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Building Real Estate Market Indices for the Brazilian Market

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Property portals around the world have ready access to a vast range of information on home sales and rental prices.  From these, it is possible to create a series of market indices that can track the performance of a market.
ZAP in Brazil has partnered with FIPE (Institute of Economic Research Foundation) to create a series of FipeZAP indices covering sales and rentals.  This session looks at how they approached this and the lesson learned in building these indices.

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Building Real Estate Market Indices for the Brazilian Market

  1. 1. BUILDING REAL ESTATE MARKET INDEXES FOR THE BRAZILIAN MARKET
  2. 2. Who is ZAP? Who is Fipe? Brazil: numbers, historical facts and real estate market FipeZAP partnership: products and indexes Repercussions in the media
  3. 3. Who is Fipe? Brazil: numbers, historical facts and real estate market FipeZAP partnership: products and indexes Repercussions in the media Who is ZAP?
  4. 4. Launched 2007 ZAP TIMELINE 140x more listings 1000x more audience than the newspapers 2010 100% owned by Grupo Globo – The largest media group in Latin America 70% of TV audience market share 2012
  5. 5. Approximately 400 employees 27 offices in all of Brazil TODAY ZAP TIMELINE Sponsors Formula 1 Top of Mind in classified ads 40.1% revenue growth 2015 ZAP 50% larger than the competition Acquisitions: 2014
  6. 6. ZAP IN NUMBERS2015 VS 2014 Source: Internal database VISITS 116mi 36% SEARCHES LISTINGS AD IMPRESSIONS LEADS TRANSACTIONS 412Mi 76% 1.1Mi 139% 13Bi 180% 8.4Mi 61% 169.7K 61% 2015
  7. 7. Who is ZAP? Brazil: numbers, historical facts and real estate market FipeZAP partnership: products and indexes Repercussions in the media Who is Fipe?
  8. 8. Indexes Expertise Indicators F I PE INSTITUTE OF ECONOMIC RESEARCH FOUNDATION Consumers Public Sector Real Estate Market Academic Programs Ad-Hoc Projects Researches Economic and Financial Indicators Indicator for Developers Indicator for Auto Market Salary-meter Indicator for Job Market
  9. 9. WHY DOES THE PAS T M ATTE R ? 1890 1910 1930 1950 1970 1990 2010 + 60 + 200 + 80 + 100 + 120 + 140 + 160 + 180 HOME PRICES IN THE USA In 2005, the Nobel Prize Winner Robert Shiller foresaw and demonstrated the evolution of real estate prices in USA ’
  10. 10. HOW ABOUT BRAZIL? Necessity to create an index of historical pricing High volatility in the political and economic environments Historical data is rare
  11. 11. Who is ZAP? Who is Fipe? FipeZAP partnership: products and indexes Repercussions in the media Brazil: numbers, historical facts and real estate market
  12. 12. Largest economy in South America and Latin American region (40% share) USD 11.38k in 2014 GDP per capita: GDP: USD 2.39 trillion in 2014 Population: 205 million 2nd largest economy in the Western Hemisphere Size 3,286,488 square miles World’s 7th largest economy Total homes 50 million BRAZIL IN NUMBERS
  13. 13. 1964 Beginning of the military dictatorship Until 1964 Market totally deregulated 1967 New Currency: Cruzeiro 1964 Establishment of the Housing Finance System 1970 New Currency: Cruzeiro Novo 1966 Creation of the National Housing Bank 1964 1970MAIN FACTS IN BRAZIL Dictatorship Regime IN THE REAL ESTATE MARKET Time for structuring
  14. 14. 1975 Expansion of the middle class + Consumption = inflation Low resources for the real estate financing 1976 Impact of the International oil crisis 1971 1976MAIN FACTS IN BRAZIL Economic Growth IN THE REAL ESTATE MARKET Housing Shortage Accumulated Units(Total) 6.000.000 5.000.000 4.000.000 3.000.000 2.000.000 1.000.000 0 1970 1974 19781972 1976 1980 Evolution of the number of financed homes (Units)
  15. 15. 1980 Accumulated inflation (110% a.a in 1980) Banks restrict new credits 1977 1982MAIN FACTS IN BRAZIL End of the economic miracle IN THE REAL ESTATE MARKET Delinquency as high as a skyscraper GPD Evolution 1950 to 1987 15 13 11 9 7 5 3 1 -1 -3 -5 1951 1957 1963 1969 1975 1981 1987 Economic Miracle “Lost Decade” Real Estate Developers take on the role of financiers
  16. 16. 1984 Social movement wanting democracy Big unemployment rate 1983 1990MAIN FACTS IN BRAZIL End of the dictatorship IN THE REAL ESTATE MARKET Delinquency still growing Stratospheric delinquency Delinquency SFH rate evolution compared to total financings (1980 – 1984) 20,0% 10,0% 0,0% 60,0% 40,0% 30,0% 50,0% 1980 1981 1982 1983 1984 54,6% Total 1985 GDP growth reaches 7.8% 1986 New president and new currency: Cruzado 1989 New currency: Cruzado Novo Accumulated inflation: 1.035% 1990 The first president elected by the brazilians New loan offers slowed down
  17. 17. 1992 President Collor was impeached Blockage of financial assets and 60% of savings accounts 1994 New currency: Real The most successful economic plan until nowadays The lowest amount of financed houses since 1965 End of high inflation 4th World Soccer Cup Title 1991 1995MAIN FACTS IN BRAZIL A new chance for Brazil IN THE REAL ESTATE MARKET Stagnation
