Election Sends Futures Rates Lower, Raising Expectations for Real Estate Repricing
The reaction in rates and equities is raising expectations for a lower cost of capital, but the market remains dependent on the next fiscal policy
The first-round result of Brazil’s 2026 presidential election triggered a strong reaction across financial markets, putting interest rates back at the center of the outlook for real estate. Flávio Bolsonaro (PL), who received 47.03% of the valid votes, finished ahead of Luiz Inácio Lula da Silva (PT), who received 45.16%, in a race that was followed by a sharp decline in interest rate futures on Monday (5).
The move was particularly pronounced at the longer end of the curve. At the start of trading, the DI contract for January 2035 fell by roughly 97 basis points to 13.16%, while the January 2028 contract was down 77 basis points at 12.735%.
For the commercial real estate market, the prospect of a Bolsonaro victory has raised expectations for lower long-term interest rates, which could reduce companies’ cost of capital and change the relative attractiveness of longer-duration assets such as office properties, shopping centers and residential developments.
The move was already reflected in the performance of publicly traded companies. On Monday (5), shares of interest-rate-sensitive companies posted strong gains. Cyrela (CYRE3), for example, rose more than 20% at one point during the session, while B3’s IMOB real estate index was up approximately 13.5% early in the trading day.
“This optimism reflects expectations of a change in government and more disciplined fiscal management, which could contribute to more controlled inflation and lower interest rates, particularly at the longer end of the curve,” a prominent real estate market specialist who spoke to REsource on condition of anonymity said.
According to the specialist, market enthusiasm is being driven not only by the first-round election result but also by the broader economic environment, as demographic trends remain favorable and demand across the sector remains strong.
“Interest rate futures fell by as much as 100 basis points. That makes financing cheaper, which is highly relevant for real estate because the sector operates on a long-term basis,” the source said. Asked what could happen if Lula were to come from behind and win the runoff, the specialist said: “We would go back to where we were before, and the stocks would likely come under pressure again.”
The reaction is also reflected in financial institutions’ analysis. In a report released after the first round, JPMorgan upgraded Cyrela and Eztec from neutral to overweight, the equivalent of a buy recommendation, and added both companies to its top picks among homebuilders.
According to the bank, the election result increased the possibility of a change in government. Under that scenario, long-term real interest rates could compress, accompanied by a lower fiscal risk premium and improved financing conditions for companies. JPMorgan estimates that a 1.5 percentage-point reduction in the cost of equity could increase the fair values of the homebuilders analyzed by between 13% and 18%.
For Jonata Tribioli, a real estate operations specialist and commercial director at IBR Capital, lower interest rates would primarily support asset valuations and the return of institutional capital to the office market. However, vacancy, location and building quality would remain key factors.
“I see real estate as more optimistic after the first round, but that optimism is still largely based on expectations about what could happen. If, after the election, we have fiscal policies that build confidence, more controlled inflation and room for interest rates to continue falling, then this improvement could start moving beyond the stock market and into the real estate market itself,” Tribioli said.
Shopping Centers
The impact of interest rates extends to other real estate segments as well. In an earlier analysis, JPMorgan identified shopping center operators such as Iguatemi, Multiplan and Allos among the companies that could benefit from a lower-rate environment, given the sensitivity of these businesses to the cost of capital and perceptions of risk.
All three companies posted gains on Monday, with Multiplan rising 12.19%, Iguatemi gaining 10.47% and Allos advancing 10.03%.
“The market is pricing in expectations of tighter fiscal management. To determine whether this will be sustainable, we will need to see the economic team, policy proposals, the budget, the trajectory of public debt and, above all, the government’s ability to get these measures through Congress,” Tribioli said.
