In 2008, when countries like USA and UK were going through a credit crunch, Brazil was starting to show prosperity, with GDP growth of 60%. The economy was doing well and so was the property market, between 2008 and 2011 the real estate valuation increased 20%. Large numbers of mortgages were being approved and continued to increase for the next several years. There was low unemployment of 7.9% in 2008, which decreased further to 5.5% in 2012. Customer confidence and higher demand was followed by increased property value – 121% between 2008 and 2011.
Then, in 2015, the economy in Brazil began to weaken. Inflation reached 10.7% in January 2016 and less credit was available. Together, the country was going through a political crisis, which hasn’t really let up. Current ex-President Dilma Rousseff was suffering political pressure, and members of her party have been investigated and arrested for corruption. After the impeachment process, her Vice President took over the country, although political instability remained strong. Despite the current economic doubt, inflation began to show more manageable rates, with the most recent recorded as 8.7%. The online news of the popular Brazilian G1 website showed the variations of property finance in Brazil starting from the period of the well-known credit crunch and property crisis of 2008:
- 2008 – Growth of the property market post-crisis
- 2010 – Property market begins to enhance
- 2011 – BRL 79 billion (approx USD 24.2 billion) in property finance
- 2012 – BRL 82.8 billion (approx USD 25.4 billion) in property finance
- 2013 – BRL 109.2 billion (approx USD 33.5 billion) in property finance
- 2014 – BRL 113 billion (approx USD 34.6 billion) in property finance
- 2015 – Economic instability – property finance 33% lower (BRL 75.6 billion, approx USD 23.2 billion), and property prices drop
- 2016 – Unstable economy
The 2014 FiFA World Cup brought a lot of investment and improvement to the cities where matches were held – BRL 25.6 billion, according to the initial plan. However, the people were unhappy with the way improvements were conducted. There were major delays and a lack of organisation. Then came the Olympic Games in Rio de Janeiro, which seemed far better organised than the World Cup of 2014 despite the negative speculations and some corruption scandals, including Rio’s Mayor.
The majestic Games brought to Rio promises, dreams, and hopes of growth and progress, not only to the city, but also to the country. From the announcement that Rio de Janeiro would host the Olympics, property prices increased on average 200% over this period, according to Secovi-Rio (official organization for research and real estate indicators). Since then, Rio has received investments from public and private sectors with the hope to rouse the city into more cosmopolitan living. The event cost BRL 38.26 billion.
Many necessary improvements in the city were made and there were huge property investments. In addition, investments in infra-structure were also vital in order to ensure the success of the Games. Until recent years, Rio’s commercial hubs were only in the centre and southern area of the city, making displacement almost always necessary for most of the population.
After the announcement of the Games, it was decided that many areas of the city would be utilized for the event. Therefore, the creation of business links were required between different centres of the city, improving urban mobility for the whole Rio. The property market was key in this process, since it became attractive to have a business in other regions of the city, turning these areas into new property hot spots with more shops and hospitality businesses. For instance: the number of hotel rooms, flats and bed and breakfasts have increased 10 times since 2009.
In 2017, Rio will definitely be better prepared to serve new businesses, conventions, tourists and local people. The city is changing and renewing its style and confidence, while continuing to evolve and develop itself. These changes are already visible. The economic and political instability will probably frighten the less experienced and impatient. Nevertheless, 2016 and 2017 are the years to be investing in properties, not only in Rio de Janeiro, but in all major cities throughout Brazil. There are many excellent bargains available, especially for cash buyers, considering the 14.25% interest rates and shortage in mortgage products. Some property owners are already showing doubts and uncertainty since the political crisis started. Many properties are for sale, but are taking too long to be sold. Eager sellers and favourable deals make this the best time to lock down your Brazilian investment.
Text by Giovana Southey
This story was first published in Palace