Finance Professor at the Getúlio Vargas Foundation, also known as “Mr Money”, recently advised the Brazilian public to hold off purchasing real estate or automobiles until after the World Cup in June.  Luís Carlos Ewald, speaking to Época Negócios, stated that after this period prices will start to come down and good opportunities will emerge: “everybody is saying that the Cup will be great for Brazil. But, after the event passes there will be no more investors left in the country as many are fearful.”

Ewald also observed that many who have bought off-plan (na planta) are returning their properties to developers: “a buyer who has received they keys to his/her property and needs to finance the remainder will be faced with high monthly installment commitments – the national base interest rate (SELIC) is already too high. Without the ability to pay the loan, he / she will look to sell the property back to the constructor which is an unlikely scenario.  Even if the property value is discounted, constructors will not want to take the units back. The banks are full of returned properties.”  He believes the situation is the same for the commercial sector, estimating that 30% of office space in Brazil is empty.

According to the Professor, now is the time to “relax” and direct savings towards more secure investments such as the “Treasury Direct” (Tesouro Direto, government bonds) that yields the national inflation rate plus interest. The best securities are “post-fixed” where returns follow variations of the SELIC. For those who are in need, renting is a better option over purchasing at the current time.

Four years ago, loan pay rates dropped noticeably (due to the associated drop in the SELIC), which led to the banks developing a greater interest in the housing sector.  In 2013, according the Brazilian Association of Housing Credit and Savings Entities (Associação Brasileira das Entidades de Crédito Imobiliário e Poupança, Abecip), loan levels for the purchase and construction of properties reached a new high of R$ 109.2 billion.

Yet now, with rapid rises now clearly over and the SELIC rising again to counter inflation, housing financing is no longer as attractive which, according to Ewald, will mean that more people will not be able to access the market eventually leading to excess stock and, in turn, lower prices.

“The Brazilian housing crisis is already established – even the construction companies owe money to the banks.  All financial crises start with turbulence in the housing market and there is no point thinking that the situation here will be any different,” concluded the Professor.