The price of real estate, as is well known, has risen sharply in recent years. It reached historic levels, turning thousands of Brazilians into millionaires, just by selling some property they owned as assets. However, in recent months, several indicators have shown us that prices are rising below inflation and, in specific cases, even falling.
Based on this information and even an article recently published in I Want to Get Rich, a lot of people came to ask me: “Is this a good time to buy a financed property?”
Since this is certainly a question for many readers, I decided to write this article to answer it.
Good time to buy?
Before answering this question, it is necessary to understand at a minimum why the moment has impacted the real estate market. To try to control inflation, the government has been raising the basic interest rate (SELIC rate) in recent months. From March 2013 until the end of October 2014, the SELIC rate target went from 7.25% per annum to 11.25% per annum .
Due to this increase in the SELIC rate (combined with other macroeconomic factors), the interest rate on real estate financing also increased. That way, if you want to buy a property now, you have to pay higher installments. And even if you bought a property in the plant and need to finance it now, in the delivery of keys, often do not have enough income to finance the outstanding balance, precisely because of the interest rate increase.
For these reasons, many people are unable to finance the property, making the stock of builders grow larger. With the larger inventory, they stop launching new properties (to sell existing ones), besides offering various benefits and even discounts for selling these properties. The bottom line, therefore, is that anyone who has the money to buy a property in sight can find great opportunities right now.
Good time to buy funded?
Finally we come to the question at the beginning of the article:
“Is this a good time to buy a financed property?”
And the answer is no .
Even if you can find a good final price to buy a property, the high interest rate on the mortgage will greatly increase the outstanding balance over time.
“So when would be a good time to buy a financed property?”
From a financial point of view, probably at no time.
When the interest rate is low, the price of real estate generally rises sharply. When the price stabilizes or even drops a little, the interest rate is usually high. It turns out that, in the end, those who buy financed can hardly enjoy the moment of the economy, because one factor outweighs the other.
I know a lot of people will argue that they bought a financed property in 2008 and now it has “doubled in price”, making financing a good deal. For these people, I use the same argument about return on investments: past return is no guarantee of future return. In other words, nothing guarantees that the good return that some have obtained in the past will be repeated in the near future.
After all, the market is at another time and prices have already risen sharply, making further gains in those proportions difficult. I also know that others will say that it is practically impossible to be able to save all the money to buy a spot, precisely because of the current high prices.
Even if you are unable to save all the money you need to buy the property in cash, you will still have gone a long way toward paying as little interest as possible.