Wife investigating and researching: My message to her:
Ordinary people in Brazil do not know what is real estate speculation bubble.
Only discover when (as is said of bubbles) "when the taxi drivers are riding the wave " which is time to get out.
HOW IT WORKS: But a few guys know how it works.
For example, Dubai was an economy based on speculative bubble. Ordinary people bought because the rent was high.
It was a ploy to maintain high rent: That's because there were half a dozen builders contreolling the supply. People sold what they had in country of origin and bought in Dubai. This meant: they transferred the money from the home country of Dubai.
In Dubai operated as people had been working to build malls, office blocks, local Disney world, airport, subway and -of course- construction the villas and apt for the coming build dwell in. The day that industry stopped building all that, prices plummeted.
What could happen in Brazil is different but with the same result: People will get ito debt to buy real estate and then there will be mass defaults. Which will be time to buy low.
EXAMPLE OF PRICE INCREASE:
You have to compare to international market prices taking into account the exchange rate. If that my apt has 121m2 at 2.500/m2 this gives: BRL302,500 or USD177.000. I paid USD32. 500 in 1991.
Why the exchange rate? This is because international investors began to enter the property market in Brazil for two years. Now began to enter heavily. They are snapping up shares of builders (Rossi, Cyrella) like there is no tomorrow.
Before foreignersbought only because they had insider's knowledge that was cheap and knew the market (the foreign husbands of brazucas women, Dekasseguis, immigrants remittances who repatriated USD or guys like me and Ermes) they are no longer going to find anything for 20K Euros. They need something like 50 to 100K.
NEXT DEVELOPMENTS TO KEEP EYES OPEN:
There are several parameters that should keep your eyes open for the indication of the bubble
No more good topography lots.
Bad topography start to sell.
Few empty lots in good neighborhoods (Ahu between Garibaldi and Mateus Leme. There around us. In the neighborhood around the residence of Experiment's friend (that guy who sells chemicals for the food industry. Near Texaco gas Station)
· Neighborhoods where Price have been stagnant for long time start to appreciate the Agua Verde (with the new Shopping nearby)
· Neighborhoods increased price appreciation hits unreal prices Cabral, Ahu and Juvevê where the Subway is planned to come soon, plus new park designated area.
· Neighborhoods of low-income people drive them out and traditional houses go down and good quality in a region of traditonal low income (ex. right hand side of Tingui park)
· new areas opening up to construction the opposite side of the Northern ring road, in the side of Almirante Tamandaré municility. Those neighboring municipalities also want to gorge themselves in property tax (IPTU) that mayor Richa is.
She replied:
Then you have to come here to see with their own eyes, because that is exactly what is happening now, you need to go where Nega (her sister) lives, the rent of a property there is more expensive than in downtown, with houses in good quality too, was once the suburbs were a province of the poor people.
That has changed completely now.
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