The British website BBC published on Wednesday, 30th, an article discussing the increase in real estate prices in Brazil, as wages in the country grew and mortgages became easier to obtain. However, while millions of homeowners have benefited others struggle to pay the bills.
The report notes that prices began to increase when the country confirmed the Brazil World Cup, and continued to rise when Rio was named as host of the 2016 Olympics. Juliana Guzman, owner of Rio Exclusive, a luxurious property company, told the journalist that everybody talks about a housing bubble, but people are still buying in Brazil even if prices are high, because they see it as an opportunity to have a good return on investment.
According to the index of brazilian FIFE-ZAP, prices have risen over 250% in the last six years. In São Paulo, the increase was 200%. Robert Shiller, the man who preditected the housing bubble that resulted in the collapse of the market in the United States has warned that Brazil is experiencing its own bubble.
The text implies that there is no doubt that the strong economic growth in recent years was partly motivated by the increase in consumer credit: people are spending money they do not have, which includes the property. On the other hand, Brazil is now facing a decline in economic growth and in an effort to undermine the rising inflation, the interest rate is at the highest level in the last two years. All these factors could put an end to the feeling of wealth for property owners in the future.
I already see many properties not selling in Rio and other parts of Brazil. Brazilians have a hard time ending the month with money in their pockets so many of them may default on their payments. It might be true that there’s not a bubble because yes, there is internal demand because of Brazil’s serious planning problem. Cities are not planned according to growth, so the result is chaos in transportation, infrastructure, etc… The ones with money will buy, others will try, many will fail and lose money.
Truth is no money paid is worth the property price in any part of Brazil. You should but it to enjoy a good time in the country of the sun.