Brazil property market boom?

[Ruban]

I am a UK investor/developer that has been looking at Brazil for the last couple of years and wanted to get forum users general thoughts on the housing market here.

I've been in the south for about 10 weeks. I originally started in Florianopolis (Santa Catarina). I have a few contacts over there and used the trip to enjoy the region and see what potential opportunities there were. From what I could see, the market was fairly stagnant - a number of developers were withdrawing projects and there seemed to be an over-supply of apartments (but it was off peak season).

I am now in Rio (Zona Sul) and have been speaking mainly to agents and local homeowners throughout RJ state. Now I have only been here for a month, so I am far from an expert, but here are things from how I can see it:
- a lot of Cariocas are looking to sell at the moment (money is better kept in the banks rather than property);
- there is talk of a peak in the market due to a large amount of foreign investment in the country (unnattractive returns in other countries, World Cup 2014);
- over-inflated prices due to the governments 'Minha Casa Minha Vida' programme meaning that people are not negotiating hard enough as the package is so good;
- one Brazilian told me that there is usually a dip in house prices around general election time (2010) so I should wait until then before doing anything;
- the country has witnessed a housing boom period for some time now and many Brazilians feel that house prices remain out their budgets (considering wage levels and income)

Of course, all the above maybe simple here-say and local markets would probably differ. Indeed, there are a number of factors such as the general populations dislike of debt (particularly sub-prime) and the undeveloped mortgage market which keeps Brazil as an investment region well-worth keeping a close eye on.

I would like to hear forum users thoughts on the Brazilian market at the moment and for the medium-long term. Nobody wants to be a speculator and, personally speaking, I would like to base any decisions on cold hard facts (as I'm sure many people here do too).

Looking forward to discussing this...

 

[debzor]

I am a UK investor/developer that has been looking at Brazil for the last couple of years and wanted to get forum users general thoughts on the housing market here.

I've been in the south for about 10 weeks. I originally started in Florianopolis (Santa Catarina). I have a few contacts over there and used the trip to enjoy the region and see what potential opportunities there were. From what I could see, the market was fairly stagnant - a number of developers were withdrawing projects and there seemed to be an over-supply of apartments (but it was off peak season).

I am now in Rio (Zona Sul) and have been speaking mainly to agents and local homeowners throughout RJ state. Now I have only been here for a month, so I am far from an expert, but here are things from how I can see it:
- a lot of Cariocas are looking to sell at the moment (money is better kept in the banks rather than property);
- there is talk of a peak in the market due to a large amount of foreign investment in the country (unnattractive returns in other countries, World Cup 2014);
- over-inflated prices due to the governments 'Minha Casa Minha Vida' programme meaning that people are not negotiating hard enough as the package is so good;
- one Brazilian told me that there is usually a dip in house prices around general election time (2010) so I should wait until then before doing anything;
- the country has witnessed a housing boom period for some time now and many Brazilians feel that house prices remain out their budgets (considering wage levels and income)

Of course, all the above maybe simple here-say and local markets would probably differ. Indeed, there are a number of factors such as the general populations dislike of debt (particularly sub-prime) and the undeveloped mortgage market which keeps Brazil as an investment region well-worth keeping a close eye on.

I would like to hear forum users thoughts on the Brazilian market at the moment and for the medium-long term. Nobody wants to be a speculator and, personally speaking, I would like to base any decisions on cold hard facts (as I'm sure many people here do too).

Looking forward to discussing this...

Most importantly I think it is impossible to generalise Brazil by studying and quoting one area. It is simply too big and diverse.

The market in Rio is completely different to other areas, and it is probably more necessary for you to identify your specific goals and requirements, and then search out an area that may satisfy them.

Of course it will also depend on your target market

 

[robh]

I am a UK investor/developer that has been looking at Brazil for the last couple of years and wanted to get forum users general thoughts on the housing market here.

I've been in the south for about 10 weeks. I originally started in Florianopolis (Santa Catarina). I have a few contacts over there and used the trip to enjoy the region and see what potential opportunities there were. From what I could see, the market was fairly stagnant - a number of developers were withdrawing projects and there seemed to be an over-supply of apartments (but it was off peak season).

I am now in Rio (Zona Sul) and have been speaking mainly to agents and local homeowners throughout RJ state. Now I have only been here for a month, so I am far from an expert, but here are things from how I can see it:
- a lot of Cariocas are looking to sell at the moment (money is better kept in the banks rather than property);
- there is talk of a peak in the market due to a large amount of foreign investment in the country (unnattractive returns in other countries, World Cup 2014);
- over-inflated prices due to the governments 'Minha Casa Minha Vida' programme meaning that people are not negotiating hard enough as the package is so good;
- one Brazilian told me that there is usually a dip in house prices around general election time (2010) so I should wait until then before doing anything;
- the country has witnessed a housing boom period for some time now and many Brazilians feel that house prices remain out their budgets (considering wage levels and income)

Of course, all the above maybe simple here-say and local markets would probably differ. Indeed, there are a number of factors such as the general populations dislike of debt (particularly sub-prime) and the undeveloped mortgage market which keeps Brazil as an investment region well-worth keeping a close eye on.

