A recent survey commissioned by the Brazilian Ministry of Tourism revealed that British property buyers made up seven per cent of the overseas spend on residential Brazil property, parting with £28 million in 2007. The main focus of investment is in the large cities of Sao Paulo and Rio de Janeiro, and the nine states of the northeastern region.
Nara Vidal of Brazilian Gateway says: “My personal choice has to be property in Sao Paulo because of what it represents in terms of Brazilian economy and development. Sao Paulo city alone is responsible for more than 12 per cent of Brazil’s GDP and its property market is by far the strongest in Brazil. It is the most populated city in South America and has a huge deficit of accommodation; especially for the mid and lower income classes that now have more buying power due to credit allowance. A strong property market such as Sao Paulo, offers not only the highest rental yield and capital appreciation but also a straightforward exit strategy for investors interested in investing elsewhere afterwards.”
The northeastern states are the subject of a concerted push to attract overseas investment. The states have teamed up to form ADIT Nordeste, a government-funded association aimed at attracting investment from overseas tourism and real estate investors. Its third annual Nordeste Invest conference, held earlier this year in the coastal city of Recife, is estimated to have generated £727 million of business.
One area about to feel the benefit of these efforts is Alagoas, which has previously been relatively untouched, but is now being tipped as the country’s first six-star destination. International brands such as Radisson and Invest Tur (Six Senses and Txai brands) are investing here, and Felipe Cavalcante, president of ADIT Nordeste, says: “The local government is focusing only on high-end real estate projects so the state receives the best developments in the country. It is wonderful to see that the natural beauty of Alagoas will be enhanced by all these top quality real estate projects.”
Paul Bartlett of EM Concepts says: “Many different parts of Brazil are good for investment. However property buyers need to be aware of market saturation in some second-home and popular destinations such as Natal. Look to property in Fortalaza, where you will find competitively priced ‘A-class’ condos, and Itacare if you are looking for beach property.”
As one of the BRIC countries, Brazil’s booming economy is resulting in significant capital gains.
Nara Vidal says: “With the unprecedented prosperity of our economy, some areas in Sao Paulo have seen capital appreciation of around 20 per cent in 12 months. We forecast an average of nine to 10 per cent rental yield in some of the developing areas, and capital appreciation that will easily reach 25 to 30 per cent in the next year.” Paul Bartlett adds: “Capital appreciation has been around 20 per cent over the last couple of years and we would expect a rate of around 10 to 15 per cent per annum in the coming years provided inflation is not too disruptive to economic growth and loan rates.”
Nara Vidal recommends serviced apartments as the best investment in Sao Paulo. “Contrary to the general belief that serviced flats are for tourists or executives, a very big number of “Paulistas” live in serviced flats for convenience and flexibility. The rental yield in many cases is a massive 12 per cent net, including management fee. It is definitely the best investment right now. Paul Bartlett agrees saying but adds: “For maximum capital growth it would make sense to look at beach properties in the growing coastal cities such as Maceio, where prices of property for sale are still low but should rise fast.”
Although the fundamentals for Brazilian investment, Nara Vidal adds a note of caution: “An investor needs to have a clear picture of Brazil when looking for Brazil property investment. Brazil is no tropical paradise and crime rates are still high, although increasingly low. Human development remains a challenge and corruption is still a problem. On top of that, bureaucracy is a huge obstacle when investing in Brazil, as the process of buying Brazil property can take longer than expected. It is crucial to choose a professional agent in the UK. Sadly mortgages are in their infancy in Brazil and we do not advise foreigners to take a mortgage to buy Brazil property as interest rates are still high – around 11 per cent.”
First published in October 2008.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.
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