Access to credit is the biggest barrier to buying a property, study shows

The intention to buy a home is on a downward trend in Brazil, according to a study by Brain Inteligencia Estratégica in partnership with Abrainc (Brazilian Association of Real Estate Developers). The survey heard 1,200 people between November 10th and 25th.

Despite registering positive results this year, the sector feels the consumer’s difficulty in obtaining credit. Half of respondents would anticipate the decision to buy a property if they had access to financing.

However, the ease of obtaining credit is not the same thing as the cost of credit. This is what Fábio Tadeu Araújo, managing partner of Brain Inteligencia Estratégica, says.

“And where can developers move? Instead of demanding 40% during the work, they could demand 35%, for example. If there is no way to increase the buyer’s salary, they can facilitate the way for him to acquire the property.”

In about a year, the basic interest rate jumped from 2% to the current 13.75% in an attempt to contain inflation. The surge drove many away from financing and reduced savings deposits. It is with this money that banks finance the most used real estate credit.

Between January and October of this year, the net inflow of savings was negative at R$ 82.2 billion.

The result was a 12% drop in the volume of financing (R$ 151.2 billion) and a 16% drop in the number of financed properties (619 thousand) compared to the same period last year, according to Abecip (Brazilian Association of Entities Mortgage Credit and Savings).

Despite the pressure, property sales remained strong in 2022, mainly thanks to subsidies in the Casa Verde e Amarela housing program —which should be renamed Minha Casa, Minha Vida in the third Lula administration.

“We’ve just gone through a period [2020-2021] which was the largest purchase and sale of real estate. That’s why any comparison you make seems bad, but it’s from the market”, says Araújo.

“In the first nine months of this year, the effective sale of new houses and apartments grew by 0.4%, because, in the case of new ones, the interest rate does not impact immediately.”

Renée Garofalo, development director at Plano&Plano, is betting on the country’s “giant housing demand” for a 2023 of positive results for the sector.

“Regardless of the government, there will be no change in the housing project, because it is one of the most important and iconic in the world. In the last six years, more than 25,000 families have had new homes through the CVA [Programa Casa Verde e Amarela] at Plano&Plano”, says Renee.

The sector is also waiting for a greater use of FGTS resources (guarantee fund) in financing installments for the next year. The purchase of a home is one of the possibilities for withdrawal from the worker’s fund.

“The FGTS Futuro is a very significant measure, especially for families with a gross monthly income of, at most, R$ 2,400. In addition to increasing purchasing power, these customers will be able to pay a higher monthly installment, promoting sales growth”, he says. Fernando Perobeli, institutional director of Árbore Engenharia.

“Demand continues to exist in all segments, but there is a scenario of insecurity, and people who are going to make the biggest purchase of their lives need to feel safe”, says Gabriel Mauad, partner of the Rio de Janeiro construction company that bears his surname.

“Let’s see what will happen in the first half of next year. Until then, we are focusing on high income, which does not depend on financing.”

If in the economic aspect the ease of credit can be the trigger to look for a new property, having more space and comfort is what leads Brazilians to close the purchase. Brain research indicates that a happier and more fulfilled person tends to close the deal more quickly.

Among those planning to purchase a property, the most desired are residential (87%). The survey shows that quitting renting is motivation for 33% of buyers, while 20% want more space.

Rent burdened Brazilians with rising interest rates and inflation. According to data from Serasa, the number of defaulters grew again for the ninth consecutive month in September and reached 68.39 million people.

For market analyst Max Mustrangi, record defaults and indebtedness bring a bad outlook, especially for real estate startups.

“The economic crisis has set in, and not only here. In recent years, there has been a lot of liquidity, but now there is indebtedness. You have to negotiate, stretch your cash, dry revenues to resist”, he says.

Residential properties account for 93% of all properties sold this year, and nearly half of them are apartments. However, the object of desire for most are houses, on the street or in a closed condominium.

“The apartment market is very well structured and financing comes out faster. Land prices and zoning laws make it difficult to build houses in large cities”, explains Araújo, from Brain.

“If there is no offer of new houses, the used ones are very bad and the entry of financing is greater for ready-made products.”

The director of Plano&Plano points out: families buy what fits in their pockets. “They want a house to have a bigger space, put a plant. That’s why our projects today have a barbecue, pet places, a swimming pool on the top of the building.”

“Playground is no longer important, but investing in living areas and balconies proved to be important for the real estate market after the pandemic”, says Renée.