Brazil Property in the Driving Seat
Latest mortgage loan figures and rises in prices for property in Brazil show huge growth. And the strongest increases are found in the market for homes costing less than R$150,000, one of the biggest opportunities for investment in Brazil.
As investors in Brazil real estate are well aware, this is a young market. House values, the volume of construction and number of mortgages are still considerably below those found in developed property markets. However, the latest figures show that property is well and truly in the driving seat for the Brazilian economy.
In the seven months to July this year, 187,600 mortgages were approved in Brazil, a 51.5% increase on the same period last year. Every month in 2010 has, so far, broken a record in both value and number of housing loans. In 2008, when the global financial and property crisis was in its infancy, the total value of mortgages in Brazil was R$63 billion. Just 12 months later, this had risen to R$91 billion and experts predict that by 2015, mortgage loans could reach R$455 billion, representing a giant leap of 620% in just seven years.
But it’s important to get the Brazil mortgage market into perspective. In relation to a percentage of GDP, the size of the mortgage market is tiny in Brazil. By the end of this year, it’s calculated that home loans will be worth 4% of Brazil’s GDP, rising to 11% by 2015. This is small compared to the size of the mortgage market in neighbouring Chile (18%) and Mexico (13%) and tiny when compared with the US and the UK where credit for housing runs to 72% and 75% of GDP respectively.
Brazil obviously has plenty of room for growth when it comes to mortgages.
As Leonardo Santos, an economist at the Brazilian risk rating agency Austin Rating, points out, the massive growth in mortgage lending in Brazil is only to be expected as part of the stabilisation process of the property market. According to Mr Santos, the opportunities in Brazil are very different to more developed markets because “we have a huge housing shortage and lending regulations are much stricter than in many other countries”.
Data from the Central Bank of Brazil shows strong growth in house prices too. Since 2007, prices of new homes have risen 21.4% on average per year while prices for resale properties in Brazil have gone up by an average of 15.5% annually. Demand for property is strong throughout the country and the President of the Housing Union SECOVISP, João Crestana claims that the biggest growth area is for homes valued at less than R$150,000 (around €67,000). The government housing programme, Minha Casa Minha Vida caters mostly for this price bracket, but although the programme is building 3 million homes, it will not satisfy demand.
As in all property markets, demand in Brazil is a major driving force and the principal explanation for the rapidly increasing mortgage market and rising house prices. But unlike many property markets, demand is here to stay in Brazil for at least the next 20 years. The housing shortfall at the lower end of the market runs to at least 7 million. The nationwide figure is thought to be much higher and continually added to by the ever-increasing number of Brazilian families joining the housing market and the burgeoning middle class always aspiring to a better and bigger home.
For Obelisk, the figures behind the property market in Brazil add up to excellent potential for investment. With Brazil combining all the right ingredients for exceptional returns, Obelisk maintains that, in the current global scenario, it’s almost impossible to find anything better elsewhere.
As investors in Brazil real estate are well aware, this is a young market. House values, the volume of construction and number of mortgages are still considerably below those found in developed property markets. However, the latest figures show that property is well and truly in the driving seat for the Brazilian economy.
In the seven months to July this year, 187,600 mortgages were approved in Brazil, a 51.5% increase on the same period last year. Every month in 2010 has, so far, broken a record in both value and number of housing loans. In 2008, when the global financial and property crisis was in its infancy, the total value of mortgages in Brazil was R$63 billion. Just 12 months later, this had risen to R$91 billion and experts predict that by 2015, mortgage loans could reach R$455 billion, representing a giant leap of 620% in just seven years.
But it’s important to get the Brazil mortgage market into perspective. In relation to a percentage of GDP, the size of the mortgage market is tiny in Brazil. By the end of this year, it’s calculated that home loans will be worth 4% of Brazil’s GDP, rising to 11% by 2015. This is small compared to the size of the mortgage market in neighbouring Chile (18%) and Mexico (13%) and tiny when compared with the US and the UK where credit for housing runs to 72% and 75% of GDP respectively.
Brazil obviously has plenty of room for growth when it comes to mortgages.
As Leonardo Santos, an economist at the Brazilian risk rating agency Austin Rating, points out, the massive growth in mortgage lending in Brazil is only to be expected as part of the stabilisation process of the property market. According to Mr Santos, the opportunities in Brazil are very different to more developed markets because “we have a huge housing shortage and lending regulations are much stricter than in many other countries”.
Data from the Central Bank of Brazil shows strong growth in house prices too. Since 2007, prices of new homes have risen 21.4% on average per year while prices for resale properties in Brazil have gone up by an average of 15.5% annually. Demand for property is strong throughout the country and the President of the Housing Union SECOVISP, João Crestana claims that the biggest growth area is for homes valued at less than R$150,000 (around €67,000). The government housing programme, Minha Casa Minha Vida caters mostly for this price bracket, but although the programme is building 3 million homes, it will not satisfy demand.
As in all property markets, demand in Brazil is a major driving force and the principal explanation for the rapidly increasing mortgage market and rising house prices. But unlike many property markets, demand is here to stay in Brazil for at least the next 20 years. The housing shortfall at the lower end of the market runs to at least 7 million. The nationwide figure is thought to be much higher and continually added to by the ever-increasing number of Brazilian families joining the housing market and the burgeoning middle class always aspiring to a better and bigger home.
For Obelisk, the figures behind the property market in Brazil add up to excellent potential for investment. With Brazil combining all the right ingredients for exceptional returns, Obelisk maintains that, in the current global scenario, it’s almost impossible to find anything better elsewhere.
Labels: Brazil, Brazil property investment, Brazilian real estate, investment, investment in Brazil, MCMV, Minha Casa Minha Vida, property
posted by Alison Kane at 12:34 pm
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