In the real estate coin toss, investors celebrate the increase in rent above the CDI this year. Tenants are increasingly worried about their pockets. The good news: Residential rental returns will continue to rise. The bad news is that, at least until the first half of 2025, it will become increasingly expensive to live in a house or apartment that you don’t own.
New rental contracts are rising across the country, driven by a set of factors that include rising interest rates, expensive credit and improved income. In the 12 months up to September this year, the average value of residential rentals increased by the equivalent of more than three times the inflation accumulated in the period.
These increases have weighed heavily on the pockets of renters of all profiles. This is the case of economist Luana Alves (fictitious name), who lived in Itaim Bibi, one of the most valued neighborhoods in the capital of São Paulo, until the end of last year. When he moved to the 70 square meter apartment located near the financial district of São Paulo, he was looking for the convenience of being closer to work and living in an area “where he could do everything on foot”. There, she paid around R$4,000.
Five years later, the cost of rent had already risen to R$5,000, that is, an increase of 25%. Even though she benefited, in part, from more restrained adjustments due to her old contract, the economist felt the rise in rent in her pocket. “This bill was eating away at my income,” he said. The solution was to look for a less valued region and reduce the cost.
Luana moved to Butantã, a neighborhood in the West Zone of São Paulo. The house is much larger: 150 m2, more than double the old apartment. But, to cover the same rent, she chose to share the property with two friends. As a result, her rental cost fell to a third of what she paid for her old apartment.
In Itaim, a new contract would currently be much more expensive than the R$5,000 for Luana’s apartment. A search on online real estate platforms shows that properties similar in size to the one left by the economist in the region are already offered for prices above R$6,000 per month.
The demand for rentals is gaining strength because not only has credit become more expensive and difficult to obtain, but also because people prefer to wait for a better time to buy. It’s understandable: entering into a housing loan operation can mean compromising part of your income for up to three decades.
This was the case of social scientist Gustavo Melo (fictitious name). He tried to buy an apartment in the Pompéia neighborhood, in São Paulo. It didn’t work. In addition to the very high rates, banks had many requirements to release financing. “It would be too heavy for me. Today I don’t even consider buying it. I will remain in the rental.”
Melo currently lives in a 38 m2 apartment in Perdizes, another upscale neighborhood in the capital of São Paulo, where he pays R$3,500 in rent. But he’ll have to move soon. The contract will end at the end of the year and the owner wants an adjustment of R$500 – or 14%. “This amount plus the condominium fee, IPTU and insurance will bring the cost to almost R$5,000.”
The social scientist is looking for a new residence. But he will have to move far from Perdizes. “I gave up living in the neighborhood. Everything is very expensive.” The new apartment will be smaller, measuring 30 m2, in the city center. But it will be cheaper: the rent will cost R$3,000. “It was the best decision. The region has a lot of infrastructure and I see that it is starting to get more expensive too.”
With increasingly intense competition, tenants accept higher prices to secure the desired property. “The customer doesn’t even ask for a discount. He already says: ‘it’s mine’”, says the CEO of Lopes Condovel, Carlos Berzoti, a real estate agency that is part of the Lopes group.
The consultant also remembers that, in addition to the economy and credit, the end of the pandemic still has an impact on the market, and strengthens the search for rentals. Berzoti says that Lopes receives many inquiries from people looking for a place to live closer to work. “Many people moved to more remote locations during the pandemic and now, with a return to in-person, they have done the opposite.”
Pressures on values and demand for rentals tend to become even stronger at least throughout the first half of 2025. And the dynamics of credit for property acquisition have everything to do with this: the economist and data scientist at DataZap, Paula Reis Kasmirski, predicts that in the first three months of next year, bank rates on real estate financing will tend to rise again.
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The expert explains that there are several arguments for this scenario. One of the main ones is that the Central Bank is in the process of raising interest rates. In this case, people have an incentive to postpone property purchase decisions and keep the money invested.
Furthermore, the main source of cheap resources for real estate credit, savings accounts, has shrunk in size, which makes financing more expensive. And it’s not just credit that becomes more expensive, but banks also become more selective when granting loans in this situation.
