While Brazil ponders inflation, the housing market is soaring

Brazil's real-estate market is on the upswing -- another indicator of the nation's hot economy. This could be stirring concern among Brazil's central bankers, who have already stuck a hawkish tone amid stubborn inflation and a sinking currency.

A measure of Brazil's residential real estate is available on the CEIC platform courtesy of FIPE, an institute affiliated with the University of Sao Paulo's economics department. This FipeZap index, which tracks asking prices for property sales and rents, is released earlier than home-sales data provided by the local real-estate industry group.

We've charted both of these indicators against each other. The number of properties sold in the 12 months through May — the most recent data available — surpassed 183,000, setting a record. Meanwhile, FipeZap's index accelerated to 6.53% year-on-year in July – a nine-year high. (That outpaced the 4.5% inflation rate over that time.)

Our second chart tracks mortgage activity and compares it to the central bank's key policy rate. New home financing operations reached a record high of BRL 17 billion in the 12 months through June, another record. This occurred even as the central bank publicly moved away from its dovish stance in June after a year of rate cuts.

Will these trends be derailed if the central bank hikes rates, as it said it would not hesitate to do if necessary? July figures on inflation showed price increases reached the upper band of the central bank's target range (1.5%-4.5%), and that was even before recent market turmoil sent the real lower and made imports more expensive.

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