I would like to hear forum users thoughts on the Brazilian market at the moment and for the medium-long term. Nobody wants to be a speculator and, personally speaking, I would like to base any decisions on cold hard facts (as I'm sure many people here do too).

Looking forward to discussing this...

Hi Ruban,

I am not sure what you usually develop, but I would have thought "Minha Casa Minha Vida" is a developers dream?

What housing boom there has been so far in Brazil is tiny compared to what has been going on in the rest of the world, and if you look at the Brazilian economy and forecasts for the future you will realise it still has a long way to go.

Regards,
Rob.

 

[Blc]

I am a UK investor/developer that has been looking at Brazil for the last couple of years and wanted to get forum users general thoughts on the housing market here.

I've been in the south for about 10 weeks. I originally started in Florianopolis (Santa Catarina). I have a few contacts over there and used the trip to enjoy the region and see what potential opportunities there were. From what I could see, the market was fairly stagnant - a number of developers were withdrawing projects and there seemed to be an over-supply of apartments (but it was off peak season).

I am now in Rio (Zona Sul) and have been speaking mainly to agents and local homeowners throughout RJ state. Now I have only been here for a month, so I am far from an expert, but here are things from how I can see it:
- a lot of Cariocas are looking to sell at the moment (money is better kept in the banks rather than property);
- there is talk of a peak in the market due to a large amount of foreign investment in the country (unnattractive returns in other countries, World Cup 2014);
- over-inflated prices due to the governments 'Minha Casa Minha Vida' programme meaning that people are not negotiating hard enough as the package is so good;
- one Brazilian told me that there is usually a dip in house prices around general election time (2010) so I should wait until then before doing anything;
- the country has witnessed a housing boom period for some time now and many Brazilians feel that house prices remain out their budgets (considering wage levels and income)

Of course, all the above maybe simple here-say and local markets would probably differ. Indeed, there are a number of factors such as the general populations dislike of debt (particularly sub-prime) and the undeveloped mortgage market which keeps Brazil as an investment region well-worth keeping a close eye on.

I would like to hear forum users thoughts on the Brazilian market at the moment and for the medium-long term. Nobody wants to be a speculator and, personally speaking, I would like to base any decisions on cold hard facts (as I'm sure many people here do too).

Looking forward to discussing this...

Hi

I think the situation is diffrent in all states as they boomed at diffrent time.

I purchased in Floripa 5 years ago when property prices in Jurere were low I purchased 3 beds for 250.000 BRL prices rose to 700.000 BRL. Recently I sold 2 I did not want to wait around for the market prce so I sold for 450.000 BRL within 3 weeks. I would say Floripa has reached its peak although tourist numbers are growing each year and the island is superb.....great lifestlye investment.


Rio\ Also peaked over supply ,for the moment in time I can see prices increasing once investors have cleared stock and developers stop building. 2016 games could change things again.. Effected by the credit crunch as Americans have always been keen on Rio... My opion is that Rio is the best place on earth and a good long term bet.



The north east is far more under devloped and will benefit more from the 2014 games with all the new infrastructure.

Regarding Brazilians keeping money in the bank. I think this also depends on the area mortgages are up 90% this year first 6 months of the year.


I recently moved into a new apartment I purchaded off plan 4 weeks ago whem I moved in the developer had 70% sold once finished he sold 30 % in 3 weeks I guess this has something to do with Brazilians being able to get mortgages from the banks now cheaper than developer finace which is 12% plus IGPM = 16%
BANKS 30 YEARS @ 8.4%


And the biggest sucess story I can report from Ceara.
Aquiraz Riviera Golf almost complete. The developers released the 600 lots for sale 5 weeks ago. 1000m2 plots 350.000 BRL \$ 189.000 100% SOLD IN 5 WEEKS
THATS 210.000.000 BRL 97% SOLD TO BRAZILIANS.




Brazil is a large country and finding the hot spots at the right time is the key.


I have seen the local market in Fortaleza start to roll again recently to pre credit crunch days.

Also forgeiners have started to buy again we recently released a beach project 60 days ago 70% SOLD 126 units all sold to forgieners here goes the break down.

Yanks\ 97
Brits\ 19
Mixed\ 10

The debvelopment was not offered localy as it was more suited to foreigners.

