The Demand Quadruples

[JMBroad]

Recent news article quoting Maria Fernanda Ramos Coelho, president of the Caixa Económica Federal regarding the launch of the social housing plan "My House, My Life":

Maria Fernanda Ramos Coelho commented that, only as a result of the plan being launched, the number of the visitors to the "Caixa Económica" website to perform financing simulations for the purchase of residential property has more than quadrupled, from 70 thousand visitors a day to 434 thousand visitors a day with over 1 million simulations a day over a period of five days. The simulator allows Brazilian families to obtain residential financing through the bank, calculate the mortgage payments, initial downpayments, duration of the loan and interest.

Maria Fernanda also highlighted that, boosted by the interest in the plan, the residential credit of the C.E.F. in the first quarter of 2009 increased by 119% in relation to the same period the year before, to a total of R$ 7 billion. She added: "That amount is more than the real estate credit offered during the whole of 2004".

Negócios - Caixa amplia projeção para crédito de imóvel - Diário do Nordeste

In Natal alone, over 25.000 signed up in the first eight days. (was launched in Natal in the beginning of last month - May 2009) and between 09:00 and 16:00.

Prefeitura do Natal

 

[JMBroad]

104 views and no replies? Ho-hum!

The local demand will ultimately result in more and more low income families purchasing their first homes - mortgages will become more and more common and more and more people will buy their own homes. It will start with low cost social housing but will eventually move into the middle class and eventually into the upper class and luxury holiday homes market.

Why the demand? Well for example a recent project for the local market which I know of has pre-approval for 90% LTV mortgages, 10% subsidy from the government and interest rates set at just over 5%... Add to that the free home insurance, the fact that the buyers don't start paying for the homes until they actually move into their new home (so they don't have to pay rent AND mortgages),reduced property registration fee's (or waiving of the fee's altogether),reduced or waived property tax and it's easy to understand the demand. Of course location, building quality and design have to be attractive as well.

So what does this demand mean for the overseas investor looking to invest in the real estate market of Brazil?

Well for a start, as mortgages become more common in Brazil, banks will consider lending to foreigners. As people get used to the idea of having a mortgage on their house, young Brazilian families will get used to owning their home instead of living with family or friends, leading to more and more people wanting to move into their own home. The next natural step would be for families to start to move out at younger and younger ages.

So, ultimately, for the overseas investor it means that the real estate market is growing from a solid, sustainable foundation, and isn't a speculative market inflated artificially by developers, agents and investors like so many recent "property boom" locations around the globe.

But that's just my opinion as someone living out here and working in the market - I look forward to your opinions.

 

[Dotty]

Having relatives living in Brasil and from experience I'd like to add that Brasilians enjoy living under the same roof (basically do until they have finished University,find a decent job and then eventually marry .)It's not quite the same as the U.K ,out the door at 18 and get on with it!

Family time here is very important and to own 10 properties and have families still living together is quite extrodinary,but true.Not a question of money ,but sentiment!

The market you have written about is the lower end of the market,which i personally would not think an investor from abroad would be interested in as the returns are relatively small,unless they were to buy a few at a time.
That's my little piece.

104 views and no replies? Ho-hum!
Having relatives living in Brasil and from experience I'd like to add that Brasilians enjoy living under the same roof (basically do until they have finished University,find a decent job and then eventually marry .)It's not quite the same as the U.K ,out the door at 18 and get on with it!

Family time here is very important and to own 10 properties and have families still living together is quite extrodinary,but true.Not a question of money ,but sentiment!

The market you have written about is the lower end of the market,which i personally would not think an investor from abroad would be interested in as the returns are relatively small,unless they were to buy a few at a time.
That's my little piece.


The local demand will ultimately result in more and more low income families purchasing their first homes - mortgages will become more and more common and more and more people will buy their own homes. It will start with low cost social housing but will eventually move into the middle class and eventually into the upper class and luxury holiday homes market.

Why the demand? Well for example a recent project for the local market which I know of has pre-approval for 90% LTV mortgages, 10% subsidy from the government and interest rates set at just over 5%... Add to that the free home insurance, the fact that the buyers don't start paying for the homes until they actually move into their new home (so they don't have to pay rent AND mortgages),reduced property registration fee's (or waiving of the fee's altogether),reduced or waived property tax and it's easy to understand the demand. Of course location, building quality and design have to be attractive as well.

