Brazilian housing market is recovering

Lalaine C. Delmendo | September 30, 2020

By end-September 2020, Brazil’s confirmed Covid-19 cases had climbed to about 4.78 million. With more than 143,000 deaths, the coronavirus pandemic has killed more people in Brazil than anywhere else outside the US. Yet Brazil’s housing market is showing signs of improvement.

Brazil house prices

In August 2020, Brazil’s FIPEZAP house price index rose by 1.45% from the previous year, its 19th consecutive month of y-o-y growth and its best performance since November 2015. However when adjusted for inflation, nationwide house prices remain 0.97% down during the year to August 2020.

During the year to August 2020:

  • In Sao Paulo house prices rose by an average of 2.83%, the biggest y-o-y rise in almost five years. However when adjusted for inflation, that translates to a minuscule 0.39% rise.
  • In Rio de Janeiro, house prices fell by 0.73% (-3.09% inflation-adjusted), the smallest y-o-y nominal price decline since October 2015.

Demand is rising thanks to historic-low interest rates, after slumping due to the COVID-19 pandemic. In July 2020, Sao Paulo State Housing Union (Secovi-SP) recorded 4,341 new residential units sold in the city of Sao Paulo, up by 32.3% from a year earlier.

Coronavirus-related restrictions have caused residential launches in São Paulo to plummet 44.4% y-o-y, in sharp contrast to huge annual rise of 49.6% in 2019, according Secovi-SP.

In 2019, the Brazilian economy grew by 1.1% from a year earlier, following expansions of 1.3% in both 2017 and 2018 and declines of 3.3% in 2016 and 3.6% in 2015. The government projects a GDP contraction of 4.7% this year, the biggest decline in more than a century.

Foreign individuals and nonresidents may invest in urban and rural properties in Brazil through direct ownership from abroad, or through resident companies or partnerships. To be able to buy a property, a tax registration number from the Cadastro de Pessoa Fisica (CPF) is required.

However there are restrictions on investments in rural properties. Foreign individuals who intend to migrate to Brazil may acquire rural properties directly from abroad only if they come to live in Brazil within three years from the date of acquisition. In addition, rural properties acquired by foreign companies must be destined for the implementation of agricultural, industrial or settlement projects and these activities must be related to the companies’ purposes.

The cities are stirring

During the year to August 2020, Florianópolis saw the highest nominal house price rise out of 16 large towns at 5.82% (3.3% inflation-adjusted), followed by Curitiba (4.65%), Belo Horizonte (3.84%), Vitória (3.49%), Campo Grande (3.36%), Salvador (3.1%) and São Paulo (2.83%).

Minimal house price increases were seen in Porto Alegre (1.74%), Brasilia (14%), Manaus (1.38%), João Pessoa (1.35%), Maceió (0.59%), and Goiânia (0.43%).

In contrast, Fortaleza saw the sharpest house price decline of 7.25% y-o-y in August 2020 (-9.46% inflation-adjusted), followed by Recife (-4.82%) and Rio de Janeiro (-0.73%).

Brazil house price indices

However when adjusted for inflation, 9 out of the 16 large towns actually saw falling house prices during the year to August 2020.


  2012-2017 2018 (y-o-y) 2019 (y-o-y) August 2020 (y-o-y)
FipeZap HPI 23.02 -0.21 0.00 1.45
São Paulo 27.60 1.79 2.26 2.83
Rio de Janeiro 14.37 -3.59 -2.25 -0.73
Belo Horizonte 30.56 -0.23 -0.74 3.84
Brasília -1.62 -0.86 -1.12 1.40
Salvador 23.34 0.42 1.08 3.10
Fortaleza 27.30 -2.25 -8.07 -7.25
Porto Alegre 26.28 -1.16 0.12 1.74
Curitiba 48.84 3.39 -2.66 4.65
Florianópolis 44.90 1.10 3.31 5.82
Vitória 45.50 2.46 3.57 3.49
Goiânia - 2.50 0.73 0.43
João Pessoa - - -4.46 1.35
Campo Grande - - -1.40 3.36
Maceió - - 0.54 0.59
Manaus - - 3.61 1.38
Recife 20.80 0.14 -1.54 -4.82
Sources: FIPE, Global Property Guide

Real estate sales and launches weaken

July 2020 figures indicate that residential demand is returning, with sales surging by 45.5% from the previous month and by 32.2% from a year earlier.

