Market Trends of Brazil Home Loan Industry
Increase in High End Property Sales
Luxury property sales fared well in Brazil during 2022 on the back of demand for higher quality homes with more space and communal facilities. The market is expected to continue to boom during 2023, particularly as new launches incorporate the latest technology in design and architecture. After a spectacular rise in launches last year, high-end property in Brazil was set for more of the same in 2022. The latest Confidence Index for residential real estate offers high expectations for more launches and purchases of land over the year. As a result, prices should rise in tandem, particularly as the values for luxury property remain well below international levels.
The luxury real estate market in Brazil has grown significantly in recent years, and we expect it to continue to grow in 2023. One of the main factors that stimulated the start of this market in Brazil was the increase in middle-class income and the devaluation of the Real against the dollar. This allowed more people to invest in luxury real estate and enjoy the beautiful view of Rio de Janeiro and other cities in the country. Moreover, tourism in the country has also contributed to the luxury real estate market growth, as many foreign tourists are looking to invest in real estate.
Growth in Digital Banks
Fintechs and digital banks expanded their share in the Brazilian credit market during the second half of 2022. Digital banks now represent roughly 6% of all loans to individuals in Brazil. That is up from 4.8% by the end of 2021 and virtually nothing five years back. Albeit from a low base, digital banks have been the sector growing the loan book the most since 2020. It grew at a 40% pace during 2022, doubling the system's average. During the pandemic, neobanks even saw records of 100% growth rates.
Neobanks in Brazil are finally making inroads into the country's USD 1 trillion credit market. These banks now represent almost 6% of all loans to individuals in Latin America's largest economy. Over the past decade, digital banks have spawned in Brazil, rising to challenge incumbents at their own game. With lower fees and user-friendly interfaces, they have succeeded widely in drawing clients. Nubank now boasts over 80 million customers in the region. Others, such as Banco Inter, PicPay, and Mercado Pago, have also signed up clients in the millions. While many digital lenders thrive at acquisition and cost to serve, most still fail to make a dent in the country's highly profitable yet extremely competitive credit markets.
