RIO DE JANEIRO, BRAZIL – The year 2019 brought great news for construction, as a period of strengthening for the sector and of an upturn in the real estate market. There was a positive development in the main indicators: generation of jobs, sales and launches of real estate, improvement in the construction GDP and the significant reduction in interest rates enabling new financing offers and greater access to housing.
Brazil is on the right track to regaining a heated and safe market. And the numbers prove it. The ABRAINC (Brazilian Association of Real Estate Developers) conducts in partnership with the FIPE (Economic Research Foundation Institute) a monthly survey on the number of real estate launches, sales, offers and districts throughout the country.
When comparing the third quarter of 2019 with the same period in 2018, the increase in launches is very positive. In the medium and high standard segment (MAP), the growth was 20 percent, stronger in the city of São Paulo with a concentration in high-income neighborhoods with this effect expected to be spread throughout Brazil in 2020. In the third quarter of 2019, low-income real estate launches increased by 11 percent, in line with recent years.
It is important that ‘Minha Casa Minha Vida’ (“My Home, My Life” – MCMV) program remains strong while promoting low-cost housing financing.
This positive trend is highlighted by the drop in interest rates. The SELIC rate fell to 4.5 percent, reaching its lowest mark in history, which is also reflected in future interest rates – which measure market confidence – and enable real estate credit offer. ABRAINC conducted a survey showing that a one percent drop in interest rates may include up to two million families in the real estate market. Therefore, at each percentage point in the interest rate variation, the market increases by 16 percent on average.
A further highlight in 2019 was the creation of the IPCA-indexed real estate credit modality, which is already in great demand by Caixa’s account holders and was recently launched by Banco do Brasil. And in keeping up with this trend, Caixa will launch the pre-fixed credit product in the first half of 2020.
These initiatives broaden the range of options for consumers and evidence the appetite of institutions for real estate credit.
The strong reduction in interest rates opens the opportunity for new forms of financing, such as CRI’s (Certificate of Real Estate Receivables) real estate funds, which so far still have little participation in the residential segment. In addition, the LIG (Real Estate Covered Bonds), seems a great opportunity for alternative funding.
The growth expectation for 2020 is very positive for the sector. The construction GDP recorded an increase of 1.3 percent in the third quarter of 2019, twice the GDP of Brazil (0.6 percent). It was the second consecutive quarterly increase in the sector. For 2020, growth in launches of between 20 and 30 percent in the MAP segment is expected and in what concerns the MCMV program, the estimate is for an increase in launches close to those observed in recent years of between five to ten percent.
The market’s growth in 2020 may be even greater if funding is available. A survey by the ABRAINC shows that the real estate market would have the potential to build up to one million new homes and in this scenario, the sector would generate 5.5 million jobs, which would represent five percent of all jobs generated in the country.
In 2019, the sector generated 15 percent of all formal jobs created in Brazil while there was a growth of 52 percent in the generation of jobs from 2018 to 2019, evidencing once again the positive resumption.
Brazil is on the right track to achieving larger and safer goals. After a period of turbulence, it is experiencing a moment to promote new investments and access to quality housing in order to reduce the housing deficit. With legal security and a strong economy, the sector is motivated and engaged in achieving this goal.
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Live Market IntelligenceBrazil — Live Market Board
Rio Times · Live Market Intelligence
Brazil — Live Market Board
-0.43%
171,324.31
-0.43%
71,674.32
-0.46%
10,625.27
+0.69%
2,848,945
—
2,452.93
-1.35%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 171,324.31 | -0.43% | +8.69% | 172,060.43 | 172,060 | 169,942 | — |
| USD/BRL | 5.65 | +1.12% | +7.11% | 5.58 | 5.65 | 5.65 | — |
| SELIC | 13.75% | — | — | — | — | — | |
| PETR4 | 44.70 | +2.64% | +38.18% | 43.55 | 44.97 | 43.23 | 37,990,800 |
| VALE3 | 63.95 | -0.75% | -2.75% | 64.43 | 64.48 | 62.93 | 16,658,700 |
| ITUB4 | 41.68 | -0.10% | +6.58% | 41.72 | 41.95 | 41.12 | 22,298,600 |
| BBDC4 | 14.32 | -0.07% | -26.34% | 14.33 | 14.33 | 13.92 | 62,054,800 |
| BBAS3 | 15.48 | -8.35% | -32.11% | 16.89 | 15.67 | 14.72 | 146,447,300 |
| B3SA3 | 14.76 | -0.27% | +4.53% | 14.80 | 14.90 | 14.47 | 48,848,300 |
| ABEV3 | 15.75 | -0.63% | +15.64% | 15.85 | 15.92 | 15.62 | 45,131,700 |
| WEGE3 | 51.65 | +0.08% | +15.06% | 51.61 | 52.04 | 51.17 | 5,287,600 |
| PRIO3 | 63.30 | +2.98% | +58.21% | 61.47 | 63.87 | 60.79 | 6,527,400 |
| SUZB3 | 56.04 | +4.16% | +16.58% | 53.80 | 56.06 | 53.75 | 8,381,600 |
| RENT3 | 29.58 | -2.18% | -31.31% | 30.24 | 30.42 | 29.05 | 11,810,900 |
| AZZA3 | 16.90 | +9.95% | -42.83% | 15.37 | 18.57 | 16.14 | 7,839,300 |
| CSNA3 | 4.23 | -6.42% | -51.55% | 4.52 | 4.48 | 4.19 | 18,970,400 |
| GGBR4 | 24.97 | -1.11% | +31.08% | 25.25 | 25.26 | 24.69 | 4,076,200 |
| ENEV3 | 27.00 | -1.39% | +40.26% | 27.38 | 27.11 | 26.53 | 11,153,200 |
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