Price index to bring more transparency to Brazil's property market

A new Brazilian commercial property index is currently in the process of being finalised by one of the country’s leading universities and research institutions – a project that looks set to bring further transparency throughout the sector.

According to Professor Paulo Picchetti from the Fundação Getulio Vargas, the current methodology of real estate research relies heavily on agents and portals whose estimations can be ambiguous and not focused on real numbers.  Whilst there is some evidence in terms of recent sales figures (via sales offices, local government tax statistics and comparable reports) – using these alone does not present an accurate picture, particularly due to the fact that they are not legally registered (as is required in many other countries). 

 Brazil has been very slow in building an index of its own which, according to the professor, is largely due the sheer magnitude of the country as well as the highly private nature of information on the housing industry.

 The assessment of commercial property values has been undertaken on an aggregate basis, using the following 5 stages:

1)      Confidential relationships have been developed with Brazil’s commercial real estate industry in order to analyse historical performance (on a per state basis);

2)      The utilisation of both calculation formulas primarily used by the NCREIF (National Council for Real Estate Investment Fiduciaries) with those specific to Brazil’s commercial property sector;

3)      The evaluation of unsold commercial properties in the Brazilian marketplaces followed by the subsequent exploration of potential alternatives and their comparative advantages / disadvantages;

4)      The assurance that well-defined governance structures are in place that will provide ongoing transparency and credibility to the indices;

5)      The construction of a comprehensive database designed to increase information and understanding about the Brazilian commercial property industry combined with the accurate presentation of the various profitability indices.

With formal launch expected by the end of 2010, the professor also stated that the commercial index will form the basis of a future national residential measurement – of which the team are in the primary stages of developing.

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