The new benchmark for the housing market in Brazil
April 16, 2012
Claudio Bernardes, President of Secovi-SP, said the industry is adjusting to new conditions and heading towards the level of sustainable development. “The great social function of the real estate market is to balance supply and demand, so as to achieve price stability," says Bernardes.
In evaluating the market, it is necessary to take the long view, which is examined in detail in a recent news story from Secovi-SP. It cites the 80s and 90s as the “lost decades” for Brazil's real estate industry. Except for housing programs at the end of the Figueiredo government, little of substance was done in housing production in the country during this time due to a lack of funding.
The situation began to change in 2002, with Central Bank funding for mortgages, and more so in 2004, which brought regulatory certainty for financial agents, companies and buyers. Since then, the housing market has experienced remarkable growth, related to increased purchasing power.
In 2004, loans made with funds from savings accounts in the Brazilian System of Savings and Loans (SBPE) totaled R $ 3 billion nationwide, corresponding to 54,000 units. In 2011 there was financing of $ 80 billion, equivalent to 493,000 homes, and the forecast for 2012 is nearly $ 104 billion.
This upward trend, which peaked, in 2010 is credited, in large part, to Brazil’s GDP which registered a rate of 7.6% this same year. Economic dynamism, higher incomes, confidence in the future, strong demand for housing, abundant financing and production were all factors in the success of the industry. These same factors would still have been effective in 2011 had it not been for the crisis shaking the global economy. While faring better than many, Brazil has not been immune to the slowdown internationally, as evidenced by the increase of only 2.7% of GDP.
The housing market in São Paulo—the country's largest—is also the most sensitive, and suffered a setback in three elements in the success factor: the economy slowed, confidence decreased and demand shrunk a bit. This affected the performance of the sector, which has now make the necessary adjustment to recover the balance right now with a view to sustained growth.
Although the market in 2011 exceeded the historical average levels, it underperformed compared to 2010. This is not necessarily a cause for concern, according to Secovi-SP. The industry is adjusting to new conditions and it is expected that the housing market will continue to show good results in 2012 and beyond.
By 2022, it is projected that 23 million new homes will be needed in the country; roughly 1.9 million homes per year. According to Secovi-SP, this means working to make government programs such as My Home, My Life, work for everyone, even in cities. It also calls for the proposal, advocacy and adoption of new models of urban occupation, without which it is impossible to enable enterprises and, therefore, balance supply and demand.