  18. 18. 1996 Monitary Policy Committee was established 1997 Establishment of the Real Estate Financing System 1999 Implementation of inflation targeting in 1999 by Brazilian Central Bank 2000 300 times more houses financed compared to 1994 1996 2000MAIN FACTS IN BRAZIL Inflation under control IN THE REAL ESTATE MARKET New housing policy
  19. 19. 2002 Record growth of formal jobs Launched the largest income distribution program: Bolsa Família 2001 2005MAIN FACTS IN BRAZIL Rise of the family consumption IN THE REAL ESTATE MARKET A new era in real estate financing 2001 IPO of the 14 main construction companies 2002 45.6 thousand units launched in the city of São Paulo - historical peak for launch and sale Reduction of interest rates Increase in financing terms and percentages New classified portals on the market
  20. 20. 2007 Brazilian GDP grows 6% yoy, best performance since 1986 2006 2011MAIN FACTS IN BRAZIL Brazil takes off IN THE REAL ESTATE MARKET Real estate boom 2007 Creation of ZAP portal 2009 Minha Casa Minha Vida: the largest federal housing program for low income families 2010 Economy grows 7,5% 2010 Number of financed houses doubled 2011 Launch of FipeZAP index
  21. 21. 2012 Economy has a weak performance Only 0,9% growth 2012 2015MAIN FACTS IN BRAZIL Fall, recession and pessimism IN THE REAL ESTATE MARKET Cooling off period Decline of home prices Increase in interest rate in leases Record number of cancellations up to 41% over total sales of new homes Huge offer of new properties Construction companies deep in debt 2014 Dilma Rousseff is reelected president 2015 Decrease of loan-to-value for pre-owned property financing from 80% to 50% 2015 GDP estimated by The International Monetary Fund: recession of -3,8%
  22. 22. Who is ZAP? Who is Fipe? Brazil: numbers, historical facts and real estate market Repercussions in the media FipeZAP partnership: products and indexes
  23. 23. - 50.00 100.00 150.00 200.00 250.00 300.00 350.00 400.00 450.00 Jun-65 Jun-66 Jun-67 Jun-68 Jun-69 Jun-70 Jun-71 Jun-72 Jun-73 Jun-74 Jun-75 Jun-76 Jun-77 Jun-78 Jun-79 Jun-80 Jun-81 Jun-82 Jun-83 Jun-84 Jun-85 Jun-86 Jun-87 Jun-88 Jun-89 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 BRL USD Total formal income FIPEZAP MAIN HOME PRICE INDEX FOR BRAZILIAN REAL ESTATE MARKET Both movements seem to have been triggered by changes in regulation, which increased credit supply Recent boom (and decline in prices) was accompanied by a sharp growth in total income Prices in USD are at the same level as the late 1970’s The 2005-2014 boom was similar to the 1965- 1979:In the 1960’s & 1970’s boom prices were up by 108% (real terms); in 2000’s the increase was 166%
  24. 24. 80.60% 64.50% 64.30% 62.10% 59.90% 43.80% 35.20% 23.20% 22.00% 18.90% 14.50% 9.80% 9.70% 7.00% 3.80% 1.50% UK - 2013 Canada - 2011 Portugal 2013 USA - 2013 Spain - 2013 France - 2013 Germany - 2013 Italy - 2013 South Africa - 2013 Chile - 2012 China - 2012 Mexico - 2013 Brazil - 2014-11 India - 2011 Russia - 2013 Argentina - 2012 (%) Mortgage Loans as of GDP Source: Abecip Growth of real estate prices in Brazil was very fast for international standards The current economic scenario and the enormous volatility seen over the last 30 years create additional short-term risks Over the long term, there doesn’t seem to be any abnormal behavior Potential for development and expansion of real estate credit LESSONS LEARNED
  25. 25. PARTNERSHIP FIPEZAP TWO FORCES COMBINED TO PROVIDE KNOWLEDGE Calculated based on property ads published on ZAP portal Average price per m² of ready to move properties in 20 Brazilian cities First indicator with a national scope that monitors home prices for sale and rental in Brazil Real estate market statistics by area and type of property WITH FIPE
  26. 26. FIPEZAP PRODUCTS
  27. 27. FIPEZAP INDEXES FOR S ALE AND R E NTAL Main indexes of the real estate market that monitor the evolution of home prices for sale and rental
  28. 28. X-RAY RESEARCH SURVEY WITH OVER 2.000 RESPONDENTS SEEKS TO IDENTIFY Buyer profile Purchase objectives Discounts praticed Price expectation
  29. 29. B U Y O R R E NT CALCULATOR Widget that allows users to compare purchasing options from their economic/finance point of view
  30. 30. FIPEZAP BULLETIN Quarterly publication with an economic analysis focused on the real estate market outlook It addresses macroeconomic topics, indicators and sector specific perspectives
  31. 31. FIPEZAP Annual event that gathers the main leaders of the brazilian real estate market Economic analysis Market trends PANEL
  32. 32. Who is ZAP? Who is Fipe? Brazil: numbers, historical facts and real estate market FipeZAP partnership: products and indexes Repercussions in the media
  33. 33. FIPEZAP MEDIA IMPACT Renamed national and international institutions rely on FipeZap information
  34. 34. MEDIA E XPO S U R E https://www.youtube.com/watch?v=kc7eD_Grym0&feature=youtu.be
  35. 35. TWO UNITED FORCES FORM A POWER THAT IS THE BEST DEFINITION FOR FIPEZAP
  36. 36. QUESTIONS?
  37. 37. THANK YOU
  38. 38. BUILDING REAL ESTATE MARKET INDEXES FOR THE BRAZILIAN MARKET

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