Magazine article Journal of Property Management

Brazil's Post-Impeachment Property Management Landscape

Magazine article Journal of Property Management

Brazil's Post-Impeachment Property Management Landscape

Article excerpt

After the 2016 impeachment of President Dilma Roussef, Brazil's economy has struggled to right itself. How is the aftershock of the political upheaval affecting the real estate market? Pedro Wahmann, president of SECOVI-Rio, breaks down the economic impact on the property management industry and what Brazilians have to look forward to.

BRAZIL'S KEY ISSUES

As the world's fourth largest democracy, Brazil was once in an enviable position as a growing world power. However, after a period of political corruption and scandals came to a head in 2016, the country ousted its first female president, Dilma Roussef, bringing the economy to a grinding halt.

Roussef, impeached over charges of budget manipulation, was caught up in a 13 billion corruption scandal involving Petrobras, a partially state-controlled corporation in the oil industry. Her successor and former running mate. Michel Tomer, was also accused of corruption, but has remained as president.

The unpredictable political climate has led to the worst economic recession since the 1930s, leaving 13.6 percent of Brazilians unemployed. According to economist Marcos de Barros Lisboa, the aging of the population has also contributed to the high unemployment rate and poor economic conditions. With unemployment so high, Brazilians are looking to make themselves more marketable to potential employers by seeking out extra qualifications, in turn increasing demand for IREM credentials.

OVERVIEW OF THE MANAGEMENT MARKET IN BRAZIL

Brazil's property management companies are represented by SECOVIs--employer's unions that exist in almost all states of the country. Their main duties are to negotiate workers' salaries and benefits, represent them at legislative chambers (city, state and federal levels), provide education, and work toward the improvement of the real estate market. Up until 2017, in order for SECOVIs to run their activities, each company had to pay a mandatory fee, which was determined by Brazil's Constitution and assessed based on a company's assets.

Founded in 1942, SECOVI-Rio currently represents and serves more than 4,000 management companies, most of which are dedicated to condominium management, the most popular choice for residential renters. More than 3.5 million people in Rio alone live in 32,000 buildings around the area.

In 2018, SECOVI-Rio, along with all other SECOVIs, is set to undergo major changes. The mandatory fee companies should pay will start to be elective, due to changes in Brazilian laws. However, as SECOVI-Rio prioritizes the representation of management companies and provides education and information to the market, the union is confident it will succeed in times ahead.

CURRENT MARKET CONDITIONS

The residential rental market has changed dramatically for the worse as a result of poor economic conditions. Renters, owners and managers are all feeling the sting of the increased joblessness and inflation nationwide.

When the recession began in 2014, rental property values had been climbing steadily toward their highest point, only to drop sharply over the course of the political upheaval. From March of 2012 to July of 2017, property values dropped almost 10 percent. Rental property values currently stand well below average levels, with a long way to go until they begin to break even with where they were before the recession began. …

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