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Real estate market indicators are indexes that offer data for tracking the financial performance of the real estate and economic sectors.
The real estate market’s key indicators must be quantifiable to offer insights into areas for economic intervention. Investors rely on these indicators to inform their investment decisions by predicting future market trends.
Real estate firms utilize forecasts to inform their strategic choices by predicting how upcoming economic circumstances might impact markets and earnings.
Builder managers, developers, real estate agents, brokers, and investors need to be familiar with real estate market indices to comprehend the connection between the market and society.
This blog will discuss real estate market indices and their significance for investors.
What do economic indicators represent?
Economic indicators are statistical figures that demonstrate historical or potential economic trends.
Government agencies are typically viewed as experts on economic indicators, while individuals and businesses frequently rely on these indicators to guide their financial decisions.
These choices could involve financial investments, saving funds, obtaining new assets, or other significant decisions.
What do real estate indicators refer to?
Real estate indicators consist of numerical data that is utilized by public and private entities to make estimations and plan for potential scenarios in the market.
What is the purpose of real estate indicators?
Real estate indicators provide insights into the economic landscape, aiding in the assessment of the real estate market’s conditions for government, real estate firms, and investors. These metrics enable the evaluation of whether purchasing property is a lucrative investment opportunity.
Is the real estate market a reliable gauge of the economy’s performance?
The real estate market is a key indicator of economic activity, providing valuable insights into the economy. A decrease in new housing projects or real estate prices indicates reduced buyer interest.
A sluggish real estate market can have repercussions on the overall economy. The real estate industry has traditionally been a significant driver of economic growth, particularly in the residential sector, where house prices have shown considerable strength in various countries. The rise in property transactions, coupled with low interest rates, has stimulated the housing market, leading to increased consumer spending and bolstering macroeconomic indicators.
Some factors that impact the metrics include:
- Cost of materials
- Consumer trust;
- The country’s political status.
- Inflation is on the rise.
- GDP (Gross Domestic Product)
- Credit accessibility in the market, etc.
Which economic indicators impact the housing market?
National Market Building Cost Index (INCC-M)
The National Construction Cost Index (INCC) is a metric utilized to assess the costs associated with property construction projects. This metric considers expenses related to materials, equipment, services, and labor.
The INCC is the initial official index for construction in the country, and it is computed monthly by the Getúlio Vargas Foundation (FGV).
The index is crucial for readjusting property purchase contract prices during the construction phase. The INCC is currently calculated using data from research conducted in specific capital cities.
- Belo Horizonte is a beautiful city.
- Brasilia;
- Port Cheerful.
- Rio de Janeiro;
- Salvador.
- São Paulo is indicated.
- Recife.
Basic Unity Cost of Civil Construction (CUB) – Fundamental cost unit for civil construction.
The CUB/m2 serves as a fundamental benchmark for construction firms, enabling them to record real estate developments and assess project costs.
The main goal of CUB/m2 is to challenge the real estate development market by acting as a reference point for calculating real estate expenses. However, it’s important to understand that CUB/m2 only reflects a portion of the construction costs, not the entire amount, as it doesn’t consider extra expenses.
Since the Basic Unity Cost (CUB/m2) was established in December 1964 by Federal Law 4.591, the national real estate market has started using this measure as a reference for calculating real estate expenses.
General Market Price Index (IGP-M)
This index shows the changes in prices in the market and helps determine if there was inflation or deflation during a specific time frame.
The IGP-M was designed for use in adjusting operations, particularly over the long term. As mentioned in this article, the IGP-M is an indicator that tracks and reflects price fluctuations in the market.
The market requires a monthly index to establish contract terms and balances, making IGP-M significant.
The IGP-M index is commonly used as a financial indicator and for adjusting certain regulated prices like electricity.
4. Selic rate
The Selic rate, also known as the basic interest rate, is connected to the Special System for Settlement and Custody. It serves as the financing rate in the interbank market for transactions among banking institutions.
The ups and downs of the Selic rate can influence the sale of construction projects in the construction industry. Lower interest rates facilitate borrowing for companies, boosting investment profitability. Conversely, higher interest rates can increase the cost of loans, affecting the company’s access to funding for expansion.
Five. National Consumer Price Index (IPCA)
The Central Bank views the IPCA as the official inflation index, which aims to assess changes in consumer market prices.
The IPCA is the primary indicator used to adjust for inflation and can negatively impact property sales, rentals, and investments when it is high.
ABRAINC/FIPE Indicators for the Real Estate Market
ABRAINC collaborates with FIPE to gather and analyze data from municipalities and local authorities.
The goal is to track the activities of individuals in charge of the supply during the initial stages of developing, constructing, and launching property projects in municipalities in Brazil. The Real Estate Market Advent Indicator is updated every quarter with new data.
National Consumer Price Index (INPC) refers to the national index used to measure changes in consumer prices.
The INPC is utilized to determine salary increases by analyzing the average price fluctuation of 400 specific products in the same areas as the IPCA, but for low-income households earning between 1 and 5 minimum wages.
Those in the real estate industry must comprehend the significance of INPC as it influences real estate pricing and market growth.
Conclusion
The condition of the real estate sector mirrors the overall health of the economy and plays a vital role in assessing economic performance and future prospects, which is essential for investors and industry players seeking to thrive in the market.
Understanding a variety of indicators is necessary for individuals seeking to learn more about the real estate sector, as a strong or weak real estate market can significantly impact the overall economy.
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