Trends in rental rates in Brazil are a source of vital information for
anyone looking at buy-to-let options in the country. Monthly
rents have risen sharply over the last 18 months, but what are they set
to do during 2023? Analysts recently addressed this question in an article published
by the Brazilian Mortgage Association.
Rental rates in Brazil in Q1 2023
The property portal QuintoAndar estimates that rents rose by 4.7% between January and March, considerably ahead of Q4 last year when they went up by 2.9%.
However, the increases were not uniform across the country or, indeed, in districts within the same city. According to QuintoAndar, some parts of Rio de Janeiro and Sao Paulo saw rental rates skyrocket by 22.5% in the first three months of this year.
Slight deceleration on Q1 2022
Despite the 4.7% increase, rental rates in Brazil in Q1 this year rose at a slower rate than a year ago. In Q1 2022, they increased by 6.7%, indicating that 2023 has started with a slight deceleration compared to last year.
Predictions for rental rates for the rest of 2023
Analysts believe that rents will continue to rise over the next few months but at a slower rate than during 2022. They also claim that a possible reduction in interest rates would not impact rental rates in Brazil this year.
Vinicius Oike, an economist at QuintoAndar, points out that the first quarter of the year usually brings a marked increase in rental rates because of contract renewals. However, he believes that price rises should remain consistent throughout this year, but at a more moderate rate. Nevertheless, he predicts “high levels of rent growth” in 2023.
Rates to go up in tandem with interest rates
Some analysts link rental rates in Brazil directly with shifts in interest rates. As a result, they predict continued upticks in rents until the Brazilian Central Bank starts to reduce interest.
“Bringing interest rates down could be the solution to rising rents,” commented an estate agent,” but while inflation remains unchecked, property values will continue to increase.”
For Oike, lower interest rates do not necessarily impact rental rates. “There’s a giant gap between a drop in interest rates and the economic impact on the property market,” he said. He points out that a possible reduction in the second quarter of this year would not affect real estate until 2024.
Other analysts agree and also reiterate that any changes would not be uniform throughout the country. Much will depend on supply and demand. As regards the former, they highlight the general shortage of quality homes in good locations.
New supply is slow to arrive on the market because of the timeline between the launch and completion of new residential complexes. Construction of new projects tends to take three to five years, curtailing the new supply of rental properties.
Returns from buy-to-let properties
The predicted continual increases in rental rates in Brazil will continue to boost returns from buy-to-let investment in the country. A recent study found that owners could expect double-digit returns last year, well ahead of those provided by other assets.
When compared to returns over a decade, buy-to-let investment in Brazil provided easily the best compared to savings and stocks and shares.