Residential Rent Variation Index drops 0.61% in 12 months, shows FGV

The Brazilian Institute of Economics of Fundação Getulio Vargas (FGV/Ibre) today launched a new indicator to measure the price variation of residential rents.

The Residential Rent Variation Index (Ivar) uses information from contracts signed between landlords and tenants, brokered by property management companies in São Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre.

In December, the Ivar rose 0.66%, a slowdown from the 0.79% registered in November. The 12-month index was -0.61% in December, compared to 0.70% in November.

In previous years, the annual rate was -5.08% in December 2019 and 4.08% in December 2020.

According to FGV/Ibre, the difference in statistical methodology generates a large variation between Ivar and the evolution of rents measured by traditional indices.

The Residential Rent sub-item of the Broad Consumer Price Index – 15 (IPCA-15), of the Brazilian Institute of Geography and Statistics (IBGE) rose 6.98% in the 12-month period in December, while the Weekly Consumer Price Index (IPC-S), from FGV/Ibre, the increase was 4.45%.

According to the researcher at FGV/Ibre responsible for the Ivar methodology, Paulo Picchetti, the new indicator captures nuances that the others do not reflect.

“The real estate sector has been deeply affected by the effects of the pandemic on the labor market. High unemployment sustained negotiations between tenants and landlords, which resulted, for the most part, in a fall or maintenance of rent values, contributing to the decline of the annual rate of the index”.

The four cities that make up the Ivar showed deceleration in the 12-month period, with São Paulo falling more than the national average, with -1.83%. The drop in Porto Alegre was -0.35% and Belo Horizonte and Rio de Janeiro had increases of 1.46% and 0.46%, respectively.

For the coordinator of the FGV/Ibre price indices, André Braz, negotiations between tenants and owners reflect the fall in family income, affected by high inflation and other economic factors.

“Although inflation, measured by the country’s main price indices, is accelerating, the interannual variation of residential rents continues to decelerate. The rise in inflation has been reducing family income, which continues to be pressured by the apathy of economic activity and the high unemployment rate”, he explained.

The institute informs that as of this month, Ivar data will be incorporated into the residential rent sub-item of the different versions of the Consumer Price Index (IPC).