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A recent announcement made by the Brazilian government run Institute of Geography and Statistics (IBGE) has outlined a new methodology being undertaken to produce an index to monitor the country’s residential real estate prices.  Whilst no date has been confirmed for initial publication, according to a press release by the IBGE: “The manner and procedures for which the index will be calculated for the sector are currently  being discussed and will be based on the recommendations of countries and institutions that are already producing these types of indicators.”

A series of specialists responded to news of the index via the Jornal Correio do Estado.  Antonio Carlos Mendes Gomes of the Brazilian Construction Industry Syndicate, Rio de Janeiro division (Sinduscon/RJ) believes that the index will serve the market well and should be viewed positively, stating that: “It is a reliable indicator to enable Brazilians to have a better view and understand the best opportunities.”  Casimiro Vale of the Rio de Janeiro’s Regional Council of Real Estate Brokers (CREA-RJ) supported such comments: “It will provide excellent parameters to able to assist assessing values more fairly within the market, being particularly beneficial for buyers.”

However, Rubem Vasconcelos vice president of the Rio de Janeiro Association of Real Estate Companies (Ademi) commented that the index risks bringing unnecessary control over how the market is formed, stating that “the law of supply and demand should dictate the formation of prices not any form of ranking or tables – this measure is false, misleading and has no way of telling us if the market is overheating.”  Vasconcelos believes that it will be more appropriate for the IBGE to produce a more detailed monthly publication on the research statistics and not simply a table of market prices – also stating: “this index is going to create an environment where prices are going to rise upwards without control and not under natural forces.  It is not the role of the government to undertake in such activity.”

Vasconcelos’ comments come on the back of the often questioned accuracy of IBGE statistics which have also been formerly accused of adaptation for political purposes.  My own belief is that the measure should be welcomed yet used objectively in accompaniment with other indices such as the FipeZap (see our factfiles via our home page for the monthly updated graph) as well as the impending methodology being mounted by the Getúlio Vargas Foundation mentioned in my recent interview with Ana Maria Castelo.