The Regional Council of Real Estate Agents in São Paulo (Creci-SP) has recently pointed out that rising rental figures are having a proportionate effect on the number of contracts not being renewed.  According to José Augusto Viana from Creci-SP speaking to the Diário Comércio Industria: “when contracts expire, owners are asking for absurd prices which are beyond the means of the renter.”

The research demonstrated that between August and October 2011, over 60 percent of new contracts were closed based on the fact that the previous renter had decided not to renew.  According to Viana, 5 years ago monthly rent represented 0.5 percent of the property value which today, depending on the location, is reaching up to 1.2 percent.  These figures were complemented by those of the São Paulo Housing Syndicate (Secovi-SP) which indicated that rental figures in the city had increased by 19.77 in the twelve months up to November 2011 (compared to the General Index of Market Prices – Índice Geral de Preços de Mercado, IGP-M – which had just grown by 5.09 percent over the same period).

According to Cícero Tajo of Secovi-SP, the rents have been increasing as a result of owners looking to take advantage of the rising incomes as well as the overall rising demand for leased accommodation.  He expects prices to continue to increase above the level of national inflation in the immediate future, although at a slower pace.

Viana further pointed to the fact that speculative landlords are also contributing to the issue with many empty units that are not being placed on the market – a factor supported by the 2010 Census which indicated that there were 1,112,000 empty housing units in São Paulo alone.

Nevertheless, a report just released by Secovi São Paulo indicated that the level of rental delinquencies had fallen, reaching 18,655 cases in 2011 – the lowest figure since records began in 1993.  Of the cases reported, 78.6 percent were prompted by missed payments (falling 11.96 percent in relation to 2010).

Ruban Selvanayagam www.brazilinvestmentguide.com