Brazilian Real Estate Market has Strong Foundations

May 23, 2011 - PRLog -- Mortgage lending in Brazil has doubled over the past three years and jumped 51 percent last year, compared with a 12 percent increase in Mexico and a 2.6 percent decline in the U.S.  Mortgage lending in Brazil is 4 per cent of GDP  and will continue to grow but is still a very small percentage in comparison with other developing and developed nations.

In the United States mortgage lending accounts for 68% of GDP with Germany and Spain at 45% and other developing nations such as Mexico and Chile at 11% and 20% respectively.
Developers are now concentrating on the lower middle and bottom end of the real estate market, where home-buyers are much more price-sensitive than wealthy Brazilians.  The  Minha Casa Minha Vida (My House My Life) has accelerated growth in this sector providing many Brazilians with the finance necessary to make their first home purchase.

The Brazilian Government launched the scheme in March of 2009 with an original budget of R$34 billion and a plan of building one million low-cost units throughout the country by 2014.  This has now been augmented by a doubling of the subsidy to R$72 billion.   With increased funding, the federal government is also expecting double the output, projecting the construction of two million units over the next three years.

“Right now, the north-east is one big building site,” says Fernando Bezerra Coelho, the federal integration minister. While the North-East of Brazil remains the poorest region, with 28% of the country’s citizens and just 14% of its GDP it has become Brazil’s star economic performer. In the past decade alone the area's GDP increased by 4.2% a year, compared with 3.6% for the rest of the country. Last year Pernambuco state’s economy grew by a China-like 9.3%.

The Gafisa SA Chief Executive Officer Alceu Duilio Calciolari recently stated in an interview with Bloomberg that “Brazilian home sales are unlikely to be affected by rising borrowing costs so long as the central bank keeps the benchmark interest rate below 14 percent.  Gafisa is Brazil’s third largest homebuilder by revenue.

He went on to say “The combination of strong employment, the banks’ willingness to finance mortgages and better income distribution is “extremely favorable” the Brazilian first home market with approximately 9.1 million Brazilians planning to buy real estate this year”.
With some commentators worried about a housing bubble Calciolari stated Real estate prices are “far away from a bubble, the gains are a “structural correction” that follows the country’s shift toward mortgages and away from all-cash transactions’.

Brazil Property Administration is managing the development of low cost social housing in the State of Paraiba, North East Brazil.  The company is a trusted and respected property consultancy based in Joao Pessoa, North East Brazil.   The company has launched a new property investment project for investors wishing to access the exciting Brazilian first home development market at www.brazilinvestmentproperty.net.

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Brazil Property Administration is a leading supplier of consultancy services to development companies, investors and individual land and property owners in North East Brazil. The company is based in Joao Pessoa, Paraiba.