Brazil Real Estate

Despite economic woes Brazilian real estate sector shows breath

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After the recessionary period of 2020 caused by the impacts of the Covid-19, the real estate market in Brazil has improved significantly, overcoming the economic down-turn notably in the residential sector.

In the first four months of this year, about 13,012 homes were sold, compared to 8,738 in the same period in 2020, according to Rio de Janeiro’s Housing Union. The 55% increase is the biggest jump during the first four months of a year since 2013.

Meanwhile, real estate funds in the Latin American country have collected R$26.827 (US$5.4) in the first half of 2021, according to the Brazilian Association of Financial and Capital Market Entities (Anbima). The figure represents a growth of 44.3% over that raised in the same period of 2020.

Of note, in 2020, there were six IPOs on Brazil’s stock exchange involving Brazilian developers with a total investment of R$5.2 billion. Professionals in the real estate industry already see another positive year in attracting resources.

“2021 will be one of the best years for the property market,”  Diego Villar, President of Sao Paulo-listed Moura Dubeux, the largest homebuilder and real estate development company in Northeast Brazil told BRIC Group.

The real estate market heat up after the constant reduction of the national interest rate index, the so-called “SELIC rate”, a move to boost the economy and as a result, mortgage lending became cheaper. Brazilians ditched rent in favour of homeownership making their dream true to own their own house.

Housing Index Brazil
(Source: FIPEZAP)

The move largely caused the reallocation of investments from financial assets to real estate assets, especially residential real estate.

Contributing to the economic and real estate market improvement, the drastic reduction of the Sistema Especial de Liquidação e Custodia (Special System of Clearance and Custody – SELIC) also benefited investment in real estate and stimulated the allocation of resources to real estate investment funds.

A slump in Brazil’s currency, the real, is another reason behind the big interest from international investors in the Brazilian real estate market. In 2014, a square meter in Brazil typically cost the equivalent of US$3,040. In 2020, it cost US$1,344, down 45%.

While Brazil’s central bank announced its third interest rate hike in 2021, a 75-basis point increase to 4.25% and anticipated a similar rise in August, experts predict that the real estate boom will persist.
The country’s economy expanded 1% year-on-year in the first quarter of 2021, beating market estimates of a 0.8% growth. On a quarterly basis, the economy expanded 1.2%, above market consensus of a 1% growth.

Meanwhile, residential rentals in Sao Paulo are up 3.12% in 12 months through June 2021, according to data released by the Housing Union (Secovi-SP) on Monday (July 19).