BRAZIL Trends and Developments Contributed by: Ivandro Ristum Trevelim, Rafael Jordão Bussière and Fabio Perrone Campos Mello, Campos Mello Advogados
Overview The outlook for the real estate market in 2024 is more positive than the scenario that was unfold - ing in 2023. At the beginning of last year, the country was dealing with the pressure of inflation and high interest rates, which directly impact the purchas - ing power of the population and the financing. Nevertheless, the market did not perform poor - ly. According to Abrainc (Brazilian Association of Real Estate Developers), the number of real properties sold between January and September 2023 was 22% higher than in the same period the previous year. At present, the scenario is more conducive to a heating up of the Brazilian real estate market in 2024, notably due to the following factors. Prospects for interest rate reduction The basic interest rate (Selic) is the main refer - ence for the cost of loans and financing in the country. In general, when it rises, lending money becomes more expensive, which ends up dis - couraging the economy as a whole. However, this is a mechanism to curb inflation when prices are rising rapidly. As inflation pressure is decreasing (in 2023, IPCA (National Broad Consumer Price Index) stayed within the target, after two years of exceeding it), the Brazilian Central Bank has been lowering interest rates and indicates that it could continue in this direction. This benefits the real estate market in two ways: • stimulating the economy as a whole, which increases job creation and income; and
• allowing real estate financing with less restric - tive conditions and lower interest rates. Improvement of the economy as a whole In addition to the decline in interest rates, data and expectations of improvement in the overall economy also paint a promising scenario for the real estate market in 2024. Unemployment measured by IBGE (Brazilian Institute of Geography and Statistics), for exam - ple, stood at 7.5% in November 2023, the lowest figure since February 2015. Last year’s GDP growth prospects reached 3%, well above what was expected at the turn of the previous year. Not to mention that inflation closed below 5%, within the established target, which helps pre - serve the purchasing power of the customers. In this scenario, Brazilians want to buy more real properties. According to a survey by the consul - tancy Brain, 39% of people intend to purchase property in the country within two years. Government fostering In addition to the favourable scenario for the real estate market, there are government incentives for low-income families to acquire their own property, including: • the expansion of “Minha Casa, Minha Vida” (My House, My Life) programme (federal housing programme), with an increase in the values that qualify for the main subsidy bracket; • the approval of a budget of BRL117 billion for FGTS (Guarantee Fund for Length of Service) to finance housing for low-income families; and
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