The end to political uncertainty, increased consumer confidence and record-low interest rates are leading to changes in the Brazilian property market. According to experts, it’s about to enter a new cycle of growth, due to last three to five years with prices going up.
A real estate investment forum meeting in mid-November in Sao Paulo offered some interesting insight into the current state of the Brazilian property market. Experts and analysts present were unanimous that a shift is taking place within the market, entering another upward trend in the cycle.
The defining signs
Analysts point to four major factors behind the surge in the property market. The lowest interest rates ever – the SELIC index currently stands at 6.5% – have made mortgages in Brazil their cheapest ever. In addition, recent financing reforms have pushed the maximum mortgage lending amount to R$1.5 million. The changes open up the mortgage market to higher priced properties and gives buyers access to them.
Better mortgage terms have also opened the door to buy-to-let investment in Brazil. According to figures reported by the Brazilian Mortgage Association (ABECIP), annual rental returns in Sao Paulo reached 5.6% in September, higher than those obtained from savings (4.55%). Rental prices for a 2-bedroom apartment reached R$1,745 in August, a 3.4% rise in the year.
Other factors pushing the Brazilian property market upwards include the end to political uncertainty with the election of Jair Bolsonaro as the country’s new President. He has promised wide-spread economic reforms when he takes office in January. News of which has been very well received by investors in Brazil.
The final factor in the change in cycle within the Brazilian property market is consumer confidence. Analysts at the Sao Paulo forum reported that it is on the up and expected to rise considerably during 2019. Higher consumer confidence will contribute to more sales of property.
New growth cycle for Brazilian property market
“We believe the sector is entering a new growth cycle,” said Marco Saravalle from XP Inversiones, one of the contributors at the Sao Paulo event. “This new cycle should last between three to five years, but we do not expect it to be as intense as the previous cycle.”
Brazilian real estate saw a sharp rise in the three years to June 2012. According to the Fipezap Index, prices for property in the 20 largest cities rose by 29.59% in the 36 months. Since July 2015, prices in most parts of Brazil have stabilised. However, that trend appears to have ended in the summer of this year.
According to statistics from one of the largest property portals in Brazil, sales in Sao Paulo rose by 6.8% in the year to September. The increase for the first nine months of the year were even higher – sales in Brazil’s economic capital went up by 41% between January and September.
No doubt about price rises
Given that the Brazilian property market is changing tack, analysts believe now is the time to buy. Speaking at the Sao Paulo forum, Tiago Galdino, Managing Director of Imovelweb pointed out the opportunities available for investors in new developments. “Developers are selling off stocks before they launch new products,” he said.
He also highlighted the increase in interest from buyers so far this year. Imovelweb portal saw a 35% increase in searches between January and September. “There’s no doubt prices are tending to go up,” he said. “The only question is how fast they will do so.”