The United States, United Kingdom, Spanish and Irish housing markets are still suffering from the 2008 sub-prime mortgage crisis. Investors might want a new look for their real estate investment trusts (REITs) and Igor Cornelsen makes the case for Brazil. What happened in Brazil housing during 2008?
“Did Brazil Housing Suffer in 2008?”
While the nation of Brazil has continued to industrialize, its housing market is still quite underdeveloped. Igor Cornelsen discussed how the Brazil banking sector influenced the nation during his April 2016 CNBC interview on investment opportunities. The top bank for real estate loans in the country is Caixa Economica Federal (CEF), representing 70% of the market.
In some ways, Brasil was fortunate to be underdeveloped in its housing sector, because it largely avoided the 2008 sub-prime mortgage crisis. The primary center of this disaster was the United States with a ripple effect in the United Kingdom due to similar lending practices. In Brazil, the banks suffered when the international credit markets started to dry up according to Igor Cornelsen.
“Higher Interest Rates & More Risk in Brazil Banking”
On April 28, 2015, the Wall Street Journal reported Caixa Economica Federal’s decision to require a 50% downpayment on homes (it had previously covered the standard 80% LTV rate). Brazil might be seeing its slow-down in housing in 2016 as demand for homes and apartments continues to drop. Total home sales dropped 35% in São Paulo between 2013 and 2014. One of the biggest home builders – PDG Realty – had a loss of -$181 million in 2014.
Brazil remains a good country for diversification of your wealth portfolio, according to Igor Cornelsen. The nation has a different business cycle then the Anglo bloc, which can help investors better manage their risk.