However launches have been weak. Cyrela Brazil Realty SA, one of Brazil’s largest developers, reported that they launched only 1,634 units in Q2 2020, down 68.2% from a year ago. Likewise, the total value of launches also plunged 81.1% y-o-y to just BRL395 million (US$75.4 million). Over the same period, Cyrela’s total number and value of sales also fell by 42.6% and 58.3%, respectively.

“The second quarter of 2020 was marked by the global adherence to social isolation amid the coronavirus pandemic (COVID-19), which seriously affected the performance of both the Brazilian and the global economy,” noted the Cyrela report.

Brazil sales launches sao paolo

“Even though the pace of our construction works did not slow significantly, sales fell sharply, especially in April. As a result, we postponed most of the launches scheduled for 2Q20. However, the real estate industry recovered well in June, driven by interest rates at all-time lows and the partial reopening of the economy, combined with good inventory sales and the launch of Living Ipiranga.”

Looking back: the amazing Lula housing boom

During the boom house prices in São Paulo rose by an amazing 223.8% from January 2008 to June 2015 (106.3% inflation-adjusted), and in Rio de Janeiro by an even more spectacular 266.1% (133.3% inflation-adjusted).

In 2014, nominal house prices started to grow in single digits, ending the year with a 6.7% growth (0.3% inflation-adjusted). Since 2015 national house prices have been falling in real terms.

Property had by then become increasingly unaffordable due to the surge in house prices, leading many Brazilians to rent rather than own. "In the major cities young professionals are struggling to afford the kind of prices now being asked for properties in good areas," according to Colordarcy.

This house price boom was hardly a "bubble". "A bubble means a lot of increases in prices for nothing," says professor Fabio Gallo. This was not the situation in Brazil. "You had real reasons for the expansion of the prices in Brazil."

The 2007 discovery of enormous oil fields deep beneath a layer of salt in the Atlantic seabed boosted the energy industry’s demand for residential and office space. Demand continued to surge following the 2009 announcement that Rio de Janeiro would host the 2016 Olympic Games.

Rapid development of the mortgage market followed legal reforms to streamline the foreclosure process. Plus, interest rates were progressively cut from 26% to 7.25% between 2003 and 2012. The rapid growth of the middle class was another important factor. All of these elements contributed to the house price boom.

The crisis and its aftermath – how Bolsonaro came to power

Brazil’s decade-long troubles began with the global recession in 2008. To boost the economy, the Central Bank of Brazil slashed the benchmark SELIC rate from 13.75% in December 2008 to 8.75% by July 2009.

Brazil was swamped with consumer credit, and there was a surge in inflation. Even so GDP growth fell to 1.9% in 2012, 3% in 2013, and 0.5% in 2014.

In June 2013 riots exploded, precipitated by a BRL0.20 (USD0.10) rise in public transport fares, and complaints about excessive spending on mega-sporting events. Brazil is not a poor country. But tax rates are extremely high, yet many Brazilians spend up to four hours per day in traffic jams, either in their cars or on crowded public transport. The protests were an outburst of popular frustration at corruption - a protest against an intolerable situation.

Alarmed at the inflation the central bank raised the benchmark interest rate nine times from 7.25% in March 2013 to 14.25% in 2015, the highest level for almost six years.

Brazil gdp per capita

GDP per capita fell 31.1% between 2011 and 2018, to US$9,126, according to the IMF.  Then came a corruption scandal involving oil giant Petrobras and the country’s largest engineering and construction firms. The investigation has implicated politicians, mostly from President Rousseff’s Workers’ Party.

