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Brazil’s Real Estate Crisis


Brazil’s Real Estate Crisis

 If you’re looking to sell real estate in Brazil quick, you will find this article useful. According to a report from Moody’s Investors Service, Brazil’s real estate market remain weak as the prolonged economic recession in the country hits consumer confidence. Moody’s says that banks have become far more selective about the loans they make.

Brazil is already struggling with high unemployment. Moody’s says that there is a rising problem of payment delays and defaults on mortgage debt in the country. This is despite the fact that loan defaults have remained relatively stable at 2% since 2011.

 Ceres Lisboa, a Senior Vice President at Moody's says: "A sizeable share of outstanding mortgages were originated when the economy was much healthier. At the time banks were extending credit to new sets of household borrowers, many of which had limited payment track records."

 The report says that Brazil’s major mortgage lenders such as Caixa are in big trouble as the value of their mortgage books exceeds the value of their saving deposits. Moody’s expects real estate prices to continue to fall in the near-term future as sales cancellations continue to rise.

 Cristiane Spercel, a Vice President at Moody´s says, "As the weak housing market fundamentals persist, there is an increased likelihood that homebuilders will have to restructure their debt over the next 18 months."

So, it’s certainly not good news for those who have properties for sale in Brazil. You can access the Moody’s report here.

The Central Bank of Brazil agrees with the assessment. The bank says that the economy is all set to get worse in 2017. The Central Bank expects the Brazilian Real to weaken further to R$4.25 to the dollar. The economy is expected to contract to 3% against the earlier estimate of 2.95%.

Inflation is expected to fall, though, which is good news. Inflation is expected to average 6.9%, compared to 10.5% last year.

The Brazilian currency keeps weakening, and this will have other consequences. Imports will become pricier and businesses will pass the cost to consumers. This is expected to affect their profit margins, which means real estate activity in the country is expected to suffer as a result.

Brazil may cut interest rates as inflation comes down over the next few months. Currently the inflation rate in Brazil is 9.28%, lower than before, but still quite high.

The housing market in Brazil is not insulated from the general economic conditions in the country. The real estate boom that Brazil experienced from 2003 to 2013 is over. The country deals with a large number of defaults. The demand for mortgages is very low.

 The international rating agency Fitch says that 41 out of 100 homes that were sold by developers in high rise residential projects were returned to them because buyers could not afford to pay. The percentage of withdrawals as far as housing deals are concerned is 10%.

 Certainly the housing market in Brazil has been suffering. It hasn’t helped that there is a policy paralysis in the centre following the impeachment of former President Dilma Rousseff on corruption charges. The current leadership of the country represented by Michel Temer enjoys little support and has no real power to make decisions. 




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