Over recent years, property in Brazil has attracted significant interest from both private and institutional investors alike. But is it still a solid investment and what are the risks associated with investing in property in Brazil?
Brazil is the largest country in Latin America and covers a land area of some 8,500,000 sqare km, with a coastline of 7,500 km. With the enormous size of Brazil, the market for property in Brazil is of course not just one general property market. The different states will have their own markets and the geographic areas within those regions have their own markets too. Indeed, even on a city level there are micro markets as you would expect. Further, you then have to consider the different sectors within the property market: residential, commercial, industrial etc. Even within those sectors there are several sub-markets which will have their own dynamics.
Therefore to answer the question generally and say, “yes, property in Brazil is a solid investment” could be misleading. There are several sweeping statements and claims made by agents, developers and indeed the press about property in Brazil. I would urge you to always keep this in mind when making investment decisions about property in Brazil.
The focus of this website is in the main residential property and land in NE Brazil, predominantly in the states of Rio Grande do Norte and Ceara with particular focus on the cities of Natal and Fortaleza.
So is now a good time to invest in Brazil?
At the risk of making a sweeping generalisation, I would say “yes!” But of course there is a “but”! There are several considerations an investor must take into account before investing and we will be pleased to talk these through with you.
If you would like to have an informal chat about anything to do with investing in property in Brazil you can complete the form below and we will get in touch with you within 48 hours. For a brief overview of property in Brazil please click here.
Overview of Property in Brazil
Despite the global financial instability, Brazil’s economy continues to grow and its real estate sector offers very good opportunities for investors right across the country. Due to a solid and continuing promising economic climate, Brazil is a sought-after worldwide property investment destination. With attractive entry prices in certain regions of the country, serious investors are recognising the high potential for profits on real estate investment in Brazil today. While prices continue to see a steady growth curve, investors can expect excellent returns in the hot-spot areas of Brazil with property values increasing 10% per annum over the past few years.
There is a property boom going on across all of Brazil’s major cities with is being fuelled by local demand for residential property. Brazil’s largest city Sao Paulo has long shaken off its past violent image (although violent crimes are still high by European standards), in favour of a thriving city with much business relocation from foreign companies. For example, high-end jeweller Tiffany & Co. boasts more stores in São Paulo than anywhere else in the world and bag maker, Louis Vitton earns some of its highest profits per square foot in Brazil. Price Waterhouse Coopers Consultancy expects the rapid growth to continue and that it will propel, São Paulo, from the forty-sixth spot on the world’s wealthiest city list to fifth place in a little over a decade.
Rio de Janeiro, with its long history of tourism, has also seen significant growth in terms of real estate development and prices. The Brazilian government is working on a number of areas that require improvement, including its road system and infrastructure, something that Mayor Edwardo Paes is intent of delivering to the city as a result of the 2016 Rio Olympics.
In the light of Brazil’s performance over the past years and continued strong economic potential, many investors, both local and international are entering the Brazilian property market with very real expectations of cashing in on high levels of capital growth over the coming years.
Major investment is being made in the North East of Brazil in the cities of Natal and Fortaleza. In addition to the existing shortage of local residential housing, they boast stunning beaches and a balmy tropical climate, bringing with it increased tourist development projects. Natal and its surrounding area will see more than $1.8 billion being invested over the next 5 years in new hotels, resorts and infrastructure, including a new airport, which will be the largest in Latin America (both passenger and commercial). The North East proving to be Brazil’s top property hot spot as the location currently offers optimum conditions for those who wish to invest.
Property in Brazil Sectors
To understand the real estate investment opportunities in Brazil, it is easiest to divide the property market into two sectors: residential first homes and tourist / second homes market.
Residential Property in Brazil
The new wealth is benefiting Brazilian households, with consumption rising even stronger than GDP. As a consequence of the strong economy, prosperity levels are rising fast in Brazil, which sharply increases housing demand. In just two years, 23 million people have risen to prosperity level C (middle class), which now counts 85 million people. This middle class has a monthly income between 2 and 10 times the official minimum wage. With insufficient first home housing stock to satisfy local demand, Brazil currently has an estimated housing deficit of a minimum of 8-10 million properties. The middle classes are expected to purchase between 1,000,000 and 1,200,000 units per year until 2017. With this in mind it is clear that the first residence market within Brazil’s major cities is a major investment opportunity and no region has seen greater demand that the North East.
Holiday Property in Brazil
Tourist / second homes are those properties located at desired tourist destinations, composed by second-home units and large tourism and leisure facilities such as hotels, parks, marinas, golf courses, etc. These facilities enhance the tourist experience, induce tourist flows and provide services to guests and owners. Therefore, they improve desirability and leverage prices and sales speed of residential units. Up until 2007 there was plenty of investor activity in the area of holiday resort property by national and international investors.
However, the economic and financial scenarios that emerged as a result of the credit crunch at the end of 2007 have interrupted the cycle in which Brazil was increasing its penetration in the world’s tourism real estate market. National demand for second homes remained solid by affluent Brazilians, but this is clearly a much smaller market than the first homes residential market.In 2012 there is some evidence that international buyers are returning for second homes / beach property.
Brazil is a stunningly beautiful country with a sunny climate and has direct air services to Europe and they are seeking to enjoy the great quality of life. It seems that a new cycle of buyers is emerging and this will be fuelled further by events such as the 2014 World Cup and 2016 Olympics. Branded, quality beach style resorts particularly in the North East run by international hotel chains, well located plots of land for either land banking purposes, or for building dream villas at competitive prices, offer sound medium to long term investment potential.