Brazil property market set for one of best years

Brazil property market set for one of best years

Figures for the Brazil property market for Q1 lead experts to predict a buoyant year. Some analysts go as far as forecasting one of the best years on record for real estate in Brazil on the back of consistent and growing demand. Continued low interest rates and pent-up demand mean that more and more Brazilian families want to buy property. 

Q1 figures for the Brazil property market 

The first three months of 2021 saw intense activity in Brazilian real estate. Sales of new-build properties soared by 27.1% in the year, the equivalent of 53,185 units. Plots of land continued their brisk sales with buyers particularly keen on lots within developments offering communal amenities such as pools and leisure areas. 

Mortgage lending also skyrocketed in Q1. The number of loans went up by 112.8% in the year across the country, on the back of continued low interest rates. In some parts of Brazil, such as Ceará, mortgage lending levels almost tripled in 12 months.

One of best years ever

The promising figures for the first quarter of 2021 lead some analysts to predict an outstanding year for the Brazil property market. “This year will be one of the best for the real estate market,” said Celso Petrucci, Vice-President of the Brazilian Chamber of Construction (CBIC), at a convention at the end of May. 

Petrucci points to mortgage loans as one of the main engines behind the strong figures. “We are in a very auspicious period for real estate financing,” he said. “When we look at the total for the last 12 months, the demand for mortgages in Brazil has not gone down. On the contrary, it continues to grow”.

Construction and real estate leading Brazilian economy 

Real estate strength is so strong that it is currently a major driving force in the Brazilian economy. According to the latest figures from the Brazilian Statistical Institute (IBGE), GDP growth in Q1 this year rose by 1.2%. The Institute attributes this rise to two sectors of the economy: civil construction with an increase of 2.1% and real estate, up by 1%. 

New-build financing on the rise 

Petrucci also underlined the rise in importance of new homes on the Brazil property market. This shift is particularly noticeable in mortgage lending. While previously most loans were for resale properties – Petrucci puts the figure at around 75% - the trend has now moved to new properties. 

Pent-up demand among families 

The Brazilian property market has traditionally suffered from a significant deficit in supply with the shortfall running to millions of homes. And the latest figures for consumer demand show that this situation is unlikely to change in the near future. 

A survey by Datastore for the first four months of this year found that over 28% of Brazilian families with a monthly income in excess of R$1,500 intended to buy a property in the next two years. This translates to 14.25 million households, a figure that has increased by 207,000 a month in 2021 alone. 

Another survey found that this demand is mostly at the higher end of the market. According to Brain Inteligencia Estratégica, in the 42% of those who expressed their intention to buy, 53% had an income of over R$15,000 a month. 45% had a monthly salary of R$9,000 to R$15,000. 

“Property has become a permanent fixture in investment portfolios for high earners,” said Marcos Kahtalian, a founding partner at Brain Inteligencia Estratégica.

Petrucci agreed and emphasised that low interest rates had changed investment strategy for many. “Nowadays, there’s no point in putting money into a fund so families now see buying a property as a financial investment,” he said. 

Supply behind demand 

Despite the strong demand, supply on the Brazil property market cannot keep up. Q1 this year saw the launch of 28,300 units, a 3.7% increase on the same period last year. This figure is, however, a drop in the ocean as supply lags behind demand. 

Petrucci also pointed to the increase in prices for construction materials as another challenge facing developers in Brazil. 

(Sources: ABECIP, IBGE)