January/2013

FipeZap House Asking Price Index

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METHODOLOGY

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Introduction

Housing is the most relevant item in household budget (32% in Brasil,

according to POF/IBGE)

Information on real estate prices is basic for proper functioning of the market

in any developed economy

On the other hand, building a property price index is chalenging

- How to compare different properties?

- How to obtain reliable information?

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Introduction

Possible methodologies:

- Stratification

- Hedonic regression

- Repeat sales

Possible data sources:

- Advertising

- Mortgage applications/approvals

- Contracts

- Registry

Weighting:

- Unweighted

- Stock

- Traded houses

Countries that use advertising as primary source for RPPI: UK, Spain, Hungary, Austria, Romenia and Malta

Reference: http://epp.eurostat.ec.europa.eu/portal/page/portal/hicp/documents/Tab/Tab/rppi_handbook%20_combinedv1_0.pdf

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Data source: Secondary apartments advertised online at ‘Zap Imóveis’ (www.zap.com.br) and other sources

Sixteen cities (300.000+ ads):

- São Paulo (since december/2007)

- Rio de Janeiro (since december/2007)

- Belo Horizonte (since april/2009)

- Distrito Federal (since august/2010)

- Fortaleza (since march/2010)

- Recife (since june/2010)

- Salvador (since august/2010)

- Santo André

- Florianópolis

- Niteroi

- Vila Velha

- Curitiba

- Vitória

- São Caetano do Sul

- Fortaleza

- Recife

Mix-adjustment: neighborhood + number of bedrooms

Weighting: Cell’s total income (Census/2000)

Index calculation: Median asking prices of each cell; 3-month moving average; sale and rental indices

Methodology – FipeZap Index

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International Experience: Spain Asking x Transaction Price Indexes

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RESULTS

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Average price (R$/m2) per city January/2013

R$ 8.711

R$ 6.922

R$ 6.477

R$ 6.372

R$ 5.109

R$ 5.014

R$ 4.912

R$ 4.760

R$ 4.436

R$ 4.303

R$ 4.121

R$ 4.041

R$ 3.929

R$ 3.881

R$ 3.722

R$ 3.440

R$ 6.350

Rio de Janeiro

São Paulo

Niteroi

Brasília

Recife

Belo Horizonte

Fortaleza

São Caetano do Sul

Florianópolis

Porto Alegre

Santo André

Salvador

São Bernardo do Campo

Vitória

Curitiba

Vila Velha

Média Nacional

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Long term house real price indices for Amsterdam and US (compared to São Paulo)

Long term house real prices

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50

100

150

200

250

300

1890 1910 1930 1950 1970 1990 2010

Amsterdam (Herengracht)

São Paulo (FipeZap)

US (Shiller)

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MoM Asking Price Change

FipeZap Composite (Sale; 7 original cities)

2,1% 2,1%

2,4%

2,1%

1,8%

2,1%

2,4%

2,7% 2,6%

2,3%

2,1%

1,7% 1,9%

1,6%

1,4%

1,1% 1,1%

1,5% 1,4%

1,2%

0,9% 1,0% 1,0% 1,0%

0,9% 0,8% 0,9%

1,0% 0,9%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%se

t/10

out/

10

nov/10

dez/

10

jan/11

fev/11

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jun/11

jul/

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ago/11

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fev/12

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Recent Asking Price Real Change (%)

IPCA Adjusted; since jun/2012

5%

5%

4%

4%

3%

3%

2%

2%

2%

1%

-1%

-1%

-1%

-4%

-4%

-6%

-6%

Niteroi

Porto Alegre

São Paulo

Salvador

Rio de Janeiro

Fortaleza

São Caetano do Sul

São Bernardo do Campo

FipeZap Ampliado

Santo André

Recife

Belo Horizonte

Vitória

Vila Velha

Florianópolis

Brasília

Curitiba

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12m Asking Price Change (%)

São Paulo and Rio de Janeiro (Sale)

44,1%

14,7%

29,0%

15,4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%ja

n/0

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mar/

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jan/1

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Rio de Janeiro São Paulo

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Asking Price Index City of São Paulo (Sale; % Change since january/2008)

161%

183%

172%

153%

119%

jan

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São Paulo 1 Dormitório 2 Dormitórios 3 Dormitórios 4+ Dormitórios

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Asking Price Index City of Rio de Janeiro (Sale; % Change since january/2008)

197%

216%

192% 186% 180%

jan

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Rio de Janeiro 1 Dormitório 2 Dormitórios 3 Dormitórios 4+ Dormitórios

