Owning a property in a paradise oasis is a dream come true for many, a getaway amidst a panoramic setting with a wonderful climate. Brazil ticks all the right boxes for such a destination, with strong political and economic developments Brazil seems to be a rather appealing location for investments. However, this does not necessarily mean that the evident appeal to purchase a high-end property in Brazil is that straight forward.
A recent report carried out by global rating agency Fitch Ratings, demonstrates that property prices in Brazil are relatively high, above all in metropolitan areas.
The real estate analysis explains that between 2008 and 2011 property prices have doubled in an economic-social context, which has seen an increase in income of only 15%. The increase in prices is a consequence of the great credit growth which has led to a frenetic loss in interest tax. Furthermore, a greater availability of saving deposits has been verified, with which loans are financed.
In addition to such a financial context, Brazil has a general shortage of premium properties. Consequently, leading to an imbalance of resources for the growing requests.
Furthermore, Fitch underlines the question of mortgage taxes, currently with a historic minimum of below 9%. Mortgage loans are mostly financed by saving deposits and workers funds (alleged FGTS). According to the Brazilian Housing Finance System (SFH), the banks are obliged to direct a part of saving deposits towards mortgages and other activities of this kind.
The growing tax for mortgage loans seem untenable , and despite a probable slowdown in growth, they will however remain double the amount.
Fitch concludes that it is very probable that the increase of salaries and loans, along with a tendency of a rise in interest tax will reduce the level of payment in 2014.