My opion is that currently the north east is by far the best bet for property investment or relocation.

My 3 hotspots.

Fortaleza will boom in the next 4 years .
Natal\ Pipa whatch this destination grow leading upto the world cup and after.

San Luis\ well i dont want to give to much away about this place but feel free to check it out.

Brazil has its problems but you can not beat it having lived here for 2 years visiting for 5 I would not change it for any place in the world.

 

[Ruban]

Thanks for you interesting responses. Would be interested to hear further comments...

 

[JMBroad]

I've been in the south for about 10 weeks. I originally started in Florianopolis (Santa Catarina). I have a few contacts over there and used the trip to enjoy the region and see what potential opportunities there were. From what I could see, the market was fairly stagnant - a number of developers were withdrawing projects and there seemed to be an over-supply of apartments (but it was off peak season).

I am now in Rio (Zona Sul) and have been speaking mainly to agents and local homeowners throughout RJ state. Now I have only been here for a month, so I am far from an expert, but here are things from how I can see it:
- a lot of Cariocas are looking to sell at the moment (money is better kept in the banks rather than property);
- there is talk of a peak in the market due to a large amount of foreign investment in the country (unnattractive returns in other countries, World Cup 2014);
- over-inflated prices due to the governments 'Minha Casa Minha Vida' programme meaning that people are not negotiating hard enough as the package is so good;
- one Brazilian told me that there is usually a dip in house prices around general election time (2010) so I should wait until then before doing anything;
- the country has witnessed a housing boom period for some time now and many Brazilians feel that house prices remain out their budgets (considering wage levels and income)

Of course, all the above maybe simple here-say and local markets would probably differ. Indeed, there are a number of factors such as the general populations dislike of debt (particularly sub-prime) and the undeveloped mortgage market which keeps Brazil as an investment region well-worth keeping a close eye on.

I would like to hear forum users thoughts on the Brazilian market at the moment and for the medium-long term. Nobody wants to be a speculator and, personally speaking, I would like to base any decisions on cold hard facts (as I'm sure many people here do too).

Looking forward to discussing this...

As pretty much everyone else has mentioned already it is hard to get an idea of the market in Brasil as such as the country is so vast and the regions are so different one from another. The country has an 8 million housing deficit but where exactly are those millions located? On top of that figure, the government body responsible for the housing market has also declared that they consider as much as 30% of the existing housing in the northeast unfit and in need of replacing. Travelling around the northeast it's not hard to figure out why - 10 minutes out of the state capital and you'll notice most of the houses are mainly "mud huts".

However you have been misinformed on a few crucial pieces of information...

- a lot of Cariocas are looking to sell at the moment (money is better kept in the banks rather than property);

This seems very unlikely given that there was new legislation put in place about three months ago according to which any Brazilian national (private person not company) who has over R$ 50.000,00 in a savings account will be taxed on the surplus. This has made more people look at investing their money outside of banks (including into real estate). The Cariocas would be the first people I've heard of who decided to put money into banks after this news was released (about three months ago if memory serves me)

More later but going to lunch now

 

[Ruban]

Been speaking to a few agents over the last few days and the consensus is that the market has come to a bit of a standstill. Could just be a temporary blip...

 

[JMBroad]

Back from lunch...

-there is talk of a peak in the market due to a large amount of foreign investment in the country (unnattractive returns in other countries, World Cup 2014);

Not sure if I understand correctly - Brazil has reached a peak because other countries offer unnatractive returns and because of the World Cup 2014? If anything those two facts should help the Brazilian market increase more?

- over-inflated prices due to the governments 'Minha Casa Minha Vida' programme meaning that people are not negotiating hard enough as the package is so good;

I guess it depends on the point of view. Earlier, low income Brazilian families would never have been able to afford houses like the ones they are now buying - so yes, they are just buying them without negotiating however "over-inflated" prices would indicate to me that either the prices are more than people want to pay for them or that they could buy them cheaper. In reality they are buying them and they never would have been able to buy them at cheaper prices before. Now I can only use my personal frame of reference which is the medium and low-income residential market of Natal, Rio Grande do Norte and here the prices are very attractive and selling quickly.

- one Brazilian told me that there is usually a dip in house prices around general election time (2010) so I should wait until then before doing anything;

I'm not sure that this will be the case again next year - the Brazilian government has been stable now for many years so I doubt there is the same incertainty around election time as there was 15 or 20 years ago for example. The next elections are held at the end of 2010 and elect the government for 2011 so you are talking about waiting another year. 2012 is when many of the infrastructure requirements for the FIFA 2014 have to be in place so it's a question of deciding which is more likely to impact the market more - the elections or the world cup (assuming the elections will affect property prices at all).