Protests in the streets escalated, worsening the country’s already ailing economy. In August 2016 Rousseff was removed from office and Michel Temer was sworn in as Brazil’s new president.

Michel Temer implemented painful reform measures but corruption controversies led him to become even more unpopular. After his term of office ended in December 2018, Temer was arrested in March 2019 on corruption and money laundering charges.  Worse, the massive bribery scandal involving Brazilian construction giant Odebrecht exploded.  Odebrecht was behind the construction of venues for the 2014 World Cup, the 2016 Olympics, the metro systems in Caracas, and other huge infrastructure projects.

The crisis helped right-wing candidate and retired army officer Jair Bolsonaro sweep to victory during the October 2018 presidential election on a populist, anticorruption platform.

Bolsonaro supports privatization of public-owned enterprises, public spending cuts and lower taxes, but has very worrying anti-environmentalist and anti-human rights views. Yet almost two years into his presidency and not much has changed. Congress has blocked most of his plans and his Cabinet is in disarray.

In November 2019, Bolsonaro launched a new political party, the Alliance for Brazil (APB), after his relationship with the right-wing Social Liberal Party (PSL) collapsed as they fought for control over its large campaign funds. PSL had emerged from obscurity last year to become the second largest party in Brazil´s Congress after Bolsonaro made it the vehicle for his presidential run.

Now, the country is in a fierce political battle over the COVID-19 pandemic, with Bolsonaro urging state governors to lift preventive lockdowns arguing that the economic damage far outweighs the public health risks.

Brazil, by some measures, is the new epicentre of the outbreak, registering higher daily averages than in any other part of the world.  Yet the central bank has reduced interest rates to rescue the economy. As always that tends to mean higher property prices – and that’s what is happening in Brazil.

BCB cuts benchmark rate to a new record low of 2%

Banco Central do Brasil’s (BCB) Monetary Policy Committee unanimously decided to lower the Selic rate to a new historic-low of 2% in August 2020, the fifth consecutive rate cut this year.

This is in line with underlying inflation, which remains well below the central bank’s target of 4%. In August 2020, inflation stood at 2.44%. The BCB expects inflation to be at a record low of 1.6% this year.

Brazil interest rate

The record-low interest rates are hoped to have a significant effect in the housing market. Brazil’s original housing boom was mainly propelled by a decline in interest rates, as successful economic reforms under President Lula da Silva pushed Brazil’s central bank benchmark rate from nearly 30% in 1998, to 8.65% in August 2009.

Real estate credit rising rapidly

Loans for real estate acquisition and construction rose by 34% y-o-y in July 2020 to BRL 54.17 billion (US$ 10.27 billion), following strong growth of 37% in 2019 and 33% in 2018, according to the Brazilian Association of Real Estate Loans and Savings Companies (ABECIP).

Pro-market reforms under former President Lula da Silva greatly helped boost mortgage lending, which rose by at least 25% per year between 2007 and 2014.

The first big breakthrough was the introduction of fiduciary alienation, whereby the buyer becomes the owner of the property only after it has been fully paid. This gives banks security if buyers default (in the past, banks were reluctant to lend, because Brazilian courts are biased in favour of borrowers).

In 2015, mortgage lending slowed sharply, and in 2016 the ABECIP saw a 38.3% y-o-y decline, amidst the ongoing political turmoil in the country. The decline continued in 2017, with the real estate credit falling by 7.4% y-o-y.

Outstanding home loans still represent only 10% of the country’s gross domestic product, according to Hofinet.

Rental yields are low to moderate

Gross rental yields - what you can earn from an apartment before tax and other expenses - have continued to move down in Brazil’s big cities, and in most parts of Sao Paolo and Rio de Janeiro being a landlord generates a much less attractive return-on-investment than a few years ago.

