Although the new coronavirus pandemic has affected various sectors, the real estate market is positively growing in Brazil. According to the October balance by the Brazilian Association of Real Estate Developers (Abrainc), recapture of launches and sales of the corporation after the most restrictive period of the pandemic occurred in a heterogenous way among different residential segments.
Based on that balance by Abrainc, in August this year there was a 58.9% increase in sales of habitational units as compared to the same month last year. In the whole, 13,156 units were traded, surpassing the previous month performance, which was of 13,023 [units], and establishing a new record by the corporation since May, 2014.
Although 2020 has been a complicated year for many, we can affirm that it has been the year in which we have managed to consolidate operations in QriarCity (formerly known as Qriar Engenharia), a company we invest in, and to identify new future real estate developments. Generally speaking, the real estate residential sector has rather stood out, if compared to the commercial one, since families have sought a greater comfort in the midst of the pandemic scenario.
Factors which impelled growth of the sector
Even with a high unemployment rate and a scarce access to credit, home ownership continues to be a priority for families. Furthermore, during the pandemic, there has been a greater search for quality milieux, for the necessity of remaining more time at home, as regards social distancing.
Another important factor for growth of the sector has been prices, which have been out of phase along the last years and have led families to believe that this is the [right] moment to good business. In other words, it is quality of life harnessed to an excellent investment.
The drop of Selic, the basic interest rate, down to 2% a year, has also been one of the responsible factors for the upturn of the real estate market, resulting in an increase in the number of financings. In October alone, according to data from the Brazilian Association of Real Estate Loans and Savings Companies (Abecip), 45.5 thousand real properties were financed, a rise of 53.6% as compared to October last year.
The civil construction building sector, which runs side by side with the real estate sector, has also had an increase during the pandemic. The Ipea indicator of Gross Fixed Capital Formation (GFCF) for civil construction building registered an advance of 3.2% in August. That result occasioned rises of 8.2% and 2.8% in the months of June and July, respectively, registering an advance of 16.6% in the moving quarter.
High demand for new real properties
Despite the recession in Brazil as well as in Portugal, where QriarCity performs, we have conquered positive and unprecedent figures by virtue of a long-term strategy which had been adopted since the enterprise appeared. With a high demand for new real properties and a low stock in the regions we build, we have had no difficulties in selling products which are much above the average in terms of quality.
The company had the highest cash generation of its history in 2020. We had a record of net sellings and also the highest net receipt in the history of the enterprise. We obtained a significant increase in net profit as compared to previous years. We also focused on recapture of launches, both in Brazil and Portugal, and we are starting a new retail project in the United States.
In Brazil, the sale of developments of medium and high standard was most affected by pandemic restrictions in the field of launches, [which] in relation to their sale have grown 8.0% in the last three months. Comparatively, developments associated with the Minha Casa Minha Vida program have shown a positive performance both in the field of launches and of sales, presenting a rise of 61.8% in the last three months.
This year in Portugal, QriarCity had only one product being developed, and we were surprised by the high search for determined types of real properties. We made a decision of selling the whole portfolio in blueprint to one investor, in order to diminish the risk of the operation, which in spite of being low, must be taken into consideration in [these] uncertain times. If we continue to find good locations and given the quality of our building construction, we have no fear of a decrease in demand from our public.
Why investing in the real estate market now?
Currently the real estate market is the safest and most yielding sector among investments, for neither having oscillations of value nor risks in case of bank crashes. With the low Selic rate, this is the ideal moment for investing and saving, because with this rate reduction there is more accessibility to banking financings.
Real properties may also be a very attractive source of revenue when rented. Furthermore, purchasing a real property is an important step for the building of a personal patrimony. It is the investment of the present which shall bring financial security and profits in the future. Based on the last ten years, real properties have had an average appreciation of 9.4% a year. As compared to savings, their yield was 44% higher, that is, whoever has opted to invest in the real estate sector has had an average gain of 15.3% per year.
In Brazil, prices are still out of phase and the demand is growing. We believe that we shall see a new cycle of rise in prices in the next 3 or 4 years. With returns around 50% for a purchaser within this period, if compared to the current interest rate, it is an astronomical gain.
In Portugal, the real estate market is one of the hottest in the world. Either for its weather, quality of life, or cost of living, it is a destination sought by people from every place.
Although it is early to predict what is going to happen within the market in the next year, we bet on a growing search for quality residential real properties. With a trend of higher search for houses for families which have already purchased a real property and are looking for an upgrade, QriarCity wants to increase its reach of performance also by maintaining the quality of already existing real properties, so that our expectation for the next year is that the real estate market be even better.