NewHumble homes withstand 'perfect storm' in Brazil real estate
Homebuilders with a focus on the low-income segment are reporting strong sales as prices fall
Brazil's once red-hot housing market has turned cold quickly, forcing many developers to slam the brakes on new construction, though one corner of the industry is so far riding out the nation's worsening economic slump.
The Brazilian real estate market is witnessing a drastic reversal from four years ago, when an economic boom lifted millions into an expanded middle class and fuelled a home-buying frenzy that pushed prices up by as much as 30 per cent on an annual basis.
At the time, developers like Cyrela Brazil Realty and Rossi Residencial, flush with cash from recent initial public offerings, launched into a building binge of middle- and high-income housing to meet what they expected would be continuously growing demand.
"Now things are moving in the exact opposite direction," said Sao Paulo-based economist Eduardo Zylberstajn, who helps oversee the widely used FipeZap real estate price index.
Economic decline, stubborn inflation, rising mortgage rates and mounting unemployment have dragged consumer confidence to the lowest level on record, scaring many Brazilians out of plans to invest in real estate and sinking prices along the way.
"It's a perfect storm," said Itau BBA analyst Enrico Trotta, who also pointed out scarcer mortgage funding and the high number of apartments collecting dust following the industry's overly optimistic expansion.