President Dilma Rousseff is using federal subsidies and state-bank loans to boost housing after economic expansion slowed for a second year in 2012 and mortgage growth declined. Home price gains are also decelerating after rising 58 percent since 2010.
“The market is trying to correct itself” and “the government is throwing more money at it to keep it expanding,” said Adolfo Sachsida, an economist in Brasilia at the Institute for Applied Economic Research, a federal government agency that evaluates public policy. “This market employs a lot of people and they want to keep it heated so employment doesn’t drop.”
Rousseff is pumping more money into the housing market even as interest rates remain at the lowest in Brazil’s history, and annual inflation is running above the central bank’s target for 29 months. As economic growth fell to the slowest pace among major emerging-market economies last year, she nearly doubled spending on Brazil’s plan to build 2 million low-income homes by 2014, a goal made more expensive as preparations for the World Cup being held that year, and the Olympics in 2016 contribute to higher construction costs.
The amount of home loans outstanding grew 38.2 percent in 2012, down from a pace of 44.5 percent in 2011 and 51.1 percent in 2010, which was the fastest since 1992, according to central bank data. Total credit outstanding increased by 16.2 percent last year.
The government’s measures are helping to sustain prices, setting the stage for a fall once interest rates climb from record lows, according to Sachsida, who co-authored an IPEA report last August that said the government is fostering a real- estate bubble.