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Brazil Sets Record for Mortgage, Real-Estate Development Lending in 2013

Brazilian real estate lending, including mortgages and loans to real-estate developers, rose to an all-time high of 109.2 billion Brazilian reais ($46.3 billion) in 2013 due to the rise in people's income, the Brazilian Association of Mortgage and Building Lenders, or Abecip, said Tuesday.

The previous record was set in 2012 with a volume of 82.8 billion Brazilian reais. As recently as 2010, real estate lending volume was only 56.2 billion reais.

"Credit for real estate development and mortgages increased in Brazil at a healthy pace," said the association's president, Octavio de Lazari Junior, in releasing the annual report. "There's no risk of a bubble in Brazil."

Most Brazilians are buying homes to use as their residence, and not as an investment, Mr. Lazari explained.

His group expects total real estate lending to expand about 15% in 2014, he added.

Brazilian mortgage-holders saw an increase in their levels of indebtedness in 2013, according to the association, but rising salaries more than compensated for the increase in debt loads. In addition, many holders of new mortgages gain in terms of family income because their mortgage payments are below what they previously paid in rent, Mr. Lazari said.

Development lending increased at a slower pace than mortgages in 2013, according to Abecip.

Of the total credit provided last year, 76.9 billion reais went to mortgages, up from 54.7 billion reais in 2012, while credit for real estate companies totaled 32.2 billion reais, up from 28.1 billion reais the previous year.

With default rates remaining at low levels, banks in Brazil are likely to expand their focus on mortgage and development lending in 2014, Mr. Lazari said.

"Brazilians are cautious when it comes to mortgages," he said. "It's not a case of impulse buying, which sometimes happens with cars."

Brazilian banks are also more cautious about lending for development, typically financing only about 65% of the cost of new construction and leaving the rest to be financed by home buyers.

Brazilian mortgage lending continues to grow, but from a much lower level than in other economies.

Brazil's mortgage lending represents 8.1% of the economy, versus nearly 70% in the U.S. and 81% in the United Kingdom.

Source: online.wsj.com