In Rio de Janeiro, yields are quite low, ranging from 2.98% to 3.79%. In Sao Paolo, apartment yields are rather higher, between 4.67% and 6.05%, based on a research conduced by Global Property Guide.

My Home, My Life housing program

The housing program Minha Casa Minha Vida (My House, My Life) continues to buoy Brazil’s housing market despite the coronavirus crisis.

“Sales under the “Minha Casa, Minha Vida” Program were the main highlight during the quarter (Q2 2020), once again showing the resilience of the low-income segment during economic crises,” said Cyrela.

The Minha Casa Minha Vida program, launched in March 2009, was one of the popular federal government programs introduced during former President Lula da Silva’s 8-year term. Under the program, subsidized mortgage loans were extended to middle and lower income homebuyers through the state-owned bank, Caixa Economica Federal (CEF). By August 2012, one million houses had been built. Former President Dilma Rousseff announced that by 2014 her administration would have contracted 2.4 million houses.

However in mid-2015, construction was paralyzed due to lack of public funds. Then in May 2016, the program was temporarily suspended. In June 2016, it became a target for spending cuts as the country wrestled with ballooning budget deficit and deep recession.

In February 2017, new rules were implemented for Minha Casa Minha Vida program, which could stimulate construction and increase the number of the program’s beneficiaries.

  • the maximum income to qualify for the program was increased from BRL 6,500 (US$ 1,241), to BRL 9,000 (US$ 1,719);
  • the maximum value of unit that can be availed through the program was increased from BRL 225,000 (US$ 42,964), to BRL 240,000 (US$45,828).

Another set of rules was published by the Ministry of Cities towards the end of 2018. The changes were mostly on the subsidy rules of the Minha Casa Minha Vida (MCMV) program.

  • Individual subsidies granted in acquiring a house for a family with incomes up to BRL 2,600 will be reduced. This allows the MCMV program to allocate some more funds to the band 2, but at the expense of the band 1.5.
  • The monthly family income limit required to receive the maximum subsidy of BRL 47,500 was reduced from BRL 1,600 to BRL 1,200.
  • For the monthly income range of around BRL 1,600, the maximum subsidy is now at BRL 29,000.
  • Families with only one participant in the financing and without dependents, will only be entitled to 50% of the subsidy of their income range, down from the previous 70% share. This prevents unmarried beneficiaries in getting the same subsidy amount as those families with many children, as well as those financially stable couples in obtaining two allowances.
  • From a 100% allocation, companies can now only allocate a maximum of 50% of the properties of a development for the 1.5 range/band. The other half of the development´s properties should be directed to trade in the upper bands.


Property Type Income Bracket Interest Rates
New (Band 1.5) up to BRL 2,600 5%
New or used (Band 2) up to BRL 2,600 5.50%
New or used (Band 2) up to BRL 3,000 6%
New or used (Band 2) up to BRL 4,000 7%
New or used (Band 3) up to BRL 7,000 8.16%
Source: Click Habitação (

Brazilian Real falls to all-time low

Brazil’s economy had improved a little over the past three years, with real GDP growing by an annual average of 1.3%. However the outlook is now uncertain, as the pandemic has caused economic activity to plunge in recent months.

Brazil gdp inflation

In Q2 2020, the Brazilian economy shrank by 9.7% q-o-q, the steepest on record, following a decline of 2.5% in Q1.

During the year to Q2 2020:

  • Industry fell by 12.3%
  • Services fell by 9.7%
  • Fixed investment was down by 15.4%
  • Household consumption dropped 12.5%
  • Government spending fell by 8.8%

The government projects a GDP contraction of 4.7% this year, the country’s biggest decline in more than a century.

In Q2 2020, nationwide unemployment surged to 13.3%, up from 12.2% in the previous quarter and the highest level in three years.

Brazil exchange rate

In August 2020, the Brazilian Real (BRL) depreciated to an all-time low of BRL 5.4678 per US dollar, losing more than 26% of its value against the dollar from a year ago, amidst the coronavirus-fuelled economic crisis.


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