By Lauren Hogan, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The volume of loans for the acquisition and construction of buildings is on the rise – reaching R$9.7 billion in May, an increase of six percent since April. According to the Brazilian Association of Real Estate and Savings (ABECIP), this is the second best result for a month of May in the past twenty years – a sign that Rio’s real estate market should continue to stay strong in 2014.
Despite warnings like those from U.S. economist Robert Shiller who predicted the American housing collapse and raised fears that the same could happen in Brazil’s major cities, CEO and founder of Agente Imovel Johan Jonsson says Rio residents needn’t worry anytime soon about a bubble burst.
Following last year’s report that the cost of real estate in Rio de Janeiro saw an increase of 15.2 percent, and the new information from ABECIP, Johan Jonsson explains, “this ‘tiny’ increase in financing still keeps the financed part of the property stock at very modest and secure levels.” In other words, it is more of a balanced and controlled growth of home financing.
Jonsson continues to explain that as part of the total property inventory, the financial numbers don’t even come close to that of the U.S. or Europe, which see figures between 60 to 80 percent. With Brazil being below ten percent, he believes it could be at least ten years before there is any cause for concern, even with almost fifty percent of property transactions performed in Brazil done completely without financing.
However Pedro Costa, owner of Lead.co, a company that works to connect clients with guesthouses, hostels and B&B’s, feels that the trend he sees is with renters versus buyers, stating that “the skyrocket housing prices will go down just as fast. People don’t have money to buy houses here anymore, only a very few can.”
Still, Sven dos Santos, CEO of Agência Heidelberg, an apartment rental service, believes this trend will continue, saying that “real estate prices will be stable or even slightly increase in the next month,” especially given that fact that getting a loan is easier than it used to be in the past.
Also important to note is that the increase demonstrated by the data does not correlate with Crédito Imóvel Próprio Caixa’s recent changes to it’s line of property refinancing loans, which occurred in December. While it is the only credit union allowed to distribute subsidized loans such as the Minha Casa, Minha Vida program, which covers almost seventy percent of the mortgage loans in Brazil, the ABECIP reports loan statistics for all banks except Caixa.
What the ABECIP’s report does show is that since the start of 2014, R$44.1 billion was borrowed for the acquisition and construction of buildings, funding over 213,000 buildings, up 11.5 percent higher than the same period last year. A look at the report over the accumulation of twelve months, further shows that with resources of savings, the volume of loans reached R$114.8 billion – an increase of 25 percent.
The ABECIP was set up in the First National Meeting of the Real Estate Loans and Savings Companies in Sâo Paulo in 1967. The result of the meeting was the creation of the association, which included partners and directors of Real Estate Credit Societies (SCIs) and Savings and Loan Association (APEs) – participated of the meeting, as well as lawyers, developers and realtors.