International investors looking towards Brazil property market
Over the last decade or so Brazil has been one of the more prominent Latin American economies and while there has been a short-term hiccup with regards to demonstrations and government difficulties, the long-term future of Brazil is still very positive. However, over the last few weeks we have seen a significant drop in the Brazilian real against the US dollar and UK sterling which has alerted many international property investors to the region.
The recent reduction in the exchange rate of the Brazilian currency was not only prompted by the mass demonstrations but also a slight weakening of the economy as forecast by HSBC. This was in line with an array of downgrades for the region even though Latin America as a whole is still far outperforming its North American, European and Far East and counterparts.
Brazilian property prices
It is difficult to say whether the reduction in the Brazilian currency will be a short-term issue or indeed it may drag on for a little longer. Whatever happens, in real terms property in the region is around 10% more affordable than it was four years ago. When you also take into account the fact that property values across some of Brazil’s more prominent cities fell by between 5% and 7% in the first quarter of 2013 could this turn out to be a long-term buying opportunity?
Quote from PropertyForum.com : “A residential property boom is under way in the north east of Brazil, historically the poorest region of the country, it is claimed.”
A number of prominent property websites are now quoting international investors as showing significant interest in the Brazilian property market as a means of taking advantage of the short-term political and economic situation. Despite the fact there is still significant poverty across Brazil, and indeed across many areas of Latin America, the middle-class population continues to grow and many of them have significant disposable income. This is why many people believe that the Brazilian economy will not slow too much in the short to medium term and the long-term situation is even brighter bearing in mind the number of trading arrangements put in place by the BRICS partnership.
Location, location, location
Despite the fact that a number property experts believe that now could be a prime time to take advantage of a long-term investment in Brazilian property, you will still need to concentrate upon the more popular areas of the country. As with so many emerging countries, the spread of wealth across Brazil is nowhere near equal and there are small pockets of extreme wealth while the vast majority of people continue to struggle. Cities such as Rio de Janeiro, Brasilia, etc continue to attract visitors and international businesses and therefore are more likely to see a short-term recovery in property prices.
As with any investment, if you’re looking to move money overseas you should where possible get the opinion of those on the ground because a blanket investment in Brazilian property is not the same as a focused prime property/main cities investment. It will be interesting to see how the Brazilian property market performs in the short to medium term and indeed whether the Brazilian president is able to quell future demonstrations and good to her word on improvements in infrastructure and public services.
An investment in Brazilian property is not without risks but we may look back in years to come and pinpoint this time as an opportune moment to review the sector.