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Posts Tagged ‘credit’

The property market in Brazil has celebrated the news that a new record growth has been achieved, to show that the credit crisis has not reached the South American country. Housing credit has closed 2008 with 299.746 properties financed, the highest number ever and a rise of up to 53% over 2007.  According to ABECIP (Brazilian Association of Property Credit Institutions and Savings Accounts) , total amount of mortgages achieved over US$ 13 billion in 2008, a figure 64% higuer than the previous year. Only in december, total mortgage amount rose 36% in relation to november.

As The Move Channel has reported, as a consequence of the strong economy, prosperity levels are rising fast in Brazil, with sharp increases in housing demand. In just two years, 23 million people have risen to prosperity level C (middle class), which now counts 85 million people. This middle class has a monthly income between two and five times the official minimum wage.

With insufficient first home housing stock to satisfy local demand, Brazil currently has an estimated housing deficit of a minimum of eight million properties.

The middle classes are expected to purchase between 1,000,000 and 1,200,000 units per year until 2015. Fuelling demand further is the fact that for the first time in 25 years mortgages are available to Brazilians.

Mortgages account for only two per cent of GDP in Brazil, versus 65 per cent in the United States and 74 per cent in the UK, so consumers aren’t feeling the effects of credit squeeze. Massive growth in this sector means that domestic mortgages are predicted to increase by up to 600 per cent by 2014.

With this in mind it is clear that the first residence market within Brazil’s regional cities is a major investment opportunity and no region has seen faster growth that the North East.

In Natal for example, a local residential 100 square metre two bed room villa with a secure gated community can cost around 180,000 Reais (around £54,000) and deals can include optional rental guarantees of six per cent for four years and guaranteed buy back agreements from the developer.

As an investor, this means there is an opportunity to invest in well located local property that has a well defined target market and exit strategy, attracting middle class tenants and buyers.

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Excellente article from the Financial Times:

At Fábio Marangoni’s printing works in São Paulo, pages of glossy magazines emerge almost silently from modern printing presses imported from Germany.

Asked how much he borrowed to install the presses, Mr Marangoni replies with an air of self-satisfaction.

“Nothing,” he says. “We used our own capital.” His family-owned business will be 50 years old next year. “During that time we’ve seen the currency go wildly up and down. Our raw materials and machinery are priced in dollars, so we’ve always taken care to use our own money. It means we have grown more slowly than otherwise. But it’s worth it. Look what’s happening now.”

Mr Marangoni’s caution has not shielded him entirely from the chaos in the world’s financial system. Credit conditions have tightened and consumers and businesses are putting spending plans on hold.

Nevertheless, Brazil should emerge relatively unscathed. Economists who previously expected growth of between 4.5 and 5.5 per cent next year now expect between 2.5 and 3.5 per cent – by no means bad compared with the global outlook.

Not all companies have been as conservative as Mr Marangoni’s. Grupo Votorantim, an industrial conglomerate, said on Friday it had paid R$2.2bn ($958m) to liquidate positions in currency derivatives. It was the third large company to announce big losses on currency bets and is unlikely to be the last.

Local media are talking of “the Brazilian subprime”. Some observers expect to see bankruptcies as more exporters are forced to admit that they exposed themselves beyond sensible limits to currency contracts that worked in their favour during the real’s long rally from R$3.95 to the US dollar in October 2002 to R$1.56 in May this year but which turned against them during its subsequent fall.

On the whole, however, Brazilian companies are much less indebted than their foreign competitors. The total amount of credit in Brazil was equal to 38 per cent of gross domestic product in August, much less than in many developed countries. where credit reaches multiples of GDP.

Economists and business leaders have long been calling on the government to enact spending reforms to release more money to finance investment and consumption through credit. There has indeed been a consumer-led acceleration of growth in the past few years, as lower interest rates, rising employment and enduring economic stability have encouraged borrowing.

Read the article in full here.

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