target over the relevant horizon, which includes the year 2024 and, to a lesser extent, 2025”. Copom once again defended that the scenario demands “serenity”, but has already signaled that it may cut the Selic rate again by 0.5 percentage points at the next meeting.

WHAT ARE THE DIRECT IMPACTS ON THE REAL ESTATE SECTOR, WITH THE SELIC RATE FALLING?

With the Selic rate declining, real estate financing becomes more accessible, providing more attractive conditions for those looking to purchase a property, whether used, new or off-plan, unlocking negotiations, reinvigorating the entire production chain of the real estate segment and putting pressure on the demand for new properties, directly impacting property values, especially in regions with less available supply.

GROWING DEMAND FOR REAL ESTATE MAY ACCELERATE REAL ESTATE VALUE INCREASE

However, even before the start of this new cycle of falling interest rates in the country, property values have been increasing continuously, especially in large capitals. ABECIP – Brazilian Association of Real Estate Credit and Savings Entities – in partnership with the Brazilian Institute of Economics (IBRE) and the Getúlio Vargas Foundation (FGV), recently released the Real Estate Appreciation Index for the last 12 months, the IGMI–R – General Residential Real Estate Market Index, one of the most reliable indexes in the sector, indicating an average increase of 12.98% in the value of properties in the period. In contrast, the IPCA, an index that measures inflation, registered an increase of 3.94%, confirming the trend of real and continuous appreciation of properties, above inflation rates.

According to the president of the Brazilian Association of Real Estate Developers (Abrainc), Luiz França, the acquisition of properties is closely linked to consumer confidence, unemployment levels and interest rates. “Interest rates below double digits, in general, create a very strong movement in the real estate market”, it says.

Aspects such as location and infrastructure help increase the value of a property, whether it is off-plan or used. However, falling interest rates also tend to have a positive impact on this, as the real estate market traditionally sees sales increase during periods of lower interest rates, pushing prices up.

The scenario, therefore, is one of great optimism for the real estate sector, which has been accumulating continuous and perennial appreciation, well above inflation and now, with the fall in interest rates, this appreciation should accelerate, given the increase in demand that will certainly produce an environment of many opportunities for those who dream of acquiring the ideal property, with the certainty of the best deal, in this final stretch of 2023.

Emplavi: Building happy stories for 41 years

Emplavi, a leading developer in the high-end real estate segment, with the largest and most diversified offer of high-end properties in the best locations in the Federal District, with 41 years of history and more than 31 thousand properties delivered, is a genuinely Brasilia-based company that has evolved with Brasilia since 1982, in the planning, marketing, construction and delivery of properties that prioritize the safety, comfort and quality of life of its customers, the result of a perfect harmony between planning, qualified management and high added value construction processes, resulting in projects that, over time, have become a reference in the high-end real estate segment in the Federal District.