- the country has witnessed a housing boom period for some time now and many Brazilians feel that house prices remain out their budgets (considering wage levels and income)

Depends greatly on the area - although prices have risen in many areas there are many other areas (and market segments like low-cost housing) which haven't seen such a strong increase and still have room for growth.

Ultimately - while I differ in opinion regarding to the information you've been given - it may well be because I'm based in the Northeast (Natal) or it may be the fact that we have a unique investment strategy which (so far) has served us very well. Despite my more positive outlook I don't believe Brazil is going through a property Boom in the sense that most speculators would relate to.

Yes there have been micro-booms in certain cities and regions which have led to incredibly inflated prices but that has been because investors have fed speculation of the kind they have been accustomed to in other parts of the world.

Brazil is not a Dubai, Costa del Sol or Black Sea Coast - it's a unique country with unique characteristics and I believe what Brazil is experiencing is a sustainable, strong and steady growth which will last for many years to come. You just need to find the right product to invest in.

This is of course my opinion based on my experiences working with and living in Brazil. As far as the market segments we are focusing on in the area we work (Natal) - we are building as fast as we can and we can't even get close to keeping up with the demand. We currently have 2 developments sold and delivered, 1 where construction finishes in six months +/- and which is 95% sold, 1 which starts construction next month and pre-launch reservations already account for around 40% of the development and 3 other residential developments in licensing (to a total of around 2000 units). We are also developing 3 commercial projects which are in different stages of licensing.

 

[robh]

Nice post JMB.

As a country I don't think you can go wrong as Brazil has so much going for it, but in terms of individual investments you really do need to do your research on areas.

As Warren Buffett puts it regarding companies, but equally is applicable to property: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Regards,
Rob.

 

[Deane]

Hi

I think the situation is diffrent in all states as they boomed at diffrent time.

I purchased in Floripa 5 years ago when property prices in Jurere were low I purchased 3 beds for 250.000 BRL prices rose to 700.000 BRL. Recently I sold 2 I did not want to wait around for the market prce so I sold for 450.000 BRL within 3 weeks. I would say Floripa has reached its peak although tourist numbers are growing each year and the island is superb.....great lifestlye investment.


Rio\ Also peaked over supply ,for the moment in time I can see prices increasing once investors have cleared stock and developers stop building. 2016 games could change things again.. Effected by the credit crunch as Americans have always been keen on Rio... My opion is that Rio is the best place on earth and a good long term bet.



The north east is far more under devloped and will benefit more from the 2014 games with all the new infrastructure.

Regarding Brazilians keeping money in the bank. I think this also depends on the area mortgages are up 90% this year first 6 months of the year.


I recently moved into a new apartment I purchaded off plan 4 weeks ago whem I moved in the developer had 70% sold once finished he sold 30 % in 3 weeks I guess this has something to do with Brazilians being able to get mortgages from the banks now cheaper than developer finace which is 12% plus IGPM = 16%
BANKS 30 YEARS @ 8.4%


And the biggest sucess story I can report from Ceara.
Aquiraz Riviera Golf almost complete. The developers released the 600 lots for sale 5 weeks ago. 1000m2 plots 350.000 BRL \$ 189.000 100% SOLD IN 5 WEEKS
THATS 210.000.000 BRL 97% SOLD TO BRAZILIANS.




Brazil is a large country and finding the hot spots at the right time is the key.


I have seen the local market in Fortaleza start to roll again recently to pre credit crunch days.

Also forgeiners have started to buy again we recently released a beach project 60 days ago 70% SOLD 126 units all sold to forgieners here goes the break down.

Yanks\ 97
Brits\ 19
Mixed\ 10

The debvelopment was not offered localy as it was more suited to foreigners.

My opion is that currently the north east is by far the best bet for property investment or relocation.

My 3 hotspots.

Fortaleza will boom in the next 4 years .
Natal\ Pipa whatch this destination grow leading upto the world cup and after.

San Luis\ well i dont want to give to much away about this place but feel free to check it out.

Brazil has its problems but you can not beat it having lived here for 2 years visiting for 5 I would not change it for any place in the world.

Hi Blc,

I'd like to talk to you about this off line. How can I contact you?

Thanks

Deane

 

[Coqueiro]

Been speaking to a few agents over the last few days and the consensus is that the market has come to a bit of a standstill. Could just be a temporary blip...

I had a developer from Victoria staying a couple of says and he says its has dipped there, though he was positive people were starting to spend again.

On another note

Many Braslians will not or cannot put their money into the bank because they are worried the recieta federal may take an interest.

So they slip it into apartments, lots in condos, parcels of land here and there, a sitio or farm etc. Even when easy access investment accounts are offering very high returns they will not touch them. These are cash buyers or sellers and will expect the declared the value not to talley with the acutal paid value.