So what does this demand mean for the overseas investor looking to invest in the real estate market of Brazil?

Well for a start, as mortgages become more common in Brazil, banks will consider lending to foreigners. As people get used to the idea of having a mortgage on their house, young Brazilian families will get used to owning their home instead of living with family or friends, leading to more and more people wanting to move into their own home. The next natural step would be for families to start to move out at younger and younger ages.

So, ultimately, for the overseas investor it means that the real estate market is growing from a solid, sustainable foundation, and isn't a speculative market inflated artificially by developers, agents and investors like so many recent "property boom" locations around the globe.

But that's just my opinion as someone living out here and working in the market - I look forward to your opinions.

 

[debzor]

Having relatives living in Brasil and from experience I'd like to add that Brasilians enjoy living under the same roof (basically do until they have finished University,find a decent job and then eventually marry .)It's not quite the same as the U.K ,out the door at 18 and get on with it!

Family time here is very important and to own 10 properties and have families still living together is quite extrodinary,but true.Not a question of money ,but sentiment!

The market you have written about is the lower end of the market,which i personally would not think an investor from abroad would be interested in as the returns are relatively small,unless they were to buy a few at a time.
That's my little piece.

Correct me if I am wrong, but I am pretty sure this guaranteed mortgage product relates to the very poor, who earn less than about R$1050 per month, and are subject to strict means testing before receiving a loan with a repayment of around R$150 per month?

There is no finance available at all to foreigners, and the interest rates to others are still restrictive. Do you know it takes approx 80 signatures/initials in Brazil to get a mortgage with Caixa, after you have been approved, which takes months?

But certainly it is a start, and one of things I admire about Brazil is the slow, steady and cautiously considered approach to these things. To dive in with money for everyone could create a financial disaster.

 

[robh]

Correct me if I am wrong, but I am pretty sure this guaranteed mortgage product relates to the very poor, who earn less than about R$1050 per month, and are subject to strict means testing before receiving a loan with a repayment of around R$150 per month?

There is no finance available at all to foreigners, and the interest rates to others are still restrictive. Do you know it takes approx 80 signatures/initials in Brazil to get a mortgage with Caixa, after you have been approved, which takes months?

But certainly it is a start, and one of things I admire about Brazil is the slow, steady and cautiously considered approach to these things. To dive in with money for everyone could create a financial disaster.

I am not sure about the "slow, steady and cautiously considered approach" to things, this was/is a double edged sword, it meant during the boom times Brazil wasn't really booming because capital wasn't available for growth, but on the plus side Brazilian banks are still awash with money whilst their foreign cousins aren't, so they will ride through the storm relatively unscathed.

The predictions are that Brazil will emerge from the global recession stronger than it went into it, which can't be said for any other country at this time. Whether that is by accident or design is another question though.

I also think the boom in the lower and middle income sectors of the Brazilian real estate market will drive the price of real estate up at all levels, regardless of whether foreigners or anyone else are given access to mortgages, in fact it is impossible for anything else to happen.

Regards,
Rob.

 

[JMBroad]

Dotty:

Portugal was exactly the same twenty-five years ago when my family moved there from the UK. We couldn't understand why 35 and 40 year olds were still living with their parents. Large families always lived together - son, daughter, husband, wife, mother and father. However take a look at Portugal now - Almost everyone I know in Portugal has their own house and (although some might live next door to their parents) they don't actually share the same roof anymore. I imagine the same thing will happen in Brazil. I can't guarantee that it will, which is why I say "The next natural step would be for families to start to move out at younger and younger ages." However as there have never been mortgages in Brazil before and it has never been an option, there is no way to know for absolute sure that it will or won't unless you can read the minds of the population.

As for overseas investors investing into low cost housing - not everyone is able to start on the R$ 500.000,00 properties - for many people, R$ 35.000,00 is a lot of money. Don't forget that a "social house - casa popular" can be sold for as much as R$ 200.000,00.

