Land increases property prices.
Research from IBGE indicates that construction companies are having to pay increasingly more for the areas where they build.
Construction companies invested less in machinery and equipment in 2009 compared to 2008. However, they invested more in land and buildings during the same period. The data comes from the Annual Survey of the Construction Industry (PAIC) for 2009, released today by the Brazilian Institute of Geography and Statistics (IBGE).
Despite the global economic crisis, total investment in the construction industry increased from R$ 5,024 billion in 2008 to R$ 5,788 billion in 2009. Of the amount invested in 2009, 31,2% (R$ 1,804 billion) went to land and buildings, 44,2% (R$ 2.560 billion) to machinery and equipment, 17,8% (R$ 1,029 billion) to transportation equipment, and 6,8% (R$ 393 million) to other acquisitions, such as furniture, computers, etc. In 2008, these percentages were 14,4% for land and buildings, 53,8% for machinery and equipment, 23% for transportation equipment, and 8.8% for other acquisitions.
"In recent years, there has been strong investment in machinery and equipment. The drop in 2009 may have been due to concerns about the state of the Brazilian economy in the coming years," said Fernando Abritta, head of the Annual Construction Industry Survey. "Since companies had already invested in machinery and equipment in recent years, they were equipped and continued building with the machines they already had."
According to Abritta, the land and buildings listed as investments were those included in the companies' share capital. "These could be land that the company bought to build a headquarters or to construct and sell in the future," explained the IBGE technician.