Solid economics point to strong S2 for Brazilian real estate

Solid economics point to strong S2 for Brazilian real estate

Brazilian real estate has welcomed the recent drop in interest rates and signs of more. The tandem of the latest cut and solid economic data leads analysts to expect a favourable scenario for the sector for the rest of this year and beyond.

Economics in favour

Since the change of government in late 2022, the Brazilian economy has delivered on a number of fronts. Despite higher-than-expected government spending, the risk of fiscal deterioration has disappeared in the short term.

As a result, much of the economic uncertainties have also dissolved, particularly as Brazil’s external trade has posted excellent results so far this year. In addition, a buoyant first quarter for agribusiness and the oil sector boosted the economy, bringing inflation down yet further.

Fall in interest rates

The Brazilian Central Bank announced the first much-anticipated drop in the SELIC rate in early August, slashing 0.5% off interest rates in Brazil. Furthermore, the entity signalled that further decreases are likely over the next few months.

The real estate sector welcomed the news of lower interest rates, expected to open the credit gates to many would-be buyers. As a result, analysts are now predicting a busy market for the rest of the year.

Resilience of Brazilian real estate

In early 2023, real estate experts believed the year would see price stabilisation and a drop in demand. However, the reality has shown the opposite.

House price increases ahead of inflation

In the year to July, square metre prices in Brazil rose by 5.61%, well ahead of inflation (3.16%). However, many state capitals saw considerably higher upticks. For example, in Maceió and Campo Grande, prices rose by 17.51% and 16.17%, respectively. Other major cities such as Recife (up 9.57%) and Fortaleza (up 7.45%) also experienced larger increases.

Credit-friendly conditions

And despite high interest rates, Brazilian buyers have continued to purchase. According to a survey carried out by the Brazilian Association of Property Developers (ABRAINC), 50% of respondents said easy credit was behind their decision to buy.

For 49%, the principal motivating factor was the increase in their household income, which allowed them to buy a home.

Great expectations for S2 2023

The economic turnaround, plus the drop in interest rates, leads the main real estate companies in Brazil to look forward to the rest of the year with optimism. Some experts quoted in an article in Folha Vitoria expect a surge in investment purchases within the sector. Residential and commercial real estate should experience an uptick in demand.

Some parts of Brazil are already experiencing this demand, such as Ceará in Northeast Brazil. Here, sales surged by over 70% in the first six months of the year. Local analysts expect this pattern to continue for the remaining few months.

(Source: ABECIP, Folha Vitoria)