A few years ago, the real estate market has gotten used to accompany its increases and declines through FipeZap index. No doubt, it has become an important tool for accompanying the changes in our market, but after studying it, I am beginning to doubt about their effectiveness in real estate.
FIPE posted on its website the methodological notes of calculation of the index, published in February 2011.
On page 4, there is a brief explanation of the index: “FipeZap uses as a source of data sales ads or rental ads registered in Zap Imóveis website.” Analyzing the methodology of the index, any person or company can interfere in its calculations making paid ads on the classifieds website, using this way to make to go prices up or down, differentiating prices that are actually practiced in the market.
How an index that is calculated based on ads may become a form of communication of increasing and devaluation? Anyway, ads are not sales.
Indeed, ads are information published in a media which intends to be an advertisement, a request, or other types of dialogues that interest to the general public, requiring or not an answer from the reader.
Lack of robustness in regional analysis
The same document mentions on page 7 that “in December 2010, for example, the city of São Paulo accounted for 60% of the nearly 115,000 valid ads, while Rio de Janeiro accounted for 26% of this total. The disparity in the amount of ads, it is safe to assume that the contents of these two cities are more robust than other regions of the country. “
In fact, ZAP Imóveis ads are focused on a few cities. It is questionable how the restricted reality of ads of Rio de Janeiro and Sao Paulo would be influencing the national index? Several small markets may have their realities distorted as a result of ads of large centers.
Resumo Imobiliário has nothing against FIPE and ZAP Imóveis. These are consolidated and respected institutions in Brazil. No doubt, Zap Imóveis is a success. One of the best ad websites for the market. At issue is the allocation of your data as measurer of the Brazilian real estate.
In recent years, many investors have made their decisions based on numbers generated by FipeZap. Several projects and used properties had their prices adjusted by the index.
By psychological strength, FipeZap may have generated serious distortions in the progress of the Brazilian real estate market. Regions may have suffered an overvaluation because of rampant speculation exerted on those ads. Due to the structural failure to consider advertising as a faithful number to be studied. I come to conclusion that the past valuation was literally imposed through ads, and consequently released in newspapers, TV channels, radio stations and other sources of media.
The natural valuation occurred but FipeZap may have been the big push to its percentage reach stratospheric levels in short time.
Finally, I would like to quote a paragraph on page 3 of the methodological notes for calculating the index, published in February 2011 by FIPE: “The creation of a property price index remains a challenge for economists and statisticians. There is no international consensus on the methodological design mainly due to the complexity involved in the process of price formation and the limitations on the availability of information. For this reason, it is common to find countries that have a set of real estate indixes calculated regularly, usually using different methodologies “
Well, if FIPE has doubts about the clarity of the calculation content of its index, why can’t we question it?