SÃO PAULO – The number of new apartments sold in the first half of 2021 – which reached 127,522 residential units – was 46.1% higher than that verified in the same period last year. The increase in sales in the second quarter of this year was 7.2% compared to the first and 60.7% compared to the second quarter of 2021. The numbers are from the study of National Real Estate Indicators for the 2nd quarter of 2021, carried out since 2016 by the Brazilian Chamber of Construction Industry (CBIC), by Senai and by Brain Strategic Intelligence.
It is the effect, in the view of the CBIC board, of interest rates that are still inviting on real estate financing for individuals, in the range of 8% per year.
The launches of new units also increased: 100,184 apartments were launched in the first half, representing a growth of 57.2% over the same period in 2020. In the second quarter of the year, compared to the first, the increase was 51 .3%. The highest growth rates were concentrated in the North and Northeast regions, with an increase of 162.9% and 127.5% in launches in the second quarter.
Despite the positive numbers in terms of growth, the greater volume of sales than launches sparks a warning sign in the sector. “The launches didn’t grow as much as the sales. It is bad for the market that we have an offer of properties equivalent to 8.3 months of sale, because that is very little”, said José Carlos Martins, president of CBIC, at a press conference this Monday (23).
The number of residential units launched was above the number of units sold since at least 2017, according to data presented by CBIC. The two curves approached in 2020 and at the end of the first half of last year, they reversed positions: just over a year ago, sales exceeded launches. In the 12-month period up to June 2021, 261.4 thousand units had been sold, against 237.2 thousand units launched.
One of the reasons for construction companies are holding new releases, according to Martins, is the uncertainty about prices. Civil construction costs have soared in the last year – but Brazilians’ income has not. There is a fear that the transfer of costs to prices could not be absorbed by potential property buyers, and that is why companies have rethought their plans for new developments.
“Real estate prices rose a little, but nothing compared to the cost of inputs. You will need to recover this. And it is this fear that makes many companies reduce launches at the moment”, says Martins, for whom the real estate sector is currently compared to a “Ferrari with the handbrake on”. “We have companies with projects ready to be launched, but the bill is no longer standing”.
The combination of high production costs, high demand and launches below sales tends to have explosive effects on property prices for consumers. “We have an increase in prices already foreseen due to the increase in construction costs and the delay in launches that may be occurring in the country,” said Celso Petrucci, vice president of the Real Estate Industry at CBIC. “As much as the INCC (National Civil Construction Index) balances the cost of materials, we will still suffer the pressure of the INCC of labor”.
In the 12 months to June 2021, the INCC accumulated an increase of 16.8%. Looking only at materials and equipment, the INCC for the period was 34.3%, while the advance of the INCC for labor reached 6.8%.
Green and Yellow House
Sales and launches under the Casa Verde e Amarela program (formerly Minha Casa Minha Vida) also grew, but at a slower pace. In the second quarter of 2021, the number of units sold increased 2.1% compared to the first quarter and 40.7% compared to the second quarter of 202.
The number of launches grew 29.6% in the second quarter of this year, compared to the first, and 83.8% compared to the second quarter of last year.
As a result, the program’s representation in the sector as a whole decreased. Currently, 48% of all units sold in the country come from Casa Verde and Amarela. Last year, according to Martins, the slice reached 55%.
The accommodation of costs is even more complicated in the case of the program’s apartments: as they are already sold at low prices, there is less flexibility for developers in adjusting their margins to absorb increases in inputs.
Therefore, according to Martins, a review of the operational limits and the amount of subsidies offered under the program is expected. According to the executive, the National Housing Secretariat, linked to the Ministry of Regional Development, in partnership with the Ministry of Economy and the Civil House, developed a proposal regarding the two themes, which is being forwarded to the FGTS Board of Trustees. FGTS resources are among the program’s funding sources.
“The proposal is to increase the program’s ranges, as there are many places in Brazil where it is no longer possible to build within the established limits”, said Martins. According to him, if the cost of construction increased by more than 20%, this would be the natural demand for adjustments. The limits currently practiced were set in October 2016.