Over the past few years lending on residential property has typically grown by 50% a year, but this year lending is expected to grow by just 20% to reach s 95.9 billion Brazilian reals. This level of growth is still very healthy in comparison with many other international countries, but still represents a sharp decline on previous years.
At the beginning of the year lenders in Brazil were expecting to see the market expand by 30%, and the economy was predicted to grow by 4.5%. Now growth is forecast to be just 1.8% which is largely due to the European debt crisis.
At a local level the Brazilian property market has its own problems. In the past property development companies raised money through capital markets to launch new developments. However demand failed to keep pace, leading to rising levels of inventory. This year has seen the number of new launches reduced, with falling levels of inventory, and it's important to remember that the mortgage market in Brazil is still developing.
At the moment outstanding mortgages account for just 5% of GDP, a figure that has considerable room for expansion. Experts view the slowdown in mortgage lending as being a good thing, as slower expansion will allow a more balanced development of Brazilian mortgage loans industry.
The Brazilian economy is also expected to rebound quite strongly next year, with most economists forecasting growth of at least 3%, while some are forecasting growth as high as 4.5% in 2013. Next year it is expected that mortgage lending will continue to expand, and that demand for homes will continue to rise as more Brazilians are able to purchase a home.
