Brazilian interest rates bad news for property?

Photo credit: Ricardo

Interest rates in South America are on the rise, according to new reports, and these rises may impact the Brazilian property market.

Brazil's real estate has seen a large boom in recent years, with prices rocketing upwards by 132 per cent in Sao Paulo between January 2008 and January 2012, according to the Merco Press. Prices in Rio de Janeiro rose even faster, leaping by 165 per cent across the four years.

As a result, Brazil's property has been compared to a bubble that could burst by the Applied Economics Research Institute. And the thing to burst it could be the rising interest rates, which would push mortgage payments up.

There is "a concrete possibility of the existence of a bubble in the real estate market in Brazil, which could possibly go bang if interest rates are increased in the future", reads the report. It does not predict "a catastrophic scenario", but adds: "The insistence of the government in further pumping up the real estate market only tends to make the final result worse."