In Sao Paulo, house prices fell by 2.26% y-o-y `in Q1 2020

Brazil’s housing market remains depressed with house prices in Sao Paulo falling by 2.26% during the year to Q1 2020, following annual declines of 1.96% in Q4 2019, 0.88% in Q3, 1.29% in Q2 and 2.41% in Q1. On a quarterly basis, house prices in Sao Paulo dropped 1.02% in Q1 2020.

 

Brazil’s political turmoil

The crisis started in 2013 when the central bank raised key interest rates nine times to 11% in April 2014, causing a sharp economic slowdown. 

In 2016, President Dilma Rousseff has been impeached, the speaker of the house has been jailed, five Cabinet ministers have been removed or allowed to step down because of allegations of corruption. Brazil's new president, Michel Temer, is embroiled in a corruption scandal.  

Worse, another massive bribery scandal, involving Brazilian construction giant Odebrecht, disrupted politics, not just in Brazil, but in more than half of the countries in Latin America, as well as in Angola and Mozambique in Africa. Odebrecht is behind the construction of venues for the 2014 World Cup, the 2016 Olympics, the metro systems in Caracas, and other huge infrastructure projects.

The crisis helped right-wing candidate and retired army officer Jair Bolsonaro sweep to victory during the October 2018 presidential election on a populist, anticorruption platform. But more than a year into his presidency and not much has changed. Congress blocks most of his plans and his Cabinet is in disarray. In November 2019, Bolsonaro launched a new political party, the Alliance for Brazil (APB), after his relationship with the right-wing Social Liberal Party (PSL) collapsed as they fought for control over its large campaign funds. PSL emerged from obscurity last year to become the second largest party in Brazil's Congress after Bolsonaro made it the vehicle for his presidential run.

Now, the country is under fierce political battle over the COVID-19 pandemic, with Bolsonaro urging state governors to lift preventive lockdowns arguing that the economic damage far outweighs the public health risks. Though, Brazil, by some measures, is the new epicentre of the outbreak, registering higher daily averages than in any other part of the world. In early-June 2020, the country’s confirmed cases had already climbed 646,000. And with more than 35,000 deaths, the coronavirus pandemic has killed more people in Brazil than anywhere else outside the US and the UK.

Rents, rental yields: rental yields are moderate ranging from 3% to 6%

Rio apartments costs are around $4,370 per sq. m. 

Brazil: typical city centre apartment buying price, monthly rent (120 sq. m)
	Buying price	Rate per month	Yield
Sao Paulo	$524,400	$1,000	5%-6%
Rio de Janeiro	$709,200	$1,200	3%-4%

Recent news. After growing by a miniscule 1.1% in 2019, the Brazilian economy contracted by 0.3% year-on-year in Q1 2020. On a quarterly basis, the economy shrank by 1.5% - the biggest fall since Q2 2015. Recently, the government lowered its 2020 economic outlook, projecting a GDP contraction of 4.7%, the country’s biggest decline in more than a century.

In an effort to buoy the economy, the Central Bank of Brazil has slashed its benchmark Selic rate by another 75 basis points to a new all-time low of 3% in May 2020, following a 50 basis points rate cut in March.