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Brazilian Property Market to Hold Strong in 2014

Brazilian property is not expected to see any great fall in price over the course of this year, despite the fact that political unrest remains a problem throughout the nation. It will be a bonus for investors in the nation, given that prices have been seeing falls ever since 2011. According to Fitch Ratings, the imbalance in supply and demand that is still inherent in Brazil will mean that the cooling off comes to an end this year, and prices are predicted to remain at a solid level throughout the year.

Other positives expected to keep the market relatively stronger than it has been recently throughout 2014 will be the fact that mortgage rates in Brazil still remain low, which has helped to take away the issue whereby many people are unable to afford homes. For many, property was only previously accessible through the long term options of 35 year funding, but lower rates should help to make it the case that more can afford to get onto the ladder.

It is a reality set to extend throughout this year, with Fitch Ratings reporting that interest rates should remain low. At the moment, they are at a historically-low level of just nine per cent, and it is expected that this will be the case for at least the next 11 months. Some 70 per cent of mortgages are funded by the government owned CEF, and Fitch said it does not expect the government will allow CEF to increase rates this year, mainly for political reasons.

“A precondition for the surge of mortgage lending since 2007 from extremely low levels was sufficient availability of savings deposits. However, year on year growth of outstanding mortgages was much faster, with an average of 41 per cent since 2009, against 16 per cent for savings deposits,” the report added. “If mortgage lending continued to grow at recent rates of around 30%, new and probably more expensive funding sources would become necessary in the near future. Savings deposit growth was relatively strong in 2013, but could start to decrease soon, with economic growth sluggish and salary increases expected to become smaller.”

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