Brazil's house price surge
Download Document| Date Published | 2014 |
| Version | |
| Primary Author | Claudia Magalhães Eloy and Rafael Fagundes Cagnin |
| Other Authors | |
| Theme | |
| Country | Brazil |
Abstract
In recent years, the evolution of the Brazilian housing market has been the subject of an ongoing debate, both locally and internationally . Influenced by the recent episodes of the U.S. subprime mortgage market crisis and in the evidence of a housing price surge, lately the analyses have been especially devoted to the identification of a possible "bubble" in the Brazilian real estate industry. Such analyses are generally based on the belief that bubbles are formed from the detachment of the market price of these assets relative to their “fundamental price”. Nonetheless, the existence of information asymmetries – particularly important in the Brazilian real estate market – mimetic behavior and the adoption of conventions, typical of asset markets, theoretically question the importance of a fundamental price in the decision-making process of economic agents.