Price Index in Brazilian Real State Markets

Testing Housing Price Index in the Brazilian Real Estate Market Denisard Alves¹ Joe Yoshino² Paula Pereda³ Carla Amrein³

Abstract

In this paper, we evaluate the impacts of capital markets in housing prices of São Paulo City, which is the largest municipality in Brazil. The analysis covers the period from January 2001 to March 2008 and the method applied was based on the model of hedonic pricing. As expected, the conditions of housing financing showed positive correlation with property prices, while banking spreads showed the opposite effect. Some interesting results were obtained through the interaction between the stock market boom in Brazil and characteristics of the houses in the sample. It was found that in periods of positive performance at stock markets, many of the house’s characteristics loose importance in pricing, while the financing conditions become more important. Key words: hedonic pricing model, stock market, real estate market

1. Full Professor, School of Economics and Business, São Paulo University (USP). 2. Associate Professor in Finance - São Paulo University (USP). 3. Department of Economics - São Paulo University (USP).

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Electronic copy available at: http://ssrn.com/abstract=1675432

1. Introduction

The housing market stands out primarily by the large asset commitment, both from house acquisition and rental expenses. This market can also be characterized by the complexity of the goods (houses) as when an individual buys a property, he acquires not only the right to enjoy its characteristics, but also to enjoy the range of amenities1 according to the property location. The importance of this market and the formation of clear patterns of land use make the housing market studies relevant, especially for large cities like Sao Paulo, in Brazil. Those large cities concentrate great variety of infrastructure becoming a favorable environment to develop more segregated patterns of land use. According to Loungani (2010), the housing...