Stable Outlook for Brazilian Real Estate | Obelisk International News

For the Central Bank of Brazil, the Brazilian real estate market is stable. Steady increases in income and by extension, purchasing power together with a conservative banking sector are all behind the strength in property in Brazil.

Recent increases in Brazilian property prices and the hikes in home loan approvals have led some analysts to question the stability of the property market. Some have concluded that there may be a bubble forming within Brazilian real estate, an opinion that is rejected by many industry experts based on the economic drivers behind the boom in property.

No Evidence of Risk

One of these experts, Antonio de Moraes, Director of Fiscal Supervision at the Central Bank of Brazil, is adamant that there is no evidence of a bubble. Interviewed in the business weekly Exame, Mr de Moraes states that “there is nothing in the Brazilian property market to concern us or anything putting the sector at risk”.

He is emphatic in that “there is no evidence to suggest a bubble forming” and he draws on two fundamentals to back this up. The first factor is, according to Mr de Moraes, the recent steady increases in income for a huge segment of the Brazilian population. This rise in income means more Brazilians have more to spend and most families want to spend their new wealth on a property in Brazil. This leads to huge demand with the first-time buyer market.

Conservative Mortgage Lending

Secondly, Mr de Moraes cites the conservative nature of lending adopted by all Brazilian banks. This conservative policy prevents mortgages in Brazil representing more than 65% loan-to-value. He also points out that most purchases of Brazilian real estate are made by first-time homebuyers with a lot more at stake in their purchase than second home buyers.

Central Bank of Brazil data shows that Brazilian real estate loans represented 1.3% of the country’s GDP in 2005. Six years later, this percentage has increased to around 4%, an easily sustainable figure and one allowing plenty of room for growth. Many experts agree that the Brazilian property market can easily support a loan rate of between 10% and 15% of GDP, a rate that is expected to be reached over the next decade.

Record Transactions in 2010

Reflecting the massive growth in the market for real estate in Brazil are figures for 2010 recently released by the Construction and Real Estate Institute (INCI). According to INCI, Brazilian real estate transactions numbered over 65,000 last year and reached a value of €11.4 billion.

The 12% annual increase in the number of transactions reflects the rise in Brazilian property investment opportunities last year. Many analysts including Obelisk International expect 2011 to see another increase based on solid activity within the real estate sector. “The social housing programme, Minha Casa Minha Vida, will add hugely to the number of transactions,” comments Gary Hardacre, CEO of Obelisk International, “as more developments are completed, confirming the potential behind Brazilian investment in property”.

“With the current demand drivers and buoyant economic situation, we at Obelisk International see no signs of a property bubble,” says Mr Hardacre. “This is particularly true in regions such as Rio Grande do Norte where the demand for affordable property is so strong,” he adds.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.
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Favourable Finance for Resale Real Estate in Brazil | Obelisk International News

Terms for preferential mortgages are now in place for resale Brazilian property. Similar to loans for the Minha Casa Minha Vida social housing programme, the favourable finance will allow thousands more Brazilians to have access to homes.

Minha Casa Minha Vida has been a highly successful means of reducing some of the deficit of real estate in Brazil. However, even the programme’s three million properties fall way short of fulfilling demand among middle class Brazilians to own a home.

To help alleviate this demand, Caixa Economica Federal – the government bank financing the Minha Casa Minha Vida scheme – has introduced preferential mortgages for middle class families. These mortgages come with no subsidies but they are based on the same eligibility criteria as the social housing programme and carry very favourable interest rates.

Qualifying Conditions

To qualify for preferential mortgages for a resale property, families must be resident in the locality where they are buying and their minimum monthly income must be R$465. The maximum income ceiling permitted is R$4,900 a month in metropolitan areas and cities with over 250,000 inhabitants.

100% finance is available up to a maximum property value of R$500,000 and interest rates for these new Brazilian mortgages range from 4.5% to 8.16%. The financing conditions are the same for all qualifying families with the only variable being the interest rates. These are based on a sliding scale – mortgages for properties valued between R$70,000 and R$80,000 attract the lowest 4.5% rate.

Boost for Resale Property

In Brazil, the social housing programme is aimed at low-income families buying new build properties. Since Minha Casa Minha Vida was introduced in 2009, resale Brazilian properties have been excluded from any government deals. Until now – this new Caixa scheme is aimed specifically at families purchasing resale homes.

Obelisk International believes that these preferential mortgages will be key in activating this sector of the Brazilian real estate market. Obelisk International CEO, Gary Hardacre is convinced that the new Caixa mortgage deals will open up the resale market to lower middle class Brazilians.

“This area of the market is currently under-exploited because of high mortgage interest rates,” Mr Hardacre explains, “and we expect to see a surge in resales to these families over the next few months”. Obelisk International also predicts a range of investment opportunities to emerge on the back of these favourable financing terms.

“These mortgages will create a ready-made exit strategy for resale Brazilian properties in many parts of the country,” says Mr Hardacre, “mirroring the exit strategy available for Minha Casa Minha Vida homes.” For Obelisk International, an on-tap market plus finance provided by Latin America’s largest public bank are fundamentals behind the success of real estate investment in Brazil.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.
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