Luxury Home Sales Boom in Sao Paulo With Low Rates Spurring Demand

(Bloomberg) -- It took less than a month to sell half the units in a Sao Paulo luxury apartment building earlier this year, even though construction won’t be complete until 2022. And one brokerage that specializes in high-end real estate saw its revenue double in the first four months of this year.

The luxury residential-property market in Brazil’s biggest city is booming with demand from rich Brazilians, fed up with the toll record low interest rates are taking on their portfolios. Gone are the days of double-digit returns on simple treasury securities, so many of the rich are trying to capitalize on soaring prices in the high-end real estate market.

“This is for sure the best year since 2014,” said Amir Makansi, chief executive officer and partner at Anglo Americana Consultoria de Imoveis SA, a boutique brokerage that specializes in luxury properties.

Luxury Home Sales Boom in Sao Paulo With Low Rates Spurring Demand

Apartments in Vila Nova Conceicao, the most expensive neighborhood in Brazil, are selling for as much as 13.5 million reais ($3.4 million), according to Makansi. Costs have jumped as high as 35,000 reais per square meter from about 25,000 reais five years ago.

Revenue at Anglo Americana doubled in the first four months of 2019 from from the same period last year, according to the company, which declined to give specific figures. Construction company Even Construtora e Incorporadora SA is building the first residential tower under the Fasano brand -- a name synonymous with affluence in the hotel and restaurant markets. Over the course of just one month, the company sold more than half of the building’s 70 apartments at an average price of 10 million reais.

Luxury Home Sales Boom in Sao Paulo With Low Rates Spurring Demand

Growth Expectations

“The residential real estate market is recovering due to the effect of low interest rates, but there is also more confidence with expectations the Brazilian economy will perform better,” said Thiago Alonso de Oliveira, CEO at JHSF Participacoes SA, a development company that owns the Fasano brand. The warehouse sector may be the next to gain traction as economic growth picks up, Oliveira said.

Brazil’s gross domestic product is expected to expand 2 percent this year, up from 1.1 percent in 2018 and 2017, according to data compiled by Bloomberg. But optimism about the economy has been fading in recent months, with GDP coming in below initial forecasts in seven of the past eight years, stoking concern that the luxury real estate rally may be short-lived.

Luxury Home Sales Boom in Sao Paulo With Low Rates Spurring Demand

New residential sales in Sao Paulo surged 39 percent in the 12 months through February, to 932.5 million reais, according to builders association Secovi-SP. The number of units sold jumped 50 percent to 2,176. Among all new apartments with three or four bedrooms offered during the period, 45 percent were sold.

Commercial real estate is suffering from a weak economy. Prices in that market in Sao Paulo fell 2.5 percent in the 12 months through March, according to the FipeZap Index.

Luxury Home Sales Boom in Sao Paulo With Low Rates Spurring Demand

Among the main buyers were entrepreneurs, bankers and hedge fund managers, who had a good year in 2018 and received big bonuses, Makansi said.

The Fasano apartments will be built in the luxury neighborhood of Itaim, at about 33,000 reais per square meter, Vinicius Mastrorosa, Even’s chief financial officer and investor relations director, said in an interview. New zoning rules in Sao Paulo that permit taller buildings close to public transportation will allow Even to build 40-story towers with two penthouses and just two apartments per floor. Most apartments will be 290 square meters (3,100 square feet), and the two penthouse units will be 500 square meters.

Luxury Home Sales Boom in Sao Paulo With Low Rates Spurring Demand

Construction hasn’t started on the building, which will be part of a complex that also includes a Fasano hotel.

“It wasn’t easy finding land for construction in such a refined neighborhood as Itaim -- we had to buy 25 houses,” Mastrorosa said, adding that complex has space for three restaurants, a pool and a bar.

©2019 Bloomberg L.P.