After months of uncertainty, the Brazilian property market appears to have returned to positivity with promising figures for launches, confidence and property investment released in July. These together with price rises in certain cities such as Fortaleza seem to indicate that the market is back on track.
The first set of positive figures came from the monthly joint study carried out by the Brazilian Association of Real Estate Developers (ABRAINC) and the Foundation Institute of Economic Research (FIPE). Their July report found that new-build launches on the Brazilian property market numbered 2,300 units, a 92.5 per cent rise on the same month last year. Launches between January and July this year totalled 33,900, 13.8 per cent more than the seven-month period last year.
Confidence higher in Brazilian property market
ABRAINC and FIPE also release a monthly index for real estate and the July Index showed rises in several key factors for the Brazilian property market. These include levels of confidence in the market generally and the attractiveness of property investment in Brazil.
Confidence, measured in main sectors of the Brazilian economy such as industry, construction and services, has risen steadily since January. The latest figure (June) of 0.9 is considerably higher than the beginning of the year when it was a mere 0.0.
The Construction Confidence Index, released by the Gergulio Vargas Foundation, rose by 2.7 points in July. The month’s total of 70.7 points is the highest since August 2015, indicating to many analysts that the property market cycle has bottomed out.
Brazilian property investment more attractive
In the attractiveness of property investment sector, this too is improving. Calculated by comparing rental yields and interest rates, June’s figure stood at 3.5 per cent, 1.1 points higher than January.
The Brazilian property market has produced excellent gains for real estate funds so far this year. According to the Sao Paulo journal Folha de S. Paulo, by mid-September property funds had seen returns of 25 per cent since January. These funds tend to concentrate on commercial property, but analysts believe that these returns show that the market generally is back on track.
The property portal Properati-Hiperdades reported that July was a month of “good news for Brazilian property”. The main reason for their bullishness came in the announcement of new rules for funding from the state-funded bank, Caixa Econômica Federal.
The loan-to-value (LTV) on mortgages for Brazilian properties has increased. The LTV for resale properties has risen from 60 to 70 per cent, and from 70 to 80 per cent for new builds, property development and purchase of land in Brazil. Other Brazilian banks are expected to follow suit and experts believe the move will lead to an increase in activity on the Brazilian property market.
Properties go up in some Brazilian cities
Properati-Hiperdades have recently introduced a monthly price index for properties in 28 Brazilian cities. While they don’t offer a national figure, their research does provide insight into house prices in the largest cities.
In the latest index (June), half the cities registered falls in property prices. These were most pronounced in Natal, Northeast Brazil where prices dropped by 3.5% in the month and Rio de Janeiro with a decrease of 2.1 per cent. In the positive zone were cities like Fortaleza, Northeast Brazil, with a 1.2 per cent rise in property generally and a 1.6 per cent increase for apartments.
“The recent changes in government have had a welcome knock-on effect in the Brazilian property market,” said Dies Poppeliers, Managing Director of BRIC Group. “Confidence is steadily growing and we fully expect to see more positivity during the rest of this year. Demand remains high and supply is low in key areas such as Fortaleza, a scenario that bodes well for the coming months.”
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.
(Sources: ABRAINC/FIPE, Exame.com, Properati- Hiperdades, El Folha de S. Paulo)