Caixa Econômica Federal (CEF) led the way in increasing restrictions on real estate credit and the down payment requirement for purchasing a home increased from 20% to 30%. This means that anyone who has already purchased a property off-plan and paid less than 30% of the value will have to run for more money when you receive the property and apply for the loan. Or pay more in one of the private banks where the minimum down payment is still 20% of the value of the house or apartment.
A senior executive from one of the country’s main developers told the InvestNews on condition of anonymity that the weight of these restrictions will fall directly on the middle class. The extremes of the market, luxury and popular properties, rarely face problems with resource availability.
I don’t case two used propertiesthe practical consequence of increasing restrictions will be the significant reduction in demandas has occurred in the past. Priscilla Basso, coordinator of the digital real estate credit platform Melhor Taxa, says that banks have started to prioritize financing for those who bought off-plan and have set aside operations for purchases of second-hand units.
“Not the Box there is more reserve for the used property market”, says the expert. The state bank is both the thermometer and the locomotive of the market. Alone, represents 67% of sector financing (new and used properties), according to data from the Brazilian Association of Real Estate Credit and Savings Entities (Abecip).
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In the Best Rate data, in the segment called the Housing Financial System (which uses savings account resources as funding), a Box offers the lowest average cost for real estate loans, with a minimum interest rate 9.99% per year (plus the variation in TR). Among private institutions, the Bradesco comes second, with 10,49% per year, followed by Itaú Unibanco e Santandercom 10,99% each year.
At first glance small, the difference of 0.5 points to one percentage point is huge in the long term and can mean tens of thousands of reais. Take the case of someone who bought an apartment worth R$1.5 million off-plan, paid 20% of that amount during construction (R$300,000) and who intended to finance with Caixa. With the state bank’s restriction on only releasing financing with a 30% down payment, this buyer will have to come up with R$150,000 (additional 10%) from one moment to the next, equivalent to a 0 km Toyota Corolla, or leave to seek financing in another bank.
No Bradescowhich charges 10.49% per year, this financing of R$1.2 million over 360 months would cost R$ 83 mil more than in Caixa. Node Itaú and no Santandera 10,99%, R$ 165 thousand more.
If the down payment is the same as the minimum installment now required by Caixa, of 30%, the financing of R$ 1.050 million (R$ 1.5 million minus R$ 450 thousand, the installment required for the down payment) in 360 months will generate a extra cost of R$73 thousand at Bradesco and R$ 144 mil at Itaú and Santander.
Banks are more selective
Professionals who work in real estate agencies and with real estate credit say that, in addition to the banks having already reduced the volume of resources for purchasing used properties, institutions also began to tighten approval conditions. The credit release rule rose. Now only customers with “relationships”that is, those who have investments, receive a salary from the bank and consume financial products from the house have had a place in this queue.
This type of restriction arises at times when banks seek to reduce portfolio risk. And also usually precede measures seen as unpopular, such as the one already adopted by Caixa to increase the entry level or raise minimum financing rates.
Caixa’s decision also signals darkest times for the coming months. Basso, from Melhor Taxa, sees the possibility of banks increase credit costs at the beginning of 2025. This increase would be a reaction to a possible increase in Selic basic rate by the Central Bank at the November and December monetary policy meetings.
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Today, the Selic is at 10.75% per year and the weekly Focus survey carried out by the BC with financial market professionals indicates an expectation that the rate will close 2024 in 11,75%that is, one percentage point above the current level. This means two increases of 0.50 points each in the next two months.
Banks tend to make a small adjustment to real estate credit rates to adjust to the new interest rate scenario. The Best Rate coordinator assesses that it is possible to average increase of up to 0.5 points in the cost of housing financing.
Among companies in the real estate sector, the situation is beginning to worry. The senior executive who spoke with the InvestNews revealed pessimism for the beginning of next year. “We started 2024 discouraged, and, as the months went by, we became more excited. But let’s close the year discouraged again. And with pessimistic expectations for the beginning of next year”, he says, highlighting that the picture is worse for middle class buyers.
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The high-income public, who consume homes worth more than R$2 million, tend to have reservations and greater chances of financing approval. To the lines of credit in this range too do not depend on resources raised in the passbook savings (called the Real Estate Financial System – SFI in the market). Funds are usually raised with products such as Real Estate Credit Letters (LCI) and other securities issued by banks.
Already the popular properties have resources subsidized and assured by the FGTS. This source receives contributions by law from all companies and workers with a formal contract.
The executive says that the range of homes with prices between R$500,000 and R$1.5 million was the one that sold the least this year so far. At the end of the third quarter, the average sales of property launches at these value levels was in 24% do totalagainst a historical average of 40%.
The savings account crisis
The origin of difficulties in financing the Housing Financial System (SFH) comes from the savings account shrinkage. Between January and August, there was a net outflow of R$12.2 billion. In 2023, the difference between deposits and withdrawals was negative at R$66.7 billion.
A Caixa has already taken drastic decisions in the past in situations where available resources fell. In April 2015during the longest-lasting recession the country faced, the state-owned bank increased the minimum down payment to 50% in any housing financing line.
In the real estate market, the result was a 60% left between the peak of sales in 2014 and the worst moment, in mid-2016. The acquisition of units went from 375 thousand at the end of 2014 to 150 thousand in 2016. During the period, new real estate credit concessions fell by 55.5%. The financial volume intended for the acquisition of houses or apartments fell from R$81 billion to R$36 billion.
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During that period, savings also suffered from net withdrawals. In 2015 alone, there was net withdrawals of more than R$50 billion. Caixa adopted even more restrictive measures ten years ago, because at the time the passbook had a much greater representation as a source of resources than it does today.
In 2015, savings represented more than 65% of everything or “funding”that is, the amount in stock to feed the real estate loan. Since then, the book’s participation has declined. Today, it represents about half of a decade ago or only 34% of the total.
The space left by the traditional investment product has been occupied by investment instruments. capital market raising. These are debt securities issued by banks or companies to obtain funds from investors. Examples are those mentioned LCI. But structures such as real estate guaranteed notes (LIG), real estate receivables certificates (CRI) and real estate funds (FII).
Together, these private fundraising instruments already represent 40% of total sources of resources for the sector. The largest share of these products belongs to LCI, with 16% of the total and a balance of R$363 billion. Next comes the FII, with R$237 billion and a 10% stake. CRI comes in third with a share of 9% and a stock of R$208 billion. Lastly, LIG appears, with 5% and R$117 billion.
A savings alone still presents a balance of R$763 billion in resources in the system, while the FGTS bank R$596 billion in the stock available for financing, with a share of 26%. In total, according to Abecip, real estate credit funding reaches R$2.28 trillion.
There is, in the view of the developer’s top executive heard by the InvestNewsa factor that can change everything in the economic equation of 2025: the government takes concrete measures to confirm its commitment to the fiscal anchor. “If the yield curve starts to declinewill unlock a strong purchase movement (of properties).”
In this scenario, the BC could reduce Selic againwhich would lead banks to reduce mortgage rates.
Until then, the middle class will have to tighten its belts, because real estate credit has disappeared.
