No other country in the world beats Brazil when it comes to rising housing prices. This is according to the March 2013 Global Real Estate Index released by Knight Frank, an independent global property consultancy. Although they are not countries, only the cities of Hong Kong and Dubai have faster rising home prices than Brazil.
Housing prices in Brazil have risen 13.7% from the fourth quarter of 2011 through the fourth quarter of 2012. To put this real estate boom in perspective, the United States ranks 12th on the list with housing prices rising only 7.3% during the same period. At the bottom of the list of 55 countries is Greece with a staggering -13.2% drop in prices.
Here is how Knight Frank ranks the top 10:
1. Hong Kong – 23.6%
2. Dubai, UAE – 19.0%
3. Brazil – 13.7%
4. Turkey – 10.5%
5. Russia – 10.2%
6. Austria – 10.1%
7. Taiwan – 9.7%
8. China – 9.3%
9. India – 8.5%
10. Colombia – 8.3%
Contributions to the Steady Rise in Real Estate Prices
There are many factors that have contributed to the steady rise in real estate prices in Brazil. The easiest factor to identify is real estate speculation in anticipation of the FIFA World Cup in 2014 and the Olympics in 2016.
Other factors include a rapidly growing middle class that is taking advantage of low mortgage rates. Brazilians have traditionally purchased homes with cash. Recently, Brazilians have been buying homes with debt causing a 550% increase in mortgage lending since 2009. With mortgage rates as low as 1.3%, home ownership is well within reach of a much larger number of families.
The Real Estate Boom Is Here to Stay
Analysts expect that the American-type real estate bubble will not be a problem for Brazil. This is because Brazilian banks are not trading in risky mortgage-backed securities and housing loans are not packaged into complicated investment products for huge hedge funds. Additionally, Brazil requires down payments so there is no risk of runaway subprime lending that led to America’s foreclosure crisis.
Now is still a great time to purchase real estate, especially for foreign investors. Thanks to the current positive political and economic situation in Brazil, and especially Rio, Frederic Cockenpot, managing director of WhereInRio, a luxury property agency, says that there are many good investment opportunities. For foreigners looking to purchase overseas property, now is the time to search for excellent real estate for personal use and business investments.