Mortgage rates in Brazil have dropped to two-year lows, while lending has risen as banks seek to benefit from a stable mortgage market.
According to Bloomberg, Itau Unibanco Holding SA and Banco Bradesco SA each increased their home-loan portfolio by 32% to 32.4 billion reals ($13.6 billion) in the second quarter compared to the same period last year. Meanwhile, according to Brazil's central bank, the average mortgage rate dropped to 11.94 percent in June from 12.91 percent six months earlier. find property qatar
In an attempt to keep inflation under check, Brazil's central bank has increased borrowing costs. From April to July, the benchmark Selic rose 125 basis points to 8.5 percent. As a result, lenders have expanded their mortgage market, lowering interest rates and making other loan forms riskier.
"Even if the central bank keeps raising Selic, rivalry would hold mortgage rates flat or slightly higher," said Octavio de Lazari, president of Abecip, the country's real-estate lenders association.
According to Luiz Franca, mortgage director at Itau Unibanco, banks add security to loans by offering mortgage clients a life-insurance premium.
Mr. Franca said, "Home loans now have real guarantees and the lowest delinquency rates of any form of credit."
In June, outstanding home loans in Brazil totaled 298.4 billion reals, up 35 percent from 220.3 billion reals the previous month.
Mr. Lazari said, "Brazilian banks have finally woken up to the opportunities the mortgage market presents as a form of long-term lending that generates client fidelity, enabling them to sell other profitable products."
Brazil is a priority for the Canada Pension Plan.
The Canada Pension Plan Investment Board and Banco BTG Pactual S.A. are forming a partnership to invest in residential construction in Brazil.
According to an announcement, CPPIB has invested US$240 million for a 40% stake in the company, with BTG matching the investment.
"As we continue to grow our real estate portfolio in Brazil, this opportunity provides us with an attractive entry point into the Brazilian residential market," said Peter Ballon, vice-president and head of real estate investments for the Americas at CPPIB.
"A increasing middle class, increased economic activity, and favorable demographic changes are driving increased demand for new housing in Brazil's residential construction market."
BTG will oversee the venture's day-to-day operations, while CPPIB will serve on the investment committee.
According to the fund's website, CPPIB's real estate portfolio in Brazil was estimated at C$1.5 billion ($1.44 billion) at the end of September 2013. The portfolio covers over 4.1 million square meters of retail, office, and logistics assets.
CPPIB and Intu Properties, a UK-based mall owner, bought Parque Principado Shopping Centre in Spain for €162 million ($219.7 million) earlier this month.