I experienced the same unsettling feeling when we were in Manhattan. A lot of our friends were pushing us to buy something. They were buying (multiple properties actually) and they talked about the tax breaks and the great investment status. But when my hair dresser told me that he owned three houses, something screamed of the shoe shine boy giving out stock tips right before the 1929 stock market crash.
Here’s a little investment tip that one should always abide by. You’ll never make money on something that EVERYBODY is doing. It just doesn’t make mathematical, financial nor logical sense.
In Sao Paulo, you’ll find on every other corner someone holding a sign directing you to apartments for sale. Yesterday, we got out of the car to go to the park and were approached by a man passing out brochures for apartments for sale in a particular building. To me, this screams a market in which supply is higher than demand. Yet in some Sao Paulo neighborhoods, the price of real estate has nearly doubled in the past 12 months.
Now Brazil does not have the credit problems that USA faced. My housekeepers is not going to get a mortgage for a million reis McMansion. But something is going on. And when 2+2 doesn’t equal 4, I tend to run in the other direction.
I actually did speak with a real estate professional, a family friend, a few months back who informed me that it is the movement in the market that is causing a false sense of demand. The incoming are being happily recorded but the outgoing, not so accurate. (If you know anything about Brazil, this is no big surprise.) And in a city where there is plenty of room to grow from a land mass perspective, there shouldn’t be this kind of growth in residential real estate returns (think Las Vegas). I’ve also seen a lot of store signs pulled down and replace with rental solicitations. I can only guess that the previous businesses couldn’t afford the hike in rent and the owners are convinced that more income is around the corner (think lower Manhattan). But some of these signs have been hanging for weeks and weeks…
Anyone have any other insights? All I can think is… buyer beware.