Purchasing power decline worries Brazilian property builders

The decrease on the purchasing power has not prevented the growth of real estate market in Brazil in recent years. To compensate for the escalating prices, developers are releasing smaller and more distant neighborhoods apartments. The strategy ensured continuity of sales so far, but experts warn that this strategy is expiring because property prices have become unaffordable for Brazilian consumers.

From the point of view of product, Brazilian developers have succeeded in settings to meet demand. The new apartments don’t have bigger rooms, but in return the condo gained a gourmet kitchen, playroom, laundry and gym, for example. Residents can still throw a party for several guests even living in a small apartment.

But the adjustment to the product may not be enough to meet demand, which was affected by soaring prices. “The will of the Brazilian population to buy property continues, but their income did not follow.”

This detachment is evidenced by the high volume of cancellations of sales reported by most major builders. In 2013, the contract dissolutions at PDG, Gafisa, Tenda, MRV, Brookfield and Tecnisa together totaled R$ 5.8 billion. The cancellations occur because the client no longer has the money available to pay off the mortgage on their property.

It is estimated that prices in Brazil will rise further because of rising construction costs. And the developers tend to pass on these costs to the consumers because their profit margins are still recovering from losses with delayed constructions and budget overflows in recent years.

Source: Portal A Tarde with information from O Estado de S. Paulo.

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Joe Cloud
Dutch, American, Brazilian... lived there for 5 years and owns property in Brazil. Out of the country for a few years now and would like to go back, however current circumstances tell me it's not the right time.

Published by Joe Cloud

Dutch, American, Brazilian... lived there for 5 years and owns property in Brazil. Out of the country for a few years now and would like to go back, however current circumstances tell me it's not the right time.