Brazil Market Overview
Tourism is a new industry in Brazil, increasing by 30 per cent in the last year alone, and the property market is hot on its heels. And, despite being rather new on the international property-buying radar, this South American country seems to be ticking all of the right boxes for investors, holiday homers and retirees alike. A diverse landscape, rich culture, idyllic climate and affordability (the cost of living in Brazil is just 20 per cent of the UK) are just some of the reasons why British buyers have started flocking here â€“ but property prices are the reason they are staying.
While the initial flood of interest in property in Brazil was from the investment market, buyers are now seriously looking for holiday homes and potential retirement destinations for the future as flight connections from the UK improves and flight time is down to around 6 hours.
Though the Brazilian economy itself has been relatively well-managed, leaving the country with some currency reserves as the government saved during the good times, the effects of the global recession are still being felt. Association with US and other international businesses has hurt the economy, though certainly not to the same extent it has elsewhere in the world. When the world begins to clamber its way out of the downturn, Brazil should be in a good position to come to the fore.
Often referred to as the giant of South America, Brazil is turning into a giant player within the global economy. Already in the top eleven largest economies, it is predicted to join the top five by 2050 based on the current rates of growth.
A key factor in Brazilâ€™s financial rise is its abundance in natural resources. Brazils land prices have been kept low by the limited availability of finance and credit to both foreign investors and current residents alike. With only 2% of the population holding mortgages, the mortgage market is in its infancy. A few years ago, the longest mortgage available was ten years, now 30-year mortgages are available at rate of 13%-14%.
Overall, the investment outlook in Brazils property market is regarded as highly promising. â€śFor much of the decade, slow-growing Brazil seemed out of its league lumped in with the dynamic emerging economies of Russia, India and China in the so called BRIC group. Brazil now becomes the potential dominant economy from this group of emerging countriesâ€ś.
With the arrival of the â€ž2014 World Cupâ€ź and â€ž2016 Olympicsâ€ź in Brazil, the government is placing a huge emphasis on improving infrastructure. The infrastructure of all the host cities and their surrounding towns are all being reviewed and updated in response to the governmentâ€™s recognition that tourism is a major contributor to the Brazilian economy. The World Cup and the Olympics will only help to increase investorsâ€ź chances of exceptional returns over the medium to long term with the government committing around GBP 20 Billion to the two events. The central bank continues to revise growth projections upwards â€“ just in October 2009 the economyâ€™s growth rate was revised from 4.5% to 5.3%.
In October 2009 big investors like Nat Rothschild, Aberdeen Asset Management and Standard Life have all announced big purchases in Brazil. Citigroups Latin American division confirms that recent trends show steady increases in value of shares in steelmaking companies, cement producers, airlines and the retail sector.
Reasons to Invest In Brazil
- Brazil is the fifth biggest country in the world in both population & landmass. Goldman Sachs predict that Brazil will be one of the five biggest economies in the world by 2050 at the current rate of growth thus turning Brazil into a giant of the global economy which will result in high rates of growth in the real estate market.
- Diverse culture and landscape. There are over 3200km of gorgeous beaches, a wide range of attractions and a booming tourist market that is sure to expand during and after both the World Cup and the Olympics.
- Average temperatures of between 26-32ÂşC giving Brazil 12 month rental potential making it one of the most promising tourist and second home destinations in the world.
- Brazil has political and economic stability with regards to the rights and contracts of foreign companies making it a secure investment destination.
- Brazil already has achieved â€śinvestment gradeâ€ť by the international ratings agency Standard and PoorÂ´s.
- Since 2003, Brazil has improved its macroeconomic stability, built foreign reserves, reduced debt, kept inflation rates under control and committed to fiscal responsibilities.
- Due to a housing deficit of 7.9million units, there is an urgent need for the construction of more than 1.4million units per year, making now a good time to invest in real estate.
- Fast growing domestic wealth is coupled with a proactive government that is investing heavily in the countryâ€™s economic security, tourism and infrastructure. Brazils economy is growing at average rate of 5% a year.
- Mortgage penetration currently sits at under 2% - UK 70%, Mexico 14%, Chile 14%, China 14%.
- The recent reduction in interest rates has generated an increase in real estate financing that should see it go from being 2% of the GDP currently, to 12% in 2014
- Brazil is now the eighth biggest oil producing nation in the world and is almost completely self sufficient in terms of its import-export trading.
- The cost of living in Brazil is 60% cheaper than the UK with low fuel costs.