Testing for Rational Speculative Bubbles in the Brazilian Residential Real-Estate Market

Abstract

Speculative bubbles have been occurring periodically in local or global real estate markets and are considered a potential cause of economic crises. In this context, the detection of explosive behaviors in the financial market and the implementation of early warning diagnosis tests are of critical importance. The recent increase in Brazilian housing prices has risen concerns that the Brazilian economy may have a speculative housing bubble. In the present paper, we employ a recently proposed recursive unit root test in order to identify possible speculative bubbles in data from the Brazilian residential real-estate market. The empirical results show evidence for speculative price bubbles both in Rio de Janeiro and São Paulo, the two main Brazilian cities.

Real Estate Market of a Brazilian Metropolis: Sustained Growth or Speculative Bubble?

“…In addition to being non-stationary, the IO model (equation 1) allows to identify that the series exhibits a structural break which probably occurred in March 2007, a behavior that is suggestive of bubble formation in this market (Graph 4). This result of the beginning of the bubble in 2007 for Belo Horizonte is slightly different from those reported by Oliveira and Almeida (2014) for São Paulo and Rio de Janeiro, for which the bubble would start in mid-2009 and in the middle of 2010 respectively. It should be noted, however, that the time series used in Oliveira and Almeida (2014) is shorter, covering 2008-2014, which may influence the initial breaking point.…”

“…This last market segment was further boosted by the federal government's housing development program called "My house, my life". Similar behavior was observed in the largest Brazilian cities, and the possibility of a real estate bubble in the country occupies the imagination of people and the topic has been raised by analysts and some academic studies (Oliveira & Almeida, 2014;Machado, Ceretta, & Vieira, 2014).…”

“…The choice is justified because it is the capital of the third most economically important state in Brazil and because it provides access to a database with information on the evolution of the real estate market, which may be the most complete in the sector. Moreover, the evidence presented in this study may reflect what is happening at the national level, since according to Oliveira and Almeida (2014) there is some similarity between the behaviors of the real estate market in the largest Brazilian cities in recent years.…”

“…The authors claim the existence of a housing bubble in this market and, objectively, elect the Federal Government, through its fiscal poli-cies and stimulus to credit, as the main responsible for the emergence of this bubble. Oliveira and Almeida (2014) are equally assertive and conclude that the evolution of prices of residential properties in the two most important cities of Brazil (São Paulo and Rio de Janeiro) shows the existence of a speculative bubble. According to the results found by the authors, based on time series analysis, the bubble would begin in mid-2009, as regards to São Paulo, and by the middle of 2010, as regards to Rio de Janeiro.…”

Há Fatores Não Econômicos na Formação do Preço de Imóveis?

“…Dentre os RAC, Rio de Janeiro, v. 20, n. 1, art. Por fim, no intuito de buscar dados de preços mais antigos, compila-se um índice composto de preços de imóveis do Rio de Janeiro a partir de dados publicados no caderno Morar Bem, do Jornal O Globo (1998-2014. Essas informações disponibilizadas pelo Jornal têm como fonte os anúncios de imóveis dos classificados e dados do Sindicato da Habitação do Rio de Janeiro (SECOVI-RJ) (1) .…”