Despite the challenges of the covid-19 pandemic, some sectors of the economy are doing well. This is the case with the Brazilian property market, currently “experiencing its best moment for years”. The real estate industry has never been busier and furthermore, is leading the Brazilian economy to recovery.
Never been better
According to the economic broadsheet, Exame, the Brazilian property market is currently riding the crest of a wave. Exame reports that never before had so many Brazilians made the decision to buy property, either for to live in or as an investment.
Buyers are looking for larger properties, preferably outside city centres and workplaces because they can now work from home. And they’re prepared to pay more for a property because the increase is offset by cheaper mortgages.
Leading the economy
This current “moment of euphoria” stands out in an economic moment when many sectors are still struggling to get back on track. But as Exame points out, the Brazilian property market also suffered during lockdown when new launches were put on hold. However, the fall in interest rates together with the shift in lifestyle trends proved to be a gamechanger for real estate.
The drop from 4.5% to 2% in the SELIC interest rate kickstarted the property market in Brazil. Almost overnight, mortgages suddenly became much cheaper and opened the doors to homebuyers and investors. Buyers can now afford a home and investors have access to more profitable assets than bank bonds.
Brazilian property market booms
The change was remarkable across the country. In Sao Paulo, Brazil’s financial capital, year-on-year new-build sales to September reached 49,700 units. This marked a new record after the highest ever in 2019.
Other parts of the country have recently registered similar results. In Ceará, purchases of new-build apartments, townhouses and villas went up by 70% in the year to August. The value of sales reached R$225 million in the same month, a 77% increase on August 2019.
And there are no signs of deceleration as the market moves towards the end of 2020. On the contrary, developers now have access to a much wider consumer base. “The potential market for our products has more than tripled,” said Febricio Mitre, President of Mitre, quoted in the Exame article.
Strong demand starts to lift prices
After six years of little movement, house prices in Brazil are now starting to move upwards. In most large capitals, square metre values have seen their highest rise since 2014. On average, prices went up by 2.14% at national level in the year to September.
Developers and analysts expect this trend to gain traction over the next few months, particularly as interest rates will remain low. Residential property is starting to attract the interest of investment funds that have moved away from the stagnant commercial market.
The new buyers
Exame carried out a survey among the Brazilian population to test buyer sentiment. It discovered that 6 out of 10 Brazilians believe that “now is the best time to buy a property”. They give two main reasons for this – good-value prices and low interest rates.
The survey also found that a majority are at the higher end of the salary scale (36%). Most want to buy to have more space (58%) while 43% say now is a good time to buy for financial reasons.
Rental attractive option
Rock-bottom interest rates have also led to heating up in the rental market. Cheaper mortgages also appeal to buy-to-let investors in Brazil, drawn to better returns from rental income. Exame reports that in September, rental returns were higher than income from fixed bonds for the first time since 2008.
There is also strong demand for rentals from tenants too. This is particularly true among the younger generations who do not necessarily share the dream of owning a home. According to a DataZap survey, just 23% of people between 25 and 36 are thinking of buying.
Property options at The Coral
The BRIC Group beach resort in Northeast Brazil offers investors the chance to benefit from the booming Brazilian property market. Options include buy-to-let properties (some with guaranteed rental income for at least two years), land purchase and turnkey villas. Prices start at US$40,500 for a plot (with finance options available) and at US$75,500 for an apartment. Villa investments have a start price of US$125,000. Find out more about investing at The Coral.