Regardless - my post wasn't a sales pitch - the point is that the low income families are a solid foundation for the Brazilian real estate market to grow on - and as the pyramid fills up with housing, people slowly start moving up the ladder so all market segments benefit. Better to grow up, with prices steadily increasing year on year than grow down (aka Dubai) with prices shooting up way past their worth only to start a downward spiral. (I wonder how much all those properties investors bought in Awali City, Emirates City and Emirates Lake Towers are selling for today?)

Debzor,

The government plan "Minha Casa Minha Vida" covers everyone from 0 minimum wages monthly income to 10 minimum wages monthly income - so families (not individuals) earning less than R$ 450 per month to R$ 4.500,00 each month. Individual residences are sold up to a maximum sales price of R$ 200.000,00 - most are being sold for much less than that - as always it's a pyramid - right at the bottom earning the least amount of money you have the majority of the people - as the income goes up, the people get fewer in number. The amount of people buying R$ 200.000,00 is going to be a lot less than those buying R$ 50.000,00 or R$ 75.000,00. Mortgage payments can be as little as R$ 50,00 per month in some cases.

The banks not only pay for part of the house from the Minha Casa Minha Vida fund in some cases, but they also provide free house insurance, they guarantee mortgage payments in the event that you lose your source of income.

One of the huge benefits of the "Minha Casa Minha Vida" plan is the debureaucratization of the the whole purchasing process. I was told once that the list of requirements has come down from something ridiculous like 120 documents to around 15 on average and in some cases as little as 4 documents which need approval. It was probably an exaggeration - it was probably less than 120 but now you can get a loan by presenting only four documents.

Anyone can go to the website of Caixa Económica and do a simulation and it will tell you all the documents you now need to present. When they had to present that ridiculous amount of paperwork I can understand having 80 signatures however with 4?

Documentos Habitação CAIXA

I would assume that they have also addressed that issue but I will bring it up at my next meeting with the Caixa to give you an answer. Remember, over 25.000 people signed up in Natal already but there are (as far as I know) no developments approved in Natal for these people to purchase. By the time the developments are made available to them - probably in the last quarter of this year - a lot of the bureaucracy will already have been dealt with (hopefully).

Rob,

I'm sure it will too - in fact can you imagine a family earning 4 minimum salaries (around R$ 1.800,00 per month) buying a house worth R$ 75.000,00 three years ago? Neither can I - at most they might have looked for a R$ 35.000,00 house ... but today they are lining up in thousands for the opportunity.

 

[mrvibe]

I blieve JMBROAD has a point. I am a portuguese living in Brazil and Portugal was as he describes. Ultimately, even if its for the low end of the rea estate market, "My House, My Life" will have a positive impact on the housing market - "people slowly start moving up the ladder so all market segments benefit"

Cheers,

NS

 

[mrvibe]

Ah, and this amount of pelople clibing from low-income to middle-income and the internal demand is what has help Brazil during this chrisis. In June, 220.000 new motor vehicles were sold, the largest number EVER sold (during a world chrisis??) :

Cheers,

NS

 

[brackenhoe]

Hmmmm, until foreigners are allowed bank accounts in Brazil, to pay their property bills, you will not see a great explosion in foreign ownership. This is probably in Brazil's best interests.

 

[robh]

Hmmmm, until foreigners are allowed bank accounts in Brazil, to pay their property bills, you will not see a great explosion in foreign ownership. This is probably in Brazil's best interests.

Moneycorp will get you a bank account.

 

[brackenhoe]

Hi Rob, best news all day........ definitely owe you a drink!!!

 

[mrvibe]

Hmmmm, until foreigners are allowed bank accounts in Brazil, to pay their property bills, you will not see a great explosion in foreign ownership. This is probably in Brazil's best interests.

I am a foreigner living in Brazil and I have a bank account and I know other foreigners not living here who have bank accounts. It's not easy to open one, but it's not impossible.

Cheers,
_________________________
NS

 

[brackenhoe]

Thanks Mr Vibe....Don't tell me I owe you a drink as well!!

 

[mrvibe]

Thanks Mr Vibe....Don't tell me I owe you a drink as well!!

A beer would be nice, I will take one later down at the beach.

