BRAZIL: Scenario of the Brazilian real estate market after the pandemics
September 2020 – Brazil – Rossetti Advogados
The new coronavirus (Covid-19) pandemics led to an unprecedented economic crisis in most of the industries in Brazil and worldwide. However, the Brazilian real estate industry managed to rapidly overcome the crisis provoked by the pandemics and is currently recovering, driven by the low interest rates in the country, favorable lines of credit and good real estate prices.
The lower level of the basic interest rate (Selic), which is currently 2% per year, is the main factor that contributes to this growth in the industry, because it has created favorable conditions for credit and investment transactions. It is sufficient to note that the average interest rate of mortgage loans is also the lowest in history, which encourages the resumption of negotiations.
Therefore, the significant discount in mortgage loan installments is more easily supported by buyers. For example, a client that bought a real property for R$500,000.00 in 2015, when the Selic rate was high and the average mortgage loan rate was approximately 14.5%, paid installments of approximately R$6,000.00. When this rate dropped to 10% in 2018, the client would pay installments of R$4,800.00 for the same property. Today, with the reduction in the Selic rate and interest, the installments would amount to R$3,500.00.
In addition to the economic aspects, the social isolation measures caused the persons to stay home longer and to value other characteristics, in the properties, than those valued before the pandemics, such as largest homes and the existence of outdoor space or balcony, for example. Another thing that might change the real estate market is the trend for increase in home office work, as a result of which the persons no longer feel the need to live close their workplace and can buy properties further away from urban centers.
These developments drive the economic recovery with the transfer of capital and creation of new jobs, combined with the implementation of technological innovations, such as the virtual visitation of houses and apartments.
This market is economically particularly important and presents many opportunities to be seized, and it will certainly help a lot in the recovery of our country.
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This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.