Brazilian property prices will not fall in 2014

Photo credit: Adrien Vieira de Mello

The country has remained one of the most popular property markets on TheMoveChannel.com in the last two years, as preparations are made for the FIFA World Cup and 2016 Summer Olympics. The interest followed a booming period for Brazilian real estate, with prices almost doubling between 2008 and the end of 2011, while incomes rose less than 15 per cent.

Since then, prices have cooled, says Fitch's report, quoted by Property Wire, although based on the "scarce" information available, it acknowledges that large metropolitan areas are expensive for middle class buyers. Indeed, the research shows that for many, real estate is now only accessible through long-term, high leverage lending of up to 35 years.

"The surge in home prices was mainly driven by massive credit expansion, which followed the sustained decrease of historically high interest rates, the increased availability of cheap savings deposits that partly have to be used to fund mortgages, and legal reforms that streamlined the foreclosure process. As banks tried to increase mortgage lending, loan maturities were extended and LTV limits were relaxed," it continues.

"Supply has not kept up with surging demand for property ownership, creating an imbalance that is unlikely to be solved in the short term."

Mortgage rates are now at a historic low in the country, falling below 9 per cent. Lenders are not expected to raise them by large amounts, though, for poltical reasons, adds Property Wire, with new lending expected to slow down in 2014, although it will still remain in double digits.

With mortgage rates low and prices remaining steady without increasing or falling, is this the year to invest in Brazil?