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Highest and Lowest Median Asking Prices São Paulo – Sale (R$/m2 – Jan/2013)

Vila Nova Conceição Jardim Paulistano Jardim Europa Ibirapuera Itaim

12.100

10.139 10.090 9.916 9.764

Vila Carmosina Jaraguá Grajaú Vila Curuçá Guaianazes

3.147 3.134 3.132 2.948 2.750

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Highest and Lowest Median Asking Prices Rio de Janeiro – Sale (R$/m2 – Jan/2013)

Brás de Pina Madureira Bangu Guadalupe Pavuna

2.413 2.401 2.292 2.267 1.913

Leblon Ipanema Lagoa Gávea Jardim Botânico

20.451

17.720

14.908 14.803 13.818

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AFFORDABILITY

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Number of households and persons per households (source: PNAD/IBGE)

Demand: Three reasons for increase

First: Demography

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3,0

3,1

3,2

3,3

3,4

3,5

3,6

3,7

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Dw

elle

rs/ho

use

ho

ld

Nu

mb

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of

ho

use

ho

lds

(x 1

.00

0)

Rented Owned Dwellers/household

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House prices and demography: quite a role!

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Unemployment rate versus real wages (R$ in Aug/2012; source: PME/IBGE)

Demand: Three reasons for increase

Second: Labor market

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Number of months needed to afford one m2 by typical (median) wage earner

Sources: IBGE and FipeZap

House prices versus Income

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3,6

4,5

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0ja

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mar

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Num

ber

of

month

s need t

o a

fford

one m

2

Rio de Janeiro

São Paulo

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Price-to-income Average m2 and monthly household income ratio (selected cities)

Sources: IBGE and FipeZap

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Price versus HH income Average m2 and monthly household income

Sources: IBGE and FipeZap

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Price to income

Median HH income / average asking price per district - São Paulo (Sale)

Sources: IBGE and FipeZap; HH income: Census (2010) in R$/oct-2012

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Median HH income versus average asking price per district

São Paulo (Sale)

Sources: IBGE and FipeZap; HH income: Census (2010) in R$/oct-2012

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Average interest rate (% per year) versus average duration (source: Central Bank)

Demand: Three reasons for increase

Third: Housing credit

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“Fair value” of real estate in São Paulo: rental yield versus real interest rate

Sources: Banco Central do Brasil and FipeZap

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Bubble?

6,2%

5,8%

3,0%

4,0%

5,0%

6,0%

7,0%

8,0%

9,0%

10,0%

11,0%

jan

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abr/

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jul/0

8

ou

t/0

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jan

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abr/

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jul/0

9

ou

t/0

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jan

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abr/

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jul/1

0

ou

t/10

jan

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abr/

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jul/1

1

ou

t/11

jan

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abr/

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jul/1

2

ou

t/12

Real interest rate (mortgages) Rental yield

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% of average montlhy income needed to pay the installments for a 1 m2 mortgage

Sources: IBGE, Banco Central do Brasil and FipeZap

Affordability

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4,2%

5,3%

2%

3%

4%

5%

6%

jan

/08

abr/

08

jul/0

8

ou

t/0

8

jan

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abr/

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jul/0

9

ou

t/0

9

jan

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abr/

10

jul/1

0

ou

t/10

jan

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abr/

11

jul/1

1

ou

t/11

jan

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abr/

12

jul/1

2

ou

t/12

% d

o r

endim

ento

médio

mensa

l necess

ári

o p

ara

pagar

a p

arc

ela

m

édia

do f

inancia

mento

im

obiliá

rio

Rio de Janeiro

São Paulo

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Relative difference from affordabillity in jan/2008

Source: FipeZap

Bubble?

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-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

jan/08

mar/

08

mai/

08

jul/

08

set/

08

nov/08

jan/09

mar/

09

mai/

09

jul/

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set/

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nov/09

jan/10

mar/

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mai/

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jul/

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set/

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nov/10

jan/11

mar/

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jul/

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set/

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nov/11

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mar/

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jul/

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set/

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nov/12

RJ SP

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Relative interest: rent versus sale % of queries from Zap website

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

jan/1

0

abr/

10

jul/10

out/

10

jan/1

1

abr/

11

jul/11

out/

11

jan/1

2

abr/

12

jul/12

out/

12

Rent

Sale

Eduardo Zylberstajn

ezylberstajn@fipe.org.br

+5511 3767-1764

Contact:

fipezap@fipe.org.br