Brazil’s real estate loans soar, break records and project a 34% increase this year

RIO DE JANEIRO, BRAZIL – After a 57.5% growth last year – with R$124 billion in bank loans – the volume of real estate financing jumped 113% in the first quarter 2021 compared to the first three months of last year.

According to data from the Brazilian Association of Real Estate Credit and Savings (ABECIP), operations between January and March reached a record R$43.1 billion, with 187,600 units sold.

The assessment is that expansion of the real estate sector should continue in the coming months, despite the start of a process of interest rate hikes in Brazil and the rise in prices of building materials.

Amid strong demand from Brazilians for owning a home or for new properties, the sector is projecting growth of over 30% in financing for this year, although the country’s economy is being impacted by the second wave of the Covid-19 pandemic.

The good performance posted in March reinforced ABECIP’s optimism, which updated its growth projection for this year from 27% to 34%. Up to R$170 billion are expected to be used this year to finance the purchase of new and used real estate. According to the association’s president Cristiane Portella, several factors are driving the purchase of homes, despite the economic crisis.

“First of all, there is still a very large housing deficit in Brazil, which means that there is a huge demand for the purchase of a first home or an exchange for a second. And we also had an important reduction in interest rates,” she says, in reference to the drop seen in 2020.

According to Cristiane, in long term financing of 20 or 30 years, any reduction in the interest rate has a considerable impact on the value of installments, which begins to be affordable for the buyer. “The current situation has placed many more people in the game, in a position to buy a property or move to a bigger one,” she says.

Property search

Maria Sonia Carvalho da Silva, 47 years old, took advantage of the low interest rates to buy a floor plan apartment from MRV, in Araçatuba (SP), in mid-April.

“The installments were lower than if I paid rent,” she says. She used the Unemployment Guarantee Fund (FGTS) for the down payment and secured Caixa Economica financing to buy the 49-square-meter apartment for R$130,000, which should be delivered between March and April 2022.

During the search for an apartment to rent in the Santa Cecília neighborhood, in São Paulo, English teacher Igor Ferreira Lobato, 29, realized that with better financing conditions he could buy a property. “With my savings and FGTS, I had enough for an apartment of up to R$400,000,” he says.

The search was successful and in February he closed the purchase of a “fully renovated and very well located” 85 square meters apartment for R$290,000. Lobato made a 40% down payment and financed the remainder through a bank. “The installments were around R$1,600, which is great for an apartment in the central region.”

SELIC rises

According to Central Bank data, despite the start of the SELIC (the economy’s basic interest rate) increase cycle in 2021, the average interest rate for home loans for individuals stood at only 6.9% per year in March this year – the lowest value since official records began. By comparison, in January last year, the average interest rate stood at 7.4%.

“Another positive aspect is the possibility of using different indexes in the loan. The consumer ends up having more options, which increases competition among banks. As a result, we haven’t seen a direct pass-through of the rise in the SELIC rate, at least for the time being,” says Cristiane Portella.

Since March, the Central Bank has raised the SELIC from 2% to 3.5% a year. In theory, the increase should also raise the interest rate for home owners. “In a market in transformation, banks began to value the long-term relationship with their clients even more,” says the ABECIP executive.

On the other hand, while the middle and upper classes are taking advantage of the moment to finance real estate, the Bolsonaro government has eliminated funding for Minha Casa Minha Vida (social housing program) and the construction of 200,000 houses for the poorer classes will be paralyzed.

However, according to José Carlos Martins, president of the Brazilian Chamber of the Construction Industry (CBIC), this cut in resources for housing for the poorest population should be reversed soon. “It is such an absurd, senseless issue that I can only believe that common sense will prevail. Therefore, I am relaxed,” he says.

Source: Infomoney