By Ben Tavener, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – In the past few years the cost of real estate has skyrocketed in Rio de Janeiro, especially in the sought-after areas of Zona Sul (South Zone). While property owners and developers have doubled and tripled their investments, renters and new buyers have struggled, and regulators may make efforts to help.
Despite lobbying by real estate industry representatives, the government has not signaled it is willing to increase the R$500,000 cap on the limit for homes financed by the Sistema de Financiamento da Habitação (Home Financing System, SFH).
Brazilian bank Caixa Econômica Federal president Jorge Hereda has said he fears an increase in the limit, as it would justify Rio’s rise in real estate prices. Many believe it would only encourage further increases in an already dangerous market bubble.
The average square meter of real estate sold in Rio rose a staggering 34.9 percent in 2011 – to R$7,421. The average residential rent in Rio de Janeiro increased 21.4 percent.
A mid-range two-bedroom apartments lists between R$350,000 to R$700,000 in most areas in Rio, O Globo newspaper says, but for something of higher quality and in the more sought-after areas in Zona Sul (Copacabana, Ipanema, Leblon) the prices reach R$1 million or more, particularly if you want to be situated near a metro station.
Mortgages in Brazil have traditionally been difficult to get, with particularly stringent requirements and very high interest rates. This has led to buyers having to save up money and buy in cash, or through the Consorcios process, which in part has shielded Brazil from the latest global financial crisis.
Much of this is changing though, as credit has been made more available in Brazil; the emerging middle class and economic growth is largely being fueled by credit markets. The research by APAS (Paulista Association of Supermarkets) shows that 53 percent of all Brazilian families are spending more than they earn.
Leonardo Schneider, vice president of Secovi-Rio told O Globo, “I have sold apartments from R$2 million for people who financed half. Today, families with incomes of R$25,000 can buy apartments from R$1 million in funding.”
Read more (in Portuguese).
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