(An excerpt from a recent article at Valor Economico)

“In the past few years, the value of houses rose much more than the Brazilians’ income, generating a mismatch between the capacity of families to contract debt and real-estate financing. While the average income of Brazilian workers rose 43% between 2007 and 2011, the average value of financing for acquisition of real estate done by the Housing Finance System, or SFH, which uses funds managed by the government, increased 83%. New financing rules announced recently by Caixa Economica Federal, the state-owned bank that manages most funds to finance housing, tend to ease access of new families to such credit.

In 2007, average loans were R$82,000 and monthly installments were absorbing 42% of an average Brazilian couple’s income, considering a 30-year maturity. Last year, average financing reached R$150,000, with initial installments accounting for 52% of the couples’ income.

Some of the largest real-estate developers in Brazil have indicated in the last few weeks that they are cancelling purchase and sale contracts signed a few years ago, in the boom of the housing market, because customers will not be able to pass bank credit analyses at the moment of transference of financing from construction companies to final borrowers, when keys are delivered.

Even before the announcement of new rules, though, the companies said they were finding new buyers for the properties and even profiting off the sale of apartments at higher prices. But since there is an enormous volume of real-estate deliveries expected for 2012 and 2013, the market started to ask itself about the size of this problem.

Banks work with the criteria that the financing installment should not exceed 30% of the couple’s available income (or two people that make up the income). This means that in order to get financing in 2007, available income had to be R$3,163 per month. Last year, this amount rose to R$5,640 per month.

If the average Brazilian could already not get financing in 2007, it was even harder in 2011…”

Source: Valor Economico

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