Rising mortgage lending continues to boost Brazilian real estate performance
Even in the face of slower economic growth, the latest mortgage data has revealed that real estate lending reached record levels in Brazil during 2013.
Brazil’s large housing deficit and government programs for low-income buyers are seen as principal reasons behind the real estate industry’s impressive performance. In fact, the mortgage market in Brazil grew by over 30% in 2013, reaching a record 46 billion USD, with nearly 530,000 properties financed. Of that, the state owned bank Caixa Econômica Federal leads the market with almost 70% of the total loans.
It is worth noting that the housing deficit continues to be a major reason for the rising real estate market, defying the wider economic down-cycle. Many Brazilians are buying homes to live in, in order to satisfy their primary accommodation needs, rather than pure investment. And although discussions were had some years ago about a potential housing bubble in Brazil, many local bankers believe that real estate and lending growth remains sustainable due to genuine housing need of the population and tighter rules on mortgage lending. In particular, Brazilian regulations require substantially higher deposits for mortgaged property purchases than seen in the US and European countries.
If we look at the Brazilian mortgage market as a proportion of GDP, it still remains on a rising curve. In 2013, the mortgage to GDP ratio amounted to around 7.9%, an increase from 6.8% in 2012. Looking back to 2007, this ratio was as low as 1.8%, indicating clearly a steep growth curve.
However, the mortgage to GDP ratio, which is still under 10%, indicates an infancy growth stage in comparison to many other developed and emerging economies. For instance, in Chile this ratio is 20% and in Mexico 12%; whilst in comparison to developed Western economies, the difference is much higher. In the UK, the ratio of mortgages to GDP is 81%, in the US 73%, and in Sweden 60.4%. Thus Brazil’s mortgage to GDP ratio suggests good scope for further growth.
According to the Brazilian Association of Real Estate and Savings (ABECIP) in May 2014 there was a 6% rise in mortgage lending compared to the previous month, posting the second best month-on-month growth over the last 20 years. This indicates that the availability of mortgages is growing and it is easier to obtain mortgage finance.However, the mortgage to GDP ratio, which is still under 10%, indicates an infancy growth stage in comparison to many other developed and emerging economies. For instance, in Chile this ratio is 20% and in Mexico 12%; whilst in comparison to developed Western economies, the difference is much higher. In the UK, the ratio of mortgages to GDP is 81%, in the US 73%, and in Sweden 60.4%. Thus Brazil’s mortgage to GDP ratio suggests good scope for further growth.
Some commentators believe that this rise in lending may be a cause of concern however CEO and founder of Agente Imovel, Johan Jonsson commented in July 2014 that it could be at least 10 years before there is any cause for concern over rising levels of lending. His opinion is based on the comparison with the developed economies and added that almost 50% of property transactions performed in Brazil are done completely without financing.
It is here where Palm Springs Natal presents the perfect opportunity for Brazilian residents and the local property market. Improved access to mortgage finance means than now Brazilians can own their own slice of the exclusive beachside condominium developed by Ritz-G5, situated in proximity of Muriu beach in Natal, one of the finest beaches in the whole of North East. The location offers direct access to the RN-60 – the main highway linking Palm Springs to central Natal – providing residents with easy access to the City as well as Natal’s newly built international airport, São Gonçalo do Amarante.
Palm Springs incorporates 40% density build in its masterplan so residents can enjoy luxurious landscaped surroundings and spectacular beach and ocean views as well as all the trappings of a modern tropical oasis (natural springs, swimming pools, spa, hot tub, sauna, and football and beach volleyball courts).
Following its completion in January 2014, the development has been a unique success story, where not only the wealthy and celebrities have been purchasing plots with a view to building the homes of their dreams but also middle-class Brazilians.
For more information on Ritz-G5 or investing in Palm Springs Natal, contact the team on +44 207 183 7565 or visit www.ritz-G5.com.