More Financing for High-end Brazilian Property

Improved terms for mortgages in Brazil are pushing up demand for high-end investment opportunities. Brazil's richest are keener than ever to get into the Brazilian real estate market and invest in luxury properties.

Brazilian mortgages are no longer just an option for middle classes to get out of the rental trap - longer loan periods have opened up the mortgage market to Class A, the richest Brazilians. With home loans now available for over 20 years, high-income families are looking to buy luxury properties in Brazil with price tags in excess of R$2 million.

This new phenomena has arisen from Brazil's economic stability. In a country where GDP growth reached 7.5% last year and 3.5% is predicted this year, real estate investments are maturing and with them, the Brazilian mortgage market.

Finance Adds Up

Just a year ago, the average mortgage length for a Brazilian property was 18 years. This year, the loan period has risen to 23 years on the back of demand from investors in the real estate market who have discovered that taking out a mortgage makes big financial sense.

Buyers making large investment in Brazilian real estate can expect to obtain higher returns from their savings than their pay-out on mortgage interest. With the average interest rate on savings at around 11%, you can use this to pay off mortgage installments and make a profit.

This option isn't open to all Brazilians - few banks are prepared to offer low mortgage interest rates to anyone other than a high net worth customer. But among Brazil's Class A there are plenty of these and a preferential client can expect to get a mortgage at 9.5%, almost two points lower than the rate offered for savings.

Rise in Property Prices

Class A's enthusiasm for investment in luxury Brazilian property is pushing up demand for high-end real estate and with it, the price tags. As a result, properties in Brazil’s largest cities has seen spectacular rises over the last 18 months and prices for apartments and homes often stand at over R$1 million.

This tendency has been noticed by Bradesco Bank, quoted in a recent edition of the business weekly, Istoe Dinheiro. Bank figures show that in 2009, the share of clients who bought property priced at over R$500,000 was 25%. Last year, this rose to 30%.

For Bradesco, the new high-end purchaser fits several buyer criteria. Some Class A Brazilians are buying their first home, while others are purchasing a second or holiday home. A third group is adding investment in Brazil property to their portfolio.

For Obelisk International, this new trend in the Brazilian real estate market comes as no surprise. "Demand for property is universal," says Obelisk, "whatever the social background because Brazil has a shortage of homes across the board." He points out that demand is high at the lower end - partly being met by the Minha Casa Minha Vida programme - and at the top end, as the latest mortgage figures prove. "This confirms that investment in Brazilian property is an extraordinary opportunity for any investor," Mr Hardacre says.

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