The sun is shining particularly bright on Brazil these days. A number of factors have come together to make this the ideal market to construct homes in.
EconomyBrazil came storming out of the global recession with robust GDP growth of 7.5% in 2010 and The Economist Intelligence Unit (EIU) has forecast average annual GDP growth of 3.9% per year through 2030. Unemployment in Brazil, for the first time in history, is now lower than it is in the US and much of Europe. The Real Plan introduced in 1994 has reversed the terrible inflation that ate away at the country's wealth for decades.Housing DemandThe strength of the economy is reflected in the surging middle class which grew by 38 million from 2003-2010 and is projected to grow by another 9 million through 2014.
Population by Income Class (source: Clarion Partners)
In addition to the rising middle class Brazil's population is young and household new household formation is robust. The EIU estimated that 910,000 new households were formed in 2010 and this number is forecast to grow to 1,390,000 by 2015. The rising middle class and growing population are looking for quality, affordable homes to purchase.
Demand for housing is buttressed for the first time in the country's history with affordable mortgage financing. In 2009 the federal government introduced the Minha Casa Minha Vida (My House My Life) program which offers subsidized mortgage loans to low and middle income buyers. Outstanding mortgage debt in Brazil is only 3.9% of GDP as of the end of 2010 compared to over 100% in the US. SupplyBecause entry level housing was hard to sell to buyers without mortgages this sector was ignored by developers for decades. As a result there is a current housing shortage estimated to be as many as 8 million units.
The combination of rapidly growing demand, an enormous housing shortage, and the introduction of mortgage financing make developing housing in Brazil a truly historic opportunity.
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