The Brazilian property market faces 2017 with optimism. Based on the tandem of falling interest rates and rising investor confidence, many analysts are pointing to this year as the best time to buy Brazilian real estate.
Mortgage loans are fundamental to any property market and the Brazilian is no exception. The recent reduction in interest rates to 13 per cent has already sent positive ripples throughout the sector. Developers and analysts believe that 2017 will be the year when more construction takes place, jobs are created and more people will buy homes.
Base interest rate falls
The Brazilian Central Bank is committed to progressive reductions in the Selic interest rate throughout the year. Banks believe the rate will drop to 11 per cent or lower by the end of the year, while some in the construction industry are forecasting a fall to 10 per cent.
The decrease will have an important knock-on effect through the Brazilian property market. The first obvious sign of change will come in the rise in the number of investors buying Brazilian real estate credit products. This increase in investor confidence will, in turn, encourage banks to lend more, both to home buyers and to the construction industry.
For home buyers needing a mortgage, 2017 looks like the best time to buy Brazilian real estate. The Brazilian Mortgage Association (ABECIP) predicts a significant uptick in mortgage financing this year. The Association expects loans valued at between R$45 and R$ 50 billion this year, an 11 per cent increase on last year.
Plenty of room for growth
According to ABECIP, Brazil has plenty of room to grow its mortgage loan sector. In 2015, the Brazilian ratio of mortgage loans to GDP reached 9.8 per cent. This is a mere fraction of the ratio in both the US and the UK where it stood at 70 per cent and 75 per cent respectively.
Equally important is the default rate on mortgage payments in Brazil. In 2015, this stood at just 2 per cent. Based on this data, ABECIP concludes that the market for mortgage loans can easily expand this year.
More loans, more construction
Cheaper mortgages will inevitably convince buyers that 2017 is the best time to buy Brazilian real estate. This increase in demand will, in turn, lead to more home starts. One of the largest Brazilian real estate companies Cyrela is forecasting a rise in new launches for the second half of the year.
This will have positive effects on the construction industry across the board. For Luiz Fernando Moura, Director of the Brazilian Association of Real Estate Developers (Abrainc in Brazilian), the knock-on effect will be immediate. The most obvious consequence will be in employment and Abrainc expects to see over 200,000 jobs created in the construction industry in Brazil this year.
The ripple will spread to most of the economy. “Almost all industries end up supplying construction,” Moura said in an ABECIP report. “More than 130 industries serve the real estate market and because we do not have to import, an increase in mortgage loans induces development.”
“We’re often asked when is the best time to buy Brazilian real estate,” says Dies Poppeliers, Managing Director of BRIC Group. “I’d say that the drop in interest rates together with the excellent value for money found in Brazilian property certainly point to 2017 as a good time.”
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.