January / February 2011 Brazil Real Estate & Land Investor NewsletterAs the country adjusts to a revitalised Workers Party cabinet, newly selected president of Brazil’s Central Bank – Alexandre Tombini – stated that he will not allow housing credit to reach a ‘bubble like proportions as was similar to many other nations of the world.’ President of the Brazilian Bank Federation Fábio Barbosa – whilst pointing to expectations of a 40 percent growth in housing credit in 2011 (after a 50 percent growth in 2010) – further stated there was very little chance of a bubble due to net mortgage finance levels forming just under 4 percent of GDP.
The country’s low cost housing sector confronted renewed waves of criticism. As a result of what was a horrific start to the new year, floods in the state of Rio de Janeiro killed over 800 and displaced 1000’s of families who lived in ramshackle buildings, often on irregular and highly prone land. The catastrophe has ignited serious political and economic debate with even the new President herself questioning: “when there aren’t housing policies, where are people who earn no more than twice the minimum wage going to live?” The ‘Minha Casa, Minha Vida’ housing programme also came under fire with one of the initial projects in Bahia receiving a torrent of negative press as a result of a range of problems emerging including arrears; abandoned apartments; squatting and illegal rental agreements / sales.
In other news, the BNDES (Brazil’s Development Bank) reported a 23 percent increase (by R$ 168.4 billion) in disbursements made when comparing 2010 to 2009 with a significant proportion allocated to spending on the development of industry (53 percent – including the growth of the country’s petroleum sector); infrastructure (31 percent) and commerce / services (16 percent).
January 2011 Factfile
This month’s factfile shows general stable growth patterns across all real estate related statistics analysed. As the SELIC rate of interest was raised to 11.25 percent – one of the highest in the world – Dilma Rousseff and Central Bank heads announced plans to implement a regime of further inflationary control measures. A survey of leading analysts conducted by the ‘Focus’ organisation nevertheless still expects consumer prices to increase to 5.53 percent by the close of 2011 (above the current 4.5 percent target level). The survey also estimated a slowdown in GDP growth to 4.5 percent in both 2011 and 2012 (compared to 7 percent in 2010). According to the Getulio Vargas Foundation (FGV), the National Index of Construction Cost (INCC-M) rose 0.37 percent in January 2011, after increasing by 0.59 percent in December last year. In the last 12 months, the index recorded an increase of 7.42 percent.