08/05/2024 – 6:30
The volume of real estate financing operations grew 30% in the first half of 2024. Analysts consulted by the website’s report This Is Money believe that the current booming credit market makes it an opportune time to purchase a financed property, but warn that it is important to analyze the financial situation before committing to a large debt.
According to the Central Bank, the average mortgage rate was 9.4% in June, compared to 9.2% in May, a level that is still high but below the 11.3% recorded in July last year. Among the factors putting pressure on credit in the sector is the expectation that the Selic rate will remain at a high level for a longer period of time.
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+Real estate financing grows 30% in the first half of the year and expectations for 2024 improve
Buy now or wait?
While at the beginning of the year the expectation was that the basic interest rate would end 2024 at 9% per year, the latest Focus Bulletin indicates that it could end 2024 without changes from the current level of 10.5% per year.
“If the federal government really takes care of the fiscal side, we have everything we need to move towards a reduction in interest rates,” says Henri Zylberstajn, CEO of real estate auction company Zuk. “But that’s not what’s happening.”
However, the Selic rate is not solely responsible for the price of real estate credit. There are also pressures arising from the low financial volume of savings accounts.
Investment specialist Felipe Passero explains that savings accounts are the main source of funds used by banks to offer credit. “If there are fewer funds available in savings, the bank will need other, more expensive forms of funding,” he explains.
Rafael Ohmachi, portfolio manager in the liquid funds area at RB Capital, believes that real estate credit rates will remain high for a longer period, but cites government subsidies through the Minha Casa, Minha Vida program as a facilitator that can be used at the moment to acquire a property.
Before financing, analyze your situation
Financial educator Mila Gaudencio points out that it is important to analyze your own financial situation before taking out a loan to buy or renovate a property. “We are talking about long-term debt,” she emphasizes.
Gaudencio recommends taking a few steps before taking out a mortgage. First, pay off any remaining debts and secure a financial cushion equivalent to six months of your living expenses, “so that in the event of a job loss or reduced income, you can continue to pay the mortgage installment.”
The expert also recommends having a down payment of at least 20% of the property value and making installments of up to a maximum of 30% of the monthly income — a recommendation from the Central Bank itself.
“Choosing where you are going to live is very important, as the location can make other basic daily costs more expensive, such as supermarkets, fairs, pharmacies and even gyms,” he warns.
Finally, the specialist recommends that, before closing the financing, a Total Effective Cost Comparison from different institutions, “which includes all fees and interest on the transaction”.
Another tip is to simulate the value of the initial installment of the financing and compare it with the amount spent today on rent.
When will rates go down?
Despite the uncertainty about the interest rate trajectory, Henri Zylberstajn points out that real estate credit is at a better level than a year ago, when the Selic rate was higher. However, with no prospect of further reductions in the base rate this year, the scenario will take time to change.
Rafael Ohmachi, from RB Capital, states that it is also necessary for the volume of money in savings to grow, since the resources in the savings account form an important part of the financial amount used by banks to make credit available.
“Brazilians’ savings levels are still low. If Brazilians saved more, they would probably have more resources to direct towards the real estate market,” he says.
The turn of LCIs
Although savings and FGTS continue to be predominant, some alternatives sought by financial institutions to finance real estate credit are Real Estate Credit Letters (LCI) and Real Estate Receivables Certificates (CRIs).
Data from the Brazilian Association of Real Estate Credit and Savings Entities (Abecip) point to the importance of these investments for the sector. Between June 2022 and 2024, they increased from 10% to 16% of funding for this type of credit. In the same period, the portion financed through CRIs went from 7% to 9%. Meanwhile, the volume that used savings resources fell from 44% to 34% in the period.
These other means, however, are considerably more expensive than savings accounts, as they require the bank to pay higher premiums to attract investors. “The bank will pay around 9 to 10% per year on these, while on savings accounts it pays 6 or 7% per year,” summarizes Passero.
Passero points out, however, that as financial education advances, more people will likely seek out more profitable forms of investment, and savings will shrink. “We need to find alternative ways to replace savings,” he says.
Ohmachi also highlights the potential of real estate as an investment. “What types of assets can pass on the value of inflation? They are precisely real assets, real estate, tangible assets. These are assets that, in a scenario of uncertainty, will often be able to retain their value in the medium and long term,” he says.
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