Brazil property market receives boost

The Brazil property market has just received a boost in the form of improved mortgage lending terms from one of the largest Brazilian banks La Caixa Economica Federal. Under the conditions, it’s easier to borrow more money to purchase Brazil property. This latest BRIC Group article reports on why analysts believe that the move will bring fresh air to the market.


La Caixa Economica Federal (CEF) announced earlier this month that it would be taking a more relaxed approach to mortgage lending. Under the new terms, financing is available for up to 70 per cent of the value of the Brazil property (resales only) for employees in the private sector. This represents a rise from the 40 to 60 per cent threshold fixed last year.


Mortgages are available for resale properties valued up to R$750,000 in the largest cities in Brazil (Brasilia, Minas, Rio de Janeiro and Sao Paulo). Elsewhere, private sector employees will be able to access mortgages on properties valued up to R$650,000 under the new conditions.


CEF has also relaxed mortgage lending criteria for purchases of second homes, traditionally difficult in Brazil. The bank expects the measure to lead to a marked increase in transactions within the Brazil property market with a rise of up to 13 per cent, the equivalent of 64,000 additional units.


Optimism in the sector

The increase in loan-to-value ratios was generally well received in the Brazilian property sector. Chief Economist at the construction union in Sao Paulo (SECOVI-SP) Celso Petrucci said the measure “widened the horizon for the purchase of resale properties in Brazil”. “The bank is sending out the message that there’s money available for new builds too and for the whole year,” he added in comments to the press.


For his part, a spokesperson for the Association of Real Estate Developers in Brazil (Abrainc) Renato Venture called the measure “a breath of fresh air”. He added that he expected to see that “the initial impact on resales spreading quickly to new-build properties”.


Many developers have reported an uptick in buyer confidence since the measure was introduced in late February. A spokesperson from Lopes, one of the main property developers in Brazil, said they firmly expected a boost in sales and an improvement on results for this year compared to those for 2015.


In anticipation of increased consumer confidence, many developers are currently offering large discounts on new build properties in Brazil’s largest cities. The development company Even is marketing some developments in Sao Paulo at 50 per cent of their original price. MCV, who largely specialises in Brazilian property within the social housing programme, announced discounts of 10 per cent on certain developments.


Analysts expect other Brazilian banks to follow suit over the next few months, a move that will undoubtedly open up the Brazil property market and lead to more sales.


“The relaxing of lending criteria by CEF is particularly interesting in terms of the second home market in Brazil,” comments Dies Poppeliers, Managing Director of BRIC Group. “Historically this type of financing has been difficult to obtain so this is certainly a very welcome move and one in the right direction particularly in terms of Brazil property investment.”


An investment company specialising in global real estate opportunities, BRIC Group is currently developing The Coral resort, in Northeast Brazil, a luxury beachfront resort. BRIC Group also offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.


Source: ABECIP

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