If you're interested, I managed to open a bank account (Itaú) because I am married to a brazilian girl and have applied to a permanent visa. But I do know someone who doesn't live here and has a bank account in Banco do Brasil, not sure how she got it. Anyway, I guess it1s the same kind of procedure everywhere, when I was studying in the Uk, I could only open an account with a statement from the university saying I was studying there. And it was mandatory to open one, don't remember why, but I only opened because it was mandatory.

There's another thread on this topic:
http://www.propertyforum.com/forum/brazil-property/2790-brazil-opening-bank-account-brazil.html

Cheers,

NS
_________________________

Nobreza Empreendimentos Imobiliários - Your dream house in a paradisiac Ceara beach.

 

[Dotty]

Bank loans are a long way off ,despite what sales pitch goes on P.C . Infact almost all large projects that were planned aimed at the foreign market,sadly went under in Rio Grande Norte and I do not think that people will be rushing to buy here as it's not overseas buyer friendly and plenty of people got the fingers burnt with over ambitious projects.

Hmmmm, until foreigners are allowed bank accounts in Brazil, to pay their property bills, you will not see a great explosion in foreign ownership. This is probably in Brazil's best interests.

 

[JMBroad]

Bank loans are a long way off ,despite what sales pitch goes on P.C . Infact almost all large projects that were planned aimed at the foreign market,sadly went under in Rio Grande Norte and I do not think that people will be rushing to buy here as it's not overseas buyer friendly and plenty of people got the fingers burnt with over ambitious projects.

Depends what we define "overseas buyer friendly". The process may be more complicated but I think it's clear that the returns and safety of your investment (assuming you buy the right thing) are much more "buyer friendly" than most other places in the world today.

 

[robh]

Bank loans are a long way off ,despite what sales pitch goes on P.C . Infact almost all large projects that were planned aimed at the foreign market,sadly went under in Rio Grande Norte and I do not think that people will be rushing to buy here as it's not overseas buyer friendly and plenty of people got the fingers burnt with over ambitious projects.

Why isn't Brazil "overseas buyer friendly"? Brazil is one of the fairly limited number of countries that allow foreigners the exact same rights and freedoms as the locals when buying property.

 

[robh]

Brazil real estate credit market sees 75% rise in demand : Brazil Property News

 

[Dotty]

Commission friendly is one thing ,but when it come to an overseas buyer having the same rights as a local buyer is complete tipple!An overeas buyer cannot open a bank account which is a must for any investor all over the world,without it makes life extremely complicated when it comes to paying bills,receiving rent etc as for applying for a CPF that's simple,but what can you use that for without a VISA??They generally work together in this part of the world.

I imagine if anybodies interesting in buying along the coasts can probably get a 30% discount.There are 1000's of properties for sale . Tabatinga has a batch of houses in a swamp but you'd obviously need a boat to get to them .I'm sure the owners will except 70% discount!!The projects along Buzios, Tabatinga and further afield have seriously destroyed the ambience .The roads no longer have places for the water to run and Prefitura Nisa Floresta have been absolutely hopeless at taking care of the environment .

Figures from overseas investing here has gone down dramatically and I am not surprised at all .

 

[robh]

Commission friendly is one thing ,but when it come to an overseas buyer having the same rights as a local buyer is complete tipple!An overeas buyer cannot open a bank account which is a must for any investor all over the world,without it makes life extremely complicated when it comes to paying bills,receiving rent etc as for applying for a CPF that's simple,but what can you use that for without a VISA??They generally work together in this part of the world.

I imagine if anybodies interesting in buying along the coasts can probably get a 30% discount.There are 1000's of properties for sale . Tabatinga has a batch of houses in a swamp but you'd obviously need a boat to get to them .I'm sure the owners will except 70% discount!!The projects along Buzios, Tabatinga and further afield have seriously destroyed the ambience .The roads no longer have places for the water to run and Prefitura Nisa Floresta have been absolutely hopeless at taking care of the environment .

Figures from overseas investing here has gone down dramatically and I am not surprised at all .

You can get an account these days through moneycorp. If you use a property management company then an account isn't necessary. So what other things does an overseas buyer not have?

What ambience did Buzios and Tabatinga ever have?