Real Estate In Brazil

By: Parag Sheth

About Brazil

Brazil is the fifth largest country in the world, and central to south America, bordering the vast majority of countries in the area. The country has over 7,000 kilometres of coastline and spans a massive four time zones. The landscape is as varied as it is different, with the golden beaches along the coastline to the mountains, valleys and beautiful rain forests inland. Along with the diversified landscape there is a vast variety of cultures which converge to give Brazil that vibrant, fun carnival atmosphere for which it has always been known. A haven for the worldwide tourist market, the country is fast becoming one of the "hot spots" in the holiday industry.

Against this back drop of beautiful landscapes, differing cultures and a fun time attitude the economic situation has been somewhat different. Historically Brazil has struggled with high inflation, high interest rates and serious bouts of unrest in the employment market. The country is heavily linked to the US economy, with the local currency tagged against the dollar, and employment also heavily dependent on the US (especially the Auto market, which has been going through a very difficult period).

Since President Lula took control in 2003, we have seen one of the more steady economic periods in the country's colourful history. Heavy spend on infrastructure has helped to improve the performance of the economy, and a more stable exchange rate has assisted the import and export trade. Currently ranked 13th largest economy in the world, this is set to increase to 5th over the next 20 to 30 years.

Property Market

As you would expect from an historically volatile economy, the Brazilian property market has been prone to huge swings. Since the current government took control the wild swings have been reduced as investors start to factor in the long term growth potential of the country - as government policies continue to kick in. This long term attitude by the authorities is a breeding ground for a potentially lucrative property market, and as prices are beginning from a very very low base, there is great potential.

As the country continues the crack down on law and order problems, which has effected the levels on foreign investment in the past, there seems to be a growing air of confidence within the Brazilian population. As with many of these so-called "developing countries" there are a number of property "hot spots" which you should be aware of. Not surprisingly Rio de Janeiro (the home of the carnival!) and Sao Paolo are the most popular locations for foreign property investors, offering a security not yet seen in the majority of Brazil. These two vast cities are the centre of the Brazilian business market, attracting multi-national companies from all over the world - although still dominated by the vast US contingent.

Rio has perhaps the greatest variation of the two offering both an ever expanding business market together with the renowned beaches, including the Copacabana and Ipanema beaches which are very popular with travellers. Investors in Brazilian property are also seeing good returns in places as far a field as Pernambuco, Alagoas and Sergipe to name but a few. Indeed many letting agents are guaranteeing minimum yields of 6% for the buy to let market.

Why Invest in Brazil

While historically Brazil has been a very volatile country, there are signs that the current government regime are getting to grips with the detail of the economy. Often renowned for the gang wars and general crime, the country has done a lot over the last few years to clean itself up. Central to the south American economy, Brazil is a massive country with much untapped natural resources. These natural resources are the major attraction to overseas companies, and with much of the country still uninhabited, this attraction will last for many years to come.

The property market in Brazil is still in its infancy, and while it has developed greatly over the last decade, there appears to be a lack of organisation. Indeed, there have been many stories of agents increasing prices, and wide variations in pricing for the same properties. As time progresses, the market will settle down, and the more unprofessional end of the market will be overshadowed by new structured entrants. It is recommended that you take advice from local reputable partners, regarding the Brazilian property market, before entering into any transactions, and ensure that the agreements are water tight.

While the country may not be at the forefront of the minds of overseas property investors, there is no doubt that property in Brazil offers good value compared to other developed countries of the world. If the economy continues to grow at a controllable rate (even if there are short term swings), the so called "hot spot" areas will grow, bringing in some of the smaller cities, both inland and on the coastline.

Outlook

Brazil is a country that has been on its knees on a number of occasions, only to be bailed out by the International Monetary Fund, and the US. More recently the country is starting to straighten, and looks set to stand high in the future, offering a useful basis for overseas investors. The more settled the economy, the easier it is to forecast future returns.

There is a general feel good factor building among the Brazilian population, with the days of 100% monthly inflation a thing of the past. While there are risks associated with countries such as Brazil, these are factored into the potential returns. Political tension between the south American countries seems to be at a relative low, compared to periods of friction in the past. There is also more co-operation between local neighbours, which is bringing a sense of purpose to the region.

With the backing of the international community, Brazil cannot be allowed to falter because of its influence on the overall south American region. The tourist market continues to thrive, with the general relaxed attitude of the population, as well as the beautiful weather, two of the main attractions. In a country historically blighted by unrest and depravation, while there is still a long way to go, property in Brazil offers definite attractions to the overseas investor.

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