Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Dow Trend Forecast Current State - 22nd Apr 21
Gold Rebounds Amid Positive Economic Reports - 22nd Apr 21
China's record first quarter fuels strong expansion in 2021 - 22nd Apr 21
Gold Price Next Key Level - 22nd Apr 21
Here's What to Look For When Hiring a Real Estate Agent - 22nd Apr 21
Ethereum EIP 1559 and Raven Coin - 21st Apr 21
Gold, USDX: The Board is Set, the Pieces are Moving - 21st Apr 21
World Economies Need to Find a Lot More COPPER! - 21st Apr 21
DogeCoin CRASH! Time to Start Mining BOODGIE Coin! Crypto Mania 2021 - 21st Apr 21
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Brazil's Housing Carnival Stokes Bubble Worries

Housing-Market / Brazil Mar 28, 2011 - 08:20 AM GMT

By: Trader_Mark

Housing-Market

Best Financial Markets Analysis ArticleAre we in the early to mid stages of a bubble forming in Brazilian real estate?   Who can tell - with the global liquidity tsunami gushing in every direction, there has to be other areas other than commodities where dislocations are forming.  I found this interesting piece while looking over the news for Brazilian homebuilder Gafisa (GFA). While the "mass" mortgage market is still relatively new in Brazil - hence a whole slew of new potential buyers can now enter the market - some of the anecdotes in this Reuters story are eerily similar to those in the U.S. circa 2005. 


Who can forget people who were camped out in developments in Las Vegas and Phoenix, just to put a bid down on an empty lot (which of course could be flipped within 2 weeks for a 30% premium).  There is also a massive push by the government to expand home ownership - hmmm, it's starting to all sound so familiar. I was surprised to hear about the cost of offices in Rio's business district - only trailing London, Hong Kong, and Tokyo?  More than Manhattan? Must be the beaches. ;)

Via Reuters:

  • Listening to Jose Carlos de Vasconcellos talk about Rio de Janeiro's property market is like being transported back to the bubble days in the United States or Europe.  The 60-year-old, who came out of retirement to join Brazil's swelling ranks of real estate brokers, is convinced that property in the beachside city (Rio) is a one-way bet despite a near doubling of house prices in just three years.
  • "I'm confident that the market isn't going to slow down any time soon," he said, taking a break from his afternoon class at a Rio school for real estate brokers. "I don't see any investment that's as good as property."
  • Burned property investors elsewhere may beg to differ, but Vasconcellos is typical of the blissful optimism that has infused Brazil's real estate market at a time when property in much of the developed world remains buried in sour debts.
  • Rio, boasting picture-postcard scenery and plans for big investments ahead of the soccer World Cup in 2014 and the Olympic Games two years later, is not alone in a Brazilian housing boom that is inevitably raising fears of an asset bubble in one of the world's hottest emerging markets.
  • Since early 2008 -- just as the credit crunch was biting in the developed world -- residential property prices in Rio have risen 99 percent with Sao Paulo not far behind on 81 percent, according to a newly launched index by Brazil's Fipe economic research institute. Brazil lacks an official gauge of national house prices, but there have been similar booms in other major cities, including the capital Brasilia and coastal cities in the northeast such as Recife and Salvador.
  • Americans and Europeans would recognize many of the symptoms of Brazil's property fever.  Apartment prices are popular dinner table -- and beach -- conversation in Rio, anecdotes of humble doormen and taxi drivers becoming real estate brokers are common, as are stories of people snapping up apartments without seeing them.
  • Rio's swankier addresses, such as beachside Leblon or Ipanema, are catching up with the eye-watering prices of Manhattan and central London with three-bedroom apartments changing hands for 2 million reais ($1.2 million) or more.
  • Rio's central business area has overtaken Manhattan's Midtown district to become the world's fourth most expensive city to rent office space, behind only Hong Kong, London and Tokyo, according to global real estate group Cushman & Wakefield.
  • Demand for places on training courses to become real estate brokers is booming. Just over 3,300 new brokers were registered in Rio state last year, a nearly ten-fold increase from 2005.  (reminds me of the statistic I read a few years back that 1 in 7 people in California had a brokers license)
  • Brazil's economy grew a sizzling 7.5 percent last year, driven by record-high employment and confident consumers who are swelling the middle class and eager to get a foot on the housing ladder, often with the help of credit.  Millions had for long been locked out of owning property because of a lack of financing, but the mortgage market is now growing rapidlyon the back of unprecedented economic stability, bringing home ownership into reach.
  • With a national housing deficit estimated at more than 7 million units, there is plenty of pent-up demand.
  • ......backed by a $41 billion government low-income housing program.
  • Mortgage debt in Brazil is indeed relatively low, standing at about 4 percent of GDP compared to about 15 percent in China in 2009, and much higher levels in developed economies
  • Brazilian banks have stricter standards too, generally lending no more than 80 percent of a property's value.  High mortgage rates also act as a sobering force, although they are now low by Brazil's historical standards. ...... offers 30-year home loans at a 13 percent fixed annual interest rate, almost triple the current rates in the United States.
  • Mortgage debt may be low, skeptics say, but the overall consumer debt burden has been growing fast when taking into account credit cards and installment payments that carry average annual interest rates of around 30 percent.
  • The explosion of credit in recent years has raised concern that Brazil is nurturing a new breed of sub-prime consumers who are not financially astute enough to manage their debts and who could default as the economy cools and interest rates rise.  "It's like putting someone who has never eaten in front of a banquet. They will get ill from eating too much," said Heitor Mello Peixoto, the head of eyesonfuture, a Sao Paulo business consultancy.
  • Matos has noticed that more of his apartments are being bought by investors these days, accounting for 40-45 percent of sales, rather than by families who want a permanent home.
Here is where it gets interesting....while mortgage debt is tiny in relative terms to other countries, household debt has surged.  This in a society where all forms of credit are relatively new.
  • Household debt costs stand at around 22 percent of income in Brazil, according to Sao Paulo consultancy LCA Consultores, compared to 15 percent in the United States at the end 2010.

One wonders if there is going to be a post World Cup / Olympics hangover.  This certainly happened in China in 2008.  Something to keep an eye on the next few years.

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

© 2011 Copyright Fund My Mutual Fund - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules