With: John B
Lives: Capim Macio, Natal
Experience: 5 years in Natal in construction and developing
Location: Sao Miguel Do Gostoso
Date: Saturday 29th September 2012
1) What is your current view of the housing market?
It is all relative, I am comparing prices going up and down and stabilizing. At places like Petropolis, Tirol, Candelaria, Nova Parnamarim, Lago Nova, Capim Macio, the prices are significantly going up.
The other thing to look at is the market segments because in the low income Minha Casa Minha Vida
sector the price is still going up steadily not shooting up but going up steadily from year to year.
Whereas the very high income sector has been negatively impacted by companies like Cirela & Rossi, massive companies from the south of Brazil who have come in and done mega developments in the second homes market with 100s of units and the prices just shot up due to speculation and those prices are now being corrected, this has affected property in the Ponta Negra area.
Overall the middle class is still going up steadily but the higher end is being adjusted all around.
2) Do you believe there is a property price bubble, or risk of one?
There have been 2 major price bubbles in Natal, the 1st was in Ponta Negra thanks to speculation from overseas investors. The prices went through the roof, double in a year or 2, which was not feasible to maintain and wasn´t maintained. There is a price bubble which was created recently by the likes of big southern developers like Rossi and Cirela who came in and again a lot of speculation a lot of price increases during construction and really out priced themselves and all the rest of the market, but generally speaking the developers which kept their head together like Capuche and Conisa, those that kept constructing good quality projects in good locations; Ecosil for example are all selling very well and I think part of their success is not being greedy. I think some people got greedy; the big companies that came up from Sao Paolo and Rio just thought they could charge Sao Paolo and Rio prices whichwas unsustainable.
3) With all the construction going on, do you think there is risk of an oversupply of property? If so in which sector/at which price range?
In some neighbourhoods and markets yes. Petropolis so far sales have kept being strong and in Tirol, I don’t know of any which are empty not having sales. Candalaria and Lagoa Nova there not really that many developments going on. Capim Macio at the top end of the market there are expensive apartments, R$ 350,000 to R$400,000, that have been built and I don’t think all of them have been sold. So there in the top end of Capim Macio you might have a problem. The middle market I still think is fine and the low end is not really the Capim Macio market.
For example if you look at the neighbourhood beginning Nova Parnamirim, there are a lot of developments going on for the low to medium market, so many developments and you don’t see all of them being sold, mainly because there is a lot on offer, there is a lot of demand but because there is so much on offer people can be very selective about what they buy so they tend to go for the nicer, bigger, better priced ones. On the road going towards the airport for example, just on that road from the BR101 when you come out of Roberto Friere to the airport you count the number of developments you have on that road , the number of towers, you´ve got Ecosil with 4 towers, 400 units maybe. 2 more towers on the left and 2 more on the right, up by Sun Towers you´ve got another 10 towers going up (they are not cheap either) medium to medium high market apartments more than R$200,000, I am a bit concerned about that area.
4) What is the impact locally of global economic conditions? Does the man on the street feel this?
No. I haven’t seen any real significant change. I consider myself a man on the street and I can see it because I hear the news about it all the time and I have friends and also business wise I can see that there are less international buyers especially looking at holiday homes, that has affected our market quite a lot. But I don´t think I have ever heard anyone talking about the crisis in Europe and the USA, any of my Brazilian friends, nothing, they don´t mention it at all.
5) How easy is it now for locals to get bank financing (mortgages and other sources)?
It really depends on the local. There are a lot of locals and a lot of the market do not have official incomes, so a huge part of the population has no official income which means that they of course can’t get any kind of bank financing. For the low income people it is easy. We have just done the launch of Park Village last year and we got 150 people and not many came back unapproved not everyone but not many, most of them got approved financing from Caixa. So the lower end can get financing quite easy because of the MCMV programme.
The medium market, it is easy to get relatively but it is still very expensive, I know quite a few people who have got loans no problems. Our first mortgage company is starting to be set up in Natal now and we are actually handling mortgages as an independent company. You can’t get off plan mortgages only on existing completed properties or a plot with a house with title deed.
6) What is the split % of first homes and investments?
At the wealthy top end of the market there are still lots of Brazlians buying holiday homes, even here in Sao Miguel Do Gostoso in Anton´s project Shamballa, a lot of people that have bought plots are Brazilian. Time share type developments are also very popular with Brazilians.
At the lower end of the market people are buying their first house as they don’t have houses, there is huge housing deficit. It is all very different depending on the market.
7) What is the % split in off plan vs. resales
In Brazil there is still a lot of bartering you can trade in your old car for a bicycle and a fridge. Real estate here is also used as a trading chip. One broker I know gets a new car every month as when he sells a property he throws in his car as part of the deal, this sort of thing is quite common here.
The medium income bracket buy off plan as an investment and then flip it over into something that is built, and upgrade to where they live into something new by swapping a plot with their house for a plot with a bigger house for example.
The resale market here is not like the UK market. In natal people generally buy from developers due to the good financing deals on offer. They can buy a property that maybe finished in a year and have 10 years to pay it off.
8) What are locals buying for investment?
A lot off plan again because they get very good payment terms and they buy off plan plots and apartments and houses, everything off plan. Finished – they tend to buy plots, landbanking or actual plots in gated developments. It depends again on the market we are talking about. The higher end of course invest in large plots for, land banking because they have probably got a couple of million lying around.
It seems to be that any one with money in Natal, have all got land everywhere, I speak to my landlord, he is a Brazilian from Minas Gerais who has got plots all over the place and a house that I rent from him and he has got apartments here and there and he has got plots, land-banking, cement factories he has got loads of different types of investments.
10) Where do you see the biggest opportunity in the market?
For an investor who has GBP 100,000? I did very well buying at Shamballa. Off plan, buy something off plan or a plot at the right price from a reputable developer with a history of being able to deliver because a lot of companies have reputations of delivering late or not at all. Very few foreign developers have delivered what was promised. Most importantly do due diligence, with independent law firms.
Just about everything in Brazil is an opportunity, not only real estate everything is an opportunity, every single business. You just have to chose the right one and importantly the right people to do it with. That is the most important part as there are a lot of people who have the best of intentions who can get it wrong, and others who do not have the best intentions from the outset.
11) What do you think the impact of the FIFA World Cup and Olympics will be?
I believe that it will bring a lot of attention from the international market and everywhere to Brazil and to Natal. I think it will be great exposure for the country but I don´t think it is going to have any real significant impact.
In Rio for example the Olympics is going to have a huge impact because they are renovating one whole side of the city and that is going to revitalise the whole neighbourhood, which is great as it is prime real estate which is being occupied by “less affluent residents.”
12) What about from an infrastructure perspective in Natal obviously not the Olympics but The World Cup?
Olympics will be good reform for infrastructure in Rio I think the football in Natal will probably do less than it should because I am not convinced all the promised infrastructure will be built in time. Brazilians are great at coming up with good ideas but they are not always as good at delivering them. The bridge was 10 years late and the although the runway at the the airport is done we are not sure the rest of it is going to get built in time for the The World Cup.
However if everything gets done as they have planned it will make a huge difference to the city. Lagoa Nova is going to go through the roof with buildings and developments. But the reality of the matter is will it get built in time...I don´t know.
I believe the football stadium will and I believe they will probably do what they do at Carnatal, close down every road within 3 km of the stadium and make everyone walk there. I don’t know if they are going to get the roads ready in time, I hope that they do but I am not holding my breath. Hopefully the airport will get done and that will kick off everything.
13) Do you think that once the world cup has been and gone the opportunity in Natal is lost?
In Portugal for The Euros in 2004 it was great for the infrastructure in Lisbon but as for life changing stuff it had zero impact.
I think The World Cup will be one heck of a great party, being in Brazil for its own world cup will a life time experience whether it will be a life changing event for businesses and companies, I don´t think so. I think at best the infrastructure that it leaves behind will help.