Crucial to the growth of any real estate market is the influx of credit. In our “developed” markets we know this only too well following rapid price growth and crash at the hands of over-zealous banks in the last decade. With high gearing ratios still in place price / funding sensitivity is still very high and the market still nervous.
Now imagine a different market; where values are real, prices tangible, where banks have funded only a tiny percentage of the total market value, where the price is effectively the cash price and where you know the price is determined by pure market demand and supply and local affordability. That market is Brazil.
In 2010 Brazil mortgage debt was only 4% of GDP, compared to around 70% in the US and most of Europe, resulting in a stable market with prices relatively insensitive to funding. With a shortage of 9.1m homes and a wealth of cash reserves the Brazil government can afford to slowly, carefully, inject cash in to the system, helping those that want to own their own residence and probably having a minimal effect of raising prices. As such the government has the goal to reach 11% of GDP as mortgage debt by 2014.
Luiz Antonio Franca the President of ABECIP (Brazilian Association of Savings and Loans) stated that 2010 was the best year in the history of the real estate market for Brazil; in 2010 housing mortgage debt reached R$ 56.2bn, outstripping figures registered in 2009 of R$ 34.0 billion, and in absolute terms the number of signings made by agents of SBPE (Brazilian Savings and Loans) amounted to 421,400 units, a 39% increase over 2009.
As of today the total number of units financed has now reached 1.052m, an increase of 57% over 2009, but still an incredibly low number when you consider the country’s population of 290m people. In 2011 ABECIP forecast that mortgages will grow 51% to reach R$ 85 billion and there should be 540,000 new mortgage units funded.
Full article here.
