A recent survey commissioned by Brazil’s Ministry of Tourism revealed that British buyers accounted for seven per cent of overseas residential property spending, up from £28m in 2007.
The main focus of real estate investment in Brazil is in the large cities of Sao Paulo and Rio de Janeiro, and in the nine states of the northeastern region.
Nara Vidal of Brazilian Gateway says: “My personal choice has to be Sao Paulo for what it represents in terms of the Brazilian economy and development. The city of Sao Paulo alone is responsible for more than 12 percent of Brazil’s GDP and its real estate market It is by far the strongest in Brazil. It is the most populous city in South America and has a large housing deficit, especially for the lower and middle classes who now have more purchasing power due to the granting of credit. A strong market like Sao Paulo, offers not only the highest rental yield and capital appreciation, but also an easy exit strategy for investors interested in investing elsewhere later.”
The northeastern states are the subject of a concerted effort to attract foreign real estate investment. The states have come together to form ADIT Nordeste, a government-funded association whose objective is to attract real estate investment from foreign 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 £727m of business.
One area that is about to feel the benefit of these efforts is Alagoas, which had previously been relatively untouched but is now considered the country’s number one 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 that 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 premium real estate projects.”
Paul Bartlett of EM Concepts says: “Many different parts of Brazil are good for real estate investment. However, buyers should be aware of market saturation in some popular and second-home destinations like Natal. Look out for Fortalaza, where you’ll find prices competitive ‘Class A’ Condominiums and Itacaré if you are looking for a property on the beach”.
As one of the BRIC countries, Brazil’s booming economy is resulting in significant capital gains.
Says Nara Vidal: “With the unprecedented prosperity of our economy, some areas in Sao Paulo have experienced a capital appreciation of around 20 percent in 12 months.
We forecast an average rental yield of 9 to 10 percent in some of the development areas, and capital appreciation that will easily reach 25 to 30 percent in the coming year.”
Paul Bartlett adds: “Capital appreciation has been around 20 percent over the past two years and we would expect a rate of around 10 to 15 percent per year for the next few years, provided inflation doesn’t disrupt economic growth too much.” and loan rates.
Nara Vidal recommends serviced apartments as the best real estate investment in Sao Paulo. “Contrary to the general belief that serviced apartments are for tourists or executives, a large number of ‘Paulistas’ live in serviced apartments for convenience and flexibility. The rental yield in many cases is a whopping 12 percent net, including administration fee.It is definitely the best investment right now.
Paul Bartlett agrees, but adds: “For maximum capital growth, it would make sense to look for beach houses in growing coastal cities like Maceio, where prices are still low but should rise rapidly.”
While the fundamentals of Brazilian investment are there, Nara Vidal adds a note of caution: “An investor must have a clear picture when investing in property in Brazil. Brazil is not a tropical paradise and crime rates remain high, even though lower and lower.” Development remains a challenge and corruption remains a problem. On top of that, bureaucracy is a big hurdle when investing in Brazil, as the buying process can take longer than expected. It is crucial to choose a professional agent in the UK. Unfortunately, mortgages are in their infancy in Brazil and we do not recommend foreigners to take a Brazilian mortgage as interest rates are still high, around 11 percent.”