And finally, the job market should remain strong. It is true that, with higher interest rates, unemployment tends to increase a little. But even so, the level of employment and disposable income should remain above the historical average. “As long as people are working and earning income, the rental market is able to continue absorbing the adjustments,” says Kasmirski.
The coordinator of the FipeZap index, Alison Oliveira, says that the scenario for the Brazilian real estate market has a great degree of unpredictability. As the sector is directly influenced by the level of interest, the trajectory of rates from now on will dictate the direction of rental costs over the next three years.
Meanwhile, Oliveira assesses that, if the government manages to gain fiscal credibility, expectations of future interest rates could fall and help reduce bank financing rates as well. “If this happens, demand for property purchases increases and helps reduce pressure on rents. The main question is whether there will be this drop (in interest rates).”
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The FipeZap Residential Rent Index represents an average of the variation in rental prices in 36 cities, including 22 capitals. The indicator registered an accumulated increase of 13.75% in the period from October 2023 to September 2024.
This is an increase more than three times above the inflation measured by the IPCA, which reached 4.42% in the same interval, and the IGP-M, with an increase of 4.53%.
In nine months of 2024, the difference is even greater. FipeZap accumulated an increase of 10.90%, which means growth 3.2 times greater than the 3.31% of the IPCA and more than four times the 2.64% of the IGP-M.
From an investor’s perspective, renting has become increasingly attractive as an extra income. The level of adjustments has managed to remain ahead of even the traditional CDI. This, even at a time of rising interest rates, with the prospect of the Selic base rate closing 2024 at close to 12% per year.
As the CDI follows the Selic, defined by the Central Bank, the tendency is for the interbank deposit certificate to reach this level at the end of the year. In 2024 until September, the CDI has already accumulated a gain of 7.90% compared to FipeZap’s 10.90%.
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For those who need to rent, on the other side of the coin, the movement has taken a high toll. Renting a 100 m2 apartment, for example, cost R$4,151.00 in September 2023, if the national average value per square meter calculated by FipeZap is considered. A year later this cost increased by almost R$600, to R$4,705.00. It’s practically as if you had to add an extra grocery purchase each month.
This increase may be even more intense in regional scenarios. In São Paulo, the largest real estate market in the country, the average rental value reaches R$56.37 per m2, that is, around 20% above the national reference. This means that renting a property with the same 100 m2 costs, on average, R$5,537.00 per month, that is, the value of an iPhone 15 per month.
Despite the widespread increase in all the country’s capitals, regional readings show that the scenario in each city can bring specific pressures on rents. In Curitiba, for example, with an unemployment rate of around 5%, well below the national rate of 6.4%, recorded in September, prices have been rising more strongly.
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Another capital, Paraná, had an average increase of 17.94% in the 12 months up to September, according to the FipeZap index. A metropolis that also stood out in recent months due to a regional factor was Porto Alegre. After the floods at the beginning of the year, the residential rental market gained momentum with the search for new homes. The increase in amounts charged for residential rentals reached an average of 25.53% in the period, of which 21.94% in just the nine months of 2024.
The expansion of agribusiness in the Central-West has also added fuel to the engine of rental prices in the region’s cities. Goiânia, capital of Goiás, for example, saw an increase of 17.23% in 12 months. In 2024 alone, the advance reached 13.19%.
In Campo Grande, the average cost jumped 34.31%. From January to September this year, prices rose 32.19% in the capital of Mato Grosso do Sul.
Current rent values already exceed levels seen before the pandemic. At FipeZap, this level was exceeded in September 2022. Since then, average prices have already been 21% above this point.
Rents tend to continue to rise, it’s true. But, for economist Paula Kasmirski, the pace of adjustments should be milder from now on. Most of the rise occurred after the pandemic as a recovery movement after the period of isolation. At the time, many owners avoided raising rental prices and even negotiated discounts due to the drop in tenants’ income.
The crossroads of rents for 2025 largely depends on how the property buying and selling market will behave. If rates fall sometime in 2025, pockets could start to feel lighter for renters. Otherwise, prices will continue to rise. Until when? Only interest knows.
