Mortgages for Brazil Property Investment on the Horizon
Added: (Tue Oct 27 2009)
Pressbox (Press Release) -
Property investment in Brazil has just received a very welcome boost. According to official government sources, mortgages for foreigners buying real estate in Brazil are finally within months of becoming a reality.
Speaking to Property Wire at the OPP Property Investor Show held in London last week, Laercio de Souza, the general co-ordinator for investment promotion at the Brazilian Ministry of Tourism, said that negotiations are taking place at the highest levels to implement the necessary legislation to allow home loans for foreigners making investment in Brazil property. Mr de Souza is confident that these negotiations will come to fruition within the next 12 months.
Obtaining finance within Brazil to buy property is currently difficult for foreigners. Although some foreigners have been successful in finding a mortgage for their Brazil property, strict qualifying conditions and bank regulations mean that in practice, mortgages for foreigners are almost non-existent.
“Although in theory the Central Bank allows foreign investors to have access to finance, in practice it does not really happen,” Mr de Souza told Property Wire. “In some rare circumstances, for example when a foreign buyer already has an account with an international bank such as HSBC, it happens, but the system for people to get finance is not really in place.”
Conscious that this situation is holding back vital investment in Brazil, the Brazilian authorities are determined to change legislation. They are set to bring in modifications in financial law to facilitate mortgages for foreigners buying property in Brazil.
For Brazilians themselves, mortgages are a relatively new product and have only been in existence for around five years. But in spite of lack of mortgage tradition, Brazilians have embraced the concept of home loans. As credit terms and conditions become more familiar, more and more Brazilians are applying for mortgages for buy real estate in Brazil.
Home loans have taken off this year with record levels of mortgages approved – the government-owned Caixa Economica Federal bank expects to approve R$39 billion in mortgages by the end of this year. In 2005, the Caixa lent a mere R$5.1 billion for buying property.
At its October meeting, Brazil’s monetary policy committee (known as Copom), voted unanimously to maintain interest rates at the historically low rate of 8.75%. In its press release, Copom explained that this low rate is “consistent with a benign inflationary scenario, contributing to ensure the maintenance of inflation in line with the target path.”
Brazil’s Central Bank uses the inflation target as a guide to setting interest rates. Brazil’s target for inflation for 2009 and 2010 is 4.5%, with a margin of 2% (plus or minus). With year-on-year inflation in September coming in at 4.34%, Brazil is comfortably inside the government and Central Bank target.
At Obelisk, we welcome the news that mortgages for foreigners buying in Brazil are shortly to become available. Brazil already ranks among the world’s top emerging markets when it comes to value for money and investment potential. The availability of mortgages for foreigners making Brazil property investment will open up the market still further and undoubtedly add to weight to the theory that an unprecedented Brazil real estate boom is on the horizon.
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