Brazil’s real estate market is one worth watching. In 2012 and 2013, Brazil welcomed two record-breaking years in real estate lending, reaching an all-time high of R$109.2 billion in 2013, according to the Brazilian Association of Mortgage and Building Lenders. With this positive trend set to continue throughout 2014, a property venture in Brazil could provide a healthy return on your investment.
Room for Growth
Even though the last two years have seen record-breaking highs in real estate lending in Brazil, the market isn’t considered to be ‘a bubble’. Credit for real estate development and mortgages has increased at a healthy pace reducing the risk of a real estate bubble.
Most Brazilians are buying homes to use as their first place of residence, not for investment purposes. Mortgage payments are generally less than current rental prices which has driven many to buy their own home. With salaries increasing and mortgage finance more readily available, Brazilians are seeing the value in purchasing their own home.
A Careful Nation
Both Brazilian people and banks are cautious when it comes to borrowing and lending money. They do not have a history of impulse buying when it comes to homes, and even though mortgage lending is growing in Brazil, it is still much lower than other economies. To give a comparison, mortgage lending in Brazil represents 8.1% of the economy whereas in the UK it represents nearly 81%. In addition, the default rate in Brazil is still at a low-level.
Mortgage vs. Development
Brazilian banks only finance about 65% of development projects leaving the rest to be financed by developers and homebuyers. Approximately R$32.2 billion goes towards construction projects whilst a larger percentage of lending in Brazil is for mortgages, representing R$76.9 billion.
What does this mean for investors?
The current situation in Brazil offers many opportunities for investors either looking for a short-term or long-term investment opportunity. Brazilians are buying property and it is predicted that lending will continue to grow by about 15% in 2014.
Source: Wall Street Journal