Brazil Facts Property Market –
Expectations for 2009
Also
see Affordable Housing Brazil
Affordable Housing Brazil Projects
Since 1994 Brazil has a stable
currency that has been growing in value compared
to the US Dollar or Euro. In 2004 the law 10.931/04 instituted “alienação fiduciária”, a juridical instrument
that gave great security to property transactions and made it cheaper and faster to dissolve contracts if they
are not honoured and repossess properties. This law also implemented other features designed to make the Brazil
property market more attractive.
Another positive factor is the
availability of credit from Brazilian Banks. Combined with stability and low inflation and the growing income of
the working class in Brazil this caused greater competition between the banks in order to get a bigger share of
the Brazilian mortgage market.
The Brazilian banks know property
financing is a relatively safe investment and it
is now possible to get financing up to 30 years
with a 7% interest rate. Up until recently this was not possible and the maximum term was 5 years pricing a
massive amount of the population out of being able to buy their own property
The explosive growth of the Brazil
property market has led to a large number of property companies listing on the Brazilian stock
exchange.
In 2006 Cyrela, Rossi, Gafisa, Company, Klabin, Brascan, Lopes, São
Carlos e Abyara – opened up their capital with an IPO and raised R$ 5.8 Billion.
In 2007 Tecnisa, Camargo Correa, Rodobens, PDG Realty, Iguatemi, Even,
JHSF, CR2, Agra, Inpar, Multiplan, General Shop, Cia.Bras.Desenv.Imob., MRV, Trisul, BR Malls, Helbor, Tenda e
EZ Tec did their IPO’s and raised R$ 13.8 Billion. In total 28 companies have gone public with R$ 19.6 Billion
being raised.
The
capital raised was partly used to fund expansion into other Brazil states and establish a presence in as many
Brazilian cities as possible with local partnerships and mergers. In 2009 the emphasis is moving
into more property development for the lower middle class financed by the Banks, mergers and acquistions and
private equity (as another option for small and medium size property companies).
There
is also an increasing amount of private investment in property development projects, an abundant flow of
international resources to the northeast of Brazil to finance second residence projects for Europeans and a
number of new investments funds along these
lines.
Second Homes Market In The
Northeast Of Brazil
The second homes market in North
East Brazil is very strong and it is getting stronger every year. The 300 days of sun per year, the paradise
beaches, the open and kind people of the north, the marvellous food and the very low prices are attracting more
tourists every day. Many of them decide to get a second residence for vacations or to live during their
retirement years. According to a Vox Populi research done in the main airports with tourists leaving Brazil in
the first months of 2009, 86% of the tourists have the intention of coming back and 96% of them would recommend
Brazil to friends and family. (1)
The Brazilian ministry of tourism
together with Embratur (Brazilian tourism governmental agency) have recently released the numbers figures that
show people residing out of the country have purchased US$ 700 Million in second homes in 2007. Europeans were
responsible for US$ 450 Million and North
Americans for US$ 102 million. The vast majority of these properties are in the beach cities of the northeast.
(2)
Research ordered by ADIT Nordeste
(Association for the Development of Real State and Tourism in the Northeast.) and executed by HVS Consulting
& Valuation and Newmark Knight Frank, concludes that if you count only existing property development
projects in the pipeline scheduled for completion
up until 2014, there will be 7200 new properties in the second residence market and 7600 new rooms in resorts or
major hotels.
This study also indicated that the
average price for a luxury second residence on the North East Brazil coast is about US$ 3000 per square metre.
The study estimates that this price will rise to US$ 5000 by 2014 to equal prices in Mexico and Punta del Leste.
(3)
Ceará and its capital Fortaleza
are one of the favourite destination for tourists because apart from all the reasons already given (weather,
beaches, people, night life, gastronomy, nature, etc) it is also in a privileged geographic location, being the
same distance from Europe and USA (6,5 hours flight from Lisbon or Miami), the closest point of South America to
Europe.
Fortaleza is a big city with 2.5
Million people, which gives the city a bright and lively culture and leisure options by night or day. The city
of Fortaleza has two different coast lines, one facing the east with wide beach and big waves, good for surfing
and such sports and another one, facing north, that has very calm waters and is very good for swimming and wind-surf or kite-surfing.
These reasons were why Fortaleza
was the city to be chosen for great projects like the new Villa Galé (in the process of obtaining the licenses)
the biggest turistic resort of Brazil, the Aquiraz Riviera.
Situated 3 km of the beach park,
the biggest water park of South and Central America, the Aquiraz Riviera has 285 hectares (2.850.000 m²) and the
total cost of US$ 350 millions and when it is finished in 2011 will be the biggest tourist project in the whole
of Brazil. (4)
Sources:
1-( www.turismoemfoco.com.br/v3/
www.voxpopuli.com.br)
2- Embratur www.turismo.gov.br
3- ADIT Nordeste (HVS Consulting & Valuation and Newmark Knight Frank, with data
collected and analized by the consultants Diogo Canteras e Raymond Smith) published em www.turismoemfoco.com.br/v3 and
distributed in the ADIT newsletter to members in 05/06/2008.
4- ADIT Nordeste. (Member
Newsletter – 12/04/2008)
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