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Brazil's Winning Economic Stability is Fast Attracting Overseas Investors to the Property Market
The outstanding strength of the Brazilian economy, significantly low property prices and huge relative capital appreciation over recent years is driving Brazil to be one of the top emerging markets for property investment.
The Brazilian Property Market is fast becoming a popular investment destination for overseas investors due to the massive benefits of low property values and the fast strengthening Real, gaining nearly 10% so far in 2007, thanks to the county's increasing economic stability and investment inflows. This, combined with a significantly lower cost of living than many traditional property investment locations, allows for a more luxurious lifestyle and the still large areas of the country unexplored by foreigners are drawing attention on property investors’ radar.
Despite the relatively low property values in Brazil, the growth of house prices over the last few years has been recording impressive performance with an average increase of 20% per annum, placing the country at the top of the property investment league table. Investors may look to Brazil for their next investment move particularly as early entry into the market takes advantage of the high level of capital growth that is expected over the coming years.
Foreign investment into Brazil has grown at an increasing pace hand-in-hand with the county's economic growth. Foreign direct investments reached $3.47 billion in April up from $2.78 billion the previous month. These strong inflows are reflected in Brazil's balance of payments with the current account surplus recording the highest ever figures in April of $1.82 billion an increase from $817 million in the previous month and exceeding average forecasts (of 21 economists in the Reuters poll) of $1.5 billion.
The Daily Mail Overseas Property supplement recently remarked that emerging markets in particular are presenting some excellent opportunities for investment, some of which are beginning to overtake more traditional established investment markets in terms of return on cash invested.
Brazil offers a fantastic lifestyle with a superb all-year round climate and the increasing number of charter flights from the UK will surely see demand for the purchase of second homes and the rental of holiday lodgings significantly increase. This is supported by Obelisk's recent launch of the Estrela do Atlantico project, in Natal, Brazil, where all available units were sold out within 48 hours. Obelisk is committed to a global search to present only the most lucrative quality investment opportunities to their clients.
Investment Potential 2008
A combination of a stable economy, falling interest rates and rising tourism are among the factors that are attracting investors in increasing numbers to the real estate market of Brazil. An online poll conducted at the beginning of 2007 showed that overseas property investors rate Brazil as the second best country in which to invest over a five-year period.
Brazil has fast developed into a sound economy with a fiscal and political environment conducive to growth. Despite the country’s vastly improved economy, living costs in the country are still substantially lower than in the UK. It is anticipated that as the population becomes wealthier as a result of economic and tourism growth, demand for property will increase prices. Prices are still low enough currently, however, to provide excellent, aggressive investment returns with notable capital growth and relatively high yields.
"It is anticipated that as the population becomes wealthier as a result of economic and tourism growth, demand for property will increase prices." These factors are expected to boost the mortgage market; up to this point borrowing to purchase a property has been rare in Brazil (22% of the population have a mortgage, against 70% in the USA and Europe, according to The Daily Telegraph), but the potential for demand is immense. Banks will respond to this by diversifying to offer more products, therefore boosting market growth and demand for property. Domestic demand is particularly strong outside of the big cities, as Brazilian residents who currently live in urban areas aspire to own second homes in diversified parts of the country. Demand from the construction sector has also grown, as a result of tax breaks implemented by the government as part of their program to accelerate growth.
Foreign investment into real estate is actively encouraged in Brazil; foreigners can own 100% of land and property within the country, which is not always the case in emerging markets. This is viewed as a major contributory factor, alongside the favorable currency exchange rate for foreigner investment. This has enabled direct foreign investment into real estate in Brazil to soar. A staggering US$1.3 billion was invested by foreigners in 2006 alone, and preliminary data from the Central Bank of Brazil has registered $26.5 billion from foreign direct investments between January and August 2007.
The fact that Brazilian properties are still available at low prices, combined with a pro-active Government that is taking a long-term attitude to investment into infrastructure improvements and into tourism, will result in inherent rises in property prices, thereby creating a lucrative property market. Additionally, the market is still in its infancy and indicators to its future are highly positive, all aspects that make it a prime emerging market.
