Are Brazil’s Real Estate Prices Outpacing Affordability?
Some recent figures by one of Brazil’s leading research agencies, the IBGE (Brazilian Institute of Geography and Statistics) profiled some interesting information related to the general public’s affordability levels.
Based on extensive surveys in line with the current 10-yearly census and national household budget survey that are currently being undertaken, it was indicated that:
- 17.9 percent have great difficulty paying their monthly commitments at the end of the month;
- 21.4 percent have difficulty;
- 35.9 percent have some difficulty;
- 14.3 percent are finding it reasonably easy;
- 9.5 percent find it easy; and
- 1 percent find it very easy.
Of the families who claimed to have much difficulty, 64.2 percent received up to three minimum wages as their monthly family income (R$ 1,395). Among families with incomes between three and six times the monthly minimum wage (R$ 1,395 – R$ 2,790), 24.2 percent indicated the same. In households with incomes in the top 15 percent of the country, 2.1 percent reported having great difficulty reaching the end of the month.
As the property market in the country continues to grow, concerns have therefore arisen as to the potential disequilibrium developing between the housing market and income levels.
Yet at the same time, the economic growth of the country is being argued as a case for such statistics to decrease – an example of this would be considerable evidence pointing to a rising middle class, largely by means of higher wages and falling unemployment (the same group of IBGE statistics pointed to joblessness levels hitting 8 year lows).
Nevertheless, for property investors affordability has long played an important part of the due diligence process – whilst the housing sector continues to show strong signs of growth, a vigilant eye should be kept on statistics such as the above to ensure that prices rises are in line with reality.
