Rio 2016: 'Favela chic' will price us out of our homes

Rio 2016: 'Favela chic' will price us out of our homes

The sleek concrete and glass rooftop Bar da Lage is nestled in a sea of illegally built red brick houses in one of Rio De Janeiro's notoriously tough hillside favelas.

Once considered a no-go area because of gang violence, the bar, in the city's posher south, offers postcard perfect views of Ipanema beach and lush green mountains.

At night, middle class Brazilians and foreigners rub shoulders sipping cocktails as the Olympic Games unfold around them.

Bar Da Laje is a vivid example of what is becoming known as 'favela chic', a phenomenon that has seen some parts of the enormous informal settlements once synonymous with poverty and violence become fashionable, home to edgy art galleries and up-market cafes.

And while many residents living in and around Vidigal welcome gentrification that has seen an influx of new businesses serving more affluent clients, other long-time residents fear they will be priced out of their homes.

"These changes aren't good for us," Barbara Nascimento, a Vidigal-born activist and literature professor told the Thomson Reuters Foundation.

"I have many friends who have had to leave because they couldn't afford the rent anymore."

DOUBLE-EDGED SWORD

The tension sparked by wealthy outsiders gentrifying working class neighborhoods is not unique to Rio de Janeiro. It's a well documented phenomenon, from London's East End to Sydney's inner west and San Francisco's mission district.

However it is even more complex in the vast, informal settlements of growing cities in developing nations like Brazil due to the lack of formal property title deeds, campaigners say.

On one hand, many residents want formal title deeds, both to allow them to use their property as collateral for bank loans and to provide protection in case of land disputes.

On the other hand, the lack of formal title plays a key role in the supply and demand cycle, ensuring that these neighborhoods remain as a stock of affordable housing.

Additionally, legal titles can pave the way for access to services such as electricity and water, improving quality of life.

But they also formalize residents' relationship with the state authorities and the taxation system - a status not always welcomed by poorer residents.

Ultimately, property experts say, developers are more likely to buy up land in slum areas if titles are available, pushing prices up and locals out.

"The interest of real-estate developers in the favela areas is huge," Edison Ferrari, director of investment for the multinational property brokerage firm CBRE, told the Thomson Reuters Foundation.

Rio's unique geography, where a series of tunnels through mountains separate different parts of the city, has made Vidigal especially appealing to foreigners and investors.

"In the south zone (where Vidigal is located) it is almost impossible to find pieces of land for new developments."

However while land around Vidigal is clearly seen as a potentially lucrative investment, laws governing favelas and the "big problem in terms of titles" has stopped institutional investors from buying properties there, Ferrari said.

SMALL BUSINESS PUSH

In the absence of large property firms developing high-end apartment blocks or other major construction in the area due to a lack of clear property deeds, niche investors have seen big opportunities.

And it is here that locals say they are feeling the effects.

Nascimento estimates that rents in Vidigal have tripled since 2007, though formal statistics on rent increases or the number of people moving into the neighborhood do not exist.

"The prices are abusive; they've gone up so much," said Jose Ferreira, a coffee vendor who has lived in Vidigal for more than 40 years.

Ferreira said rent for his one-bedroom apartment has doubled to 800 reais ($255) since 2011, when police "pacified" the community as part of a drive to cut crime ahead of the Olympics.

"Foreigners started coming in and the prices started going up," Ferreira told the Thomson Reuters Foundation, a sentiment that was echoed by other residents.

It's unclear exactly how many foreigners live in Vidigal today, but some estimate there are more than 10,000 residents - and locals observe many more outsiders are moving in.

"Sometimes it feels like there are more foreigners than locals," Aline Gomes, a student shopping in a local news agent, told the Thomson Reuters Foundation.

Local residents don't have the money to party at the new bars or eat in pop-up sushi restaurants, leaving some feeling like outsiders in their own neighborhood, Nascimento added.

"People who are coming in want the favela experience without the favelados (locals)."

'DESTINATION' FAVELA

Marcos Brandao, the owner of Bar da Laje, doesn't see it that way. His business near the top of the favela is designed for everyone, he said.

He wants the bar to appeal to a mixed clientele, not only local drinkers, in order to make it a "destination" in Rio.

"People think that if you stay in the favela you have to have low prices - our prices are medium," Brandao told the Thomson Reuters Foundation.

About 80 percent of the bar staff are locals, he said and they're proud to be working in an up market establishment so close to home.

A lawyer by training, Brandao has experienced the problem of insecure land rights first-hand, along with complaints over high prices from some locals. But he still thinks Vidigal is a good place to do business.

