Where residential property is still hot - and getting hotter
Brazil
The Economist observes:
“… domestic growth is becoming the important emerging-market story: hundreds of millions of people are earning enough to let them rapidly accumulate higher-value consumer goods, from cars to computers. There may be no clearer example of this than the Brazilian residential property market…
http://www.economist.com/daily/columns/businessview/displayStory.cfm?story_id=12079717
Comment: At this very moment I am writng from Aracaju, a North-Eastern Brazilian town of 550 thousend inhabitants. All over this place apartment blocks are on the rise. The median price for a new three to four quarters apartment has already risen to around 300 thousand Brazilian reais. This is way too expensive for the average middle class salaries and absurd in the face of the exorbitant level of interest rates. Yet ordinary folks buy residential property as if there were never a pay-back day. The belief is wide-spread that the “value” of “investment” in residential real estate would double in the next few years as it did double in price in the past couple of years. With unemployment falling, there is also the expectation that income would rise drastically in the years to come.
The boom may go on for a few more years. Yet Brazilians better watch closely what is happening in the US to get a foretaste of what is in for their own housing market.
The Economist is cautious: ”… after decades of struggling with a bad government, weak currency, high interest rates and the absence of intelligent debt, “Brazil has crossed over. It can’t go back.” We have heard this before. Fingers crossed that this time will be different.”
One sign that it is not different this time is at the very moment when the fiscal situation of the central government began to improve, the government has announced ambitious plans for the expansion of the public sector and decided that over the next few years public servants can count on high salary increases. Even if not yet a drop is in sight of the recently discovered oil field at off-shore at the Brazilian coast, the government has already made up plans of how to spend the new money “for the people.”
Antony Mueller