The housing boom in Brazil continues - Emerging Real Estate

The housing boom in Brazil continues

09/05/2011

 The housing boom in Brazil continues

The property news coming in from Brazil just continues to get better. Unlike many other places across the globe, property prices are rising and in some cities at a fast pace. IBOPE Inteligencia are a research firm carrying out Brazil’s first statistically accurate house price index, and they say that last year the average price of a new apartment in Sao Paulo rose by a quarter on average and much more in some areas. Reports from Estate Agents state that the prices in the most prime areas have risen by 80% over the last three years.

Rio De Janeiro has also been buoyed with prices doubling since the discovery of nearby oil reserves and the draw of the 2016 Olympics.  Office rents are now reported to be the highest in the Americas as Rio will soon be a hub for of one of the world’s leading oil companies – all of whom of course will also require places to live.

It has been noted of course that other countries, now experiencing a crash at worst or slump at best, were in a similar position in recent years but concerns this steep downturn could happen to Brazil seem unfounded. The boom here is crucially being driven not by excessive lending but by rising prosperity and a consequent surge in the number of potential buyers. Since 2003 the number of households with incomes higher than ten times the minimum wage more than doubled to 18million and to boost things further the mortgage market has grown as well. It is still a small proportion but mortgage debt accounted for 5% of Brazil’s GDP last year – a trebling in five years from the tiny 1.4% in 2005.

The shortage of housing as opposed to the surplus found in other places, is also contributing of course to the demand – estimates for the property shortage in Brazil range from 5m to 7m. In the meantime, the low income housing project Minha Casa Minha Vida will be providing finance for a million homes and requiring a huge labour force, with rising wages. The official construction price index is already ahead of general inflation and the gap is increasing.