"Here on the mountain poor people built houses that weren't recognized - it was a squat," Brandao told the Thomson Reuters Foundation.

Getting approval from the fire department to build his bar and other formal paperwork wasn't easy given the community's untitled status, he said.

The complexities of hazy ownership are what has kept the larger investors away.

But individuals who want to experiment with something new, off "the beaten track" were still willing to give it a go despite the lack of titles, Brandao said. "Vidigal has a special kind of energy."

Pointing to construction on the hillside, he said houses were being built for Brazilians and foreigners coming to the area.

Brandao said celebrities seeking the "favela experience" recently included the U.S. singer Queen Latifah and film director Spike Lee, as waiters in T-shirts marked "Vidigal" served drinks and customers posed for selfies.

"The adventure starts with the trip up the hill - take the motorcycles," one foreign patron wrote in a review of the bar, underlying what draws travelers to the favela.

"Locals pay $5, gringos will pay more than $10. Negotiate! This place has one of the best views in all of Rio." (Reporting By Chris Arsenault, editing by Jo Griffin and Paola Totaro; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking and climate change. Visit news.trust.org)

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In Scotland, Edinburgh is seen as a city with huge growth potential. In 2014, prices in Edinburgh were up 10% in a post referendum boom that shows little sign of slowing down.

Local agents are not expecting quite such stellar growth for the next 12 months, but they think price rises will be well above the average predicted for the whole country.

Rightmove named this as the area where it expects house prices to grow the most over the next five years. It says that over this period there will be a huge number of people moving out of London in order to afford to get onto the property ladder. They want a reasonable commute combined with plenty of attractions in the local area, and Southampton offers all this. With relatively affordable housing stock, it's a prime candidate for growth.

Luton was Rightmove's candidate for the second biggest house price rises over the next five years. It emphasised that this isn't a mater of opinion, it is the result of crunching the data.

Luton is another major beneficiary of the move out of London, and while it is arguably not as attractive a place to live as Southampton, it's only 23 minutes into central London - which rivals some of inner London's commuter times. With average prices of £179,368, it's clearly a far more affordable option, and the area has already started to show signs of a boom.

This was the third area suggested by Rightmove. As with Southampton, it is well positioned for London commuters, and also has huge local attractions.

A survey last year asked young professionals to name the place they would most like to live, and Brighton and Hove were the only areas that appeared on the list outside London.

One of the reasons it's not higher up the list is that houses are already on the pricey side, with an average cost of £338,956 - up 13% in the past year alone.

There may be few people who grow up with the dream of living in Swindon, but the electrification of the rail line to London will bring travel times down across the West Country, so Swindon becomes part of the outer commuter area.

Given that the average property costs £168, 968, it's easy to see why Swindon will be a popular option for commuters on a tight budget.

Bath is also going to benefit from electrification of the line, because the commute to London will fall to a manageable 70 minutes. The beauty of the city - along with a vibrant social and cultural life - makes it a clear choice for more long-distance commuters.

Of course, with an average asking price of £374,617, it's not a tremendously cheap place to buy, but the geography of the city restricts development, so these prices are expected to rise still further.

Property Frontiers says that the booming house prices in Oxford are set to get even higher. At the moment, travel to London takes 60 minutes, but this will reduce even further in 2016 when the line is electrified. Prices in the most desirable parts of the centre aren't much cheaper than London.

However, further out there are pockets of affordability, and when the Water Eaton station opens in 2015 it will open up areas to the north of the city too.

Manchester has seen enormous property price rises over the last couple of years, and Property Frontiers expects this to continue into 2015.

Other commentators are expecting the growth to slow over the next few years, especially given the gains made since 2012. However, demand for properties remains buoyant, and with the growth of the local economy, price rises seem inevitable.

Rising prices in London have pushed buyers further and further out of the centre, so estate agents are now claiming zone three as 'the new zone 2'.

Savills believes that the biggest gains over the next five years will be the less glamorous districts - putting the South and East in the frame. Gritty areas that could benefit include Ladywell, Streatham and Catford in the south, and Leytonstone, Forest Gate and Walthamstow in the east.

Cambridge could also perform well. It has already had house prices lifted by the growth of tech companies to the north of the city, and the arrival of pharmaceutical headquarters will help push prices up further.

In 2016 a new rail service from the city to the science park will keep prices rising, and beyond the opportunities presented by the local economy, Cambridge is also part of the 'outer commute' area of London, which Savills expects to shoot up in value over the next five years.

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