Why Investors are Looking at Investment Property in Brazil

The results of an innocent online survey on OverseasProperty-Advice.com which were released last month surprised many in the media.  The survey was simply aimed at individual property investors and it asked them about which international property markets they were looking at in 2007.

The results should not be considered indicative of where investor interest is headed this year, but rather which markets have peaked investor interest sufficiently for closer inspection - and Brazil made it into the top three countries under consideration.  The results of the survey led many media sources to question why investors are looking at investment property in Brazil – so here are a handful of reasons that we can think of just off the top of our collective heads…

1) Back in 2003 the global investment banking giant Goldman Sachs lumped Brazil in with Russia, India and China (BRIC) in an in depth analysis of which global economies are progressing so rapidly and have almost immeasurable potential so that by 2050 their economic success could obscure all of the world’s major economies as we know them today. 

The study claimed that if the BRIC nations were to work together they would become the global dominant economic forces by 2050, and while the claims of the report have been everything from criticised to ridiculed, heralded to lauded, one aspect of the report is certainly true – Brazil has one of the most exciting developing economies in the world and the current president Lula Da Silva is committed to doing everything he can to ensure successful economic management continues to benefit the entire nation.

This general commitment is having a very positive effect on the nation on many levels that are of interest to a property investor.

2) Foreign direct investment is extremely active in Brazil because the fundamentals for economic success are undeniable; even economic scandals that have rocked the government in the past couple of years have not dented foreign financial commitment.

The most significant fundamentals that investors are looking at are the size of the local active consumer marketplace, the wealth of natural resources that Brazil has in abundance, the economic growth potential of the nation and the fact that the nation is a politically stable democracy without involvement in any major personal disputes. 

Fortunately for investors, FDI is also actively encouraged and supported in Brazil – and for property investors this means that they can purchase and own real estate in Brazil unrestricted and freehold.

3) Economically Brazil is doing really well and improving which inspires much needed long term investor confidence and subsequent commitment. 

Since 2004 Brazil has managed hearty economic growth resulting in an increase in the numbers of jobs available and in the wages being paid to employees, it now has a floating exchange rate and so no longer is the currency artificially pegged one on one with the dollar, inflation is being brought under control, it is predicted interest rates will actually fall in 2007 and the government is committed to a tight fiscal policy for as long as it takes to make the economy of Brazil as successful as many predict it can be.

A stronger economy and low interest rates could kick start an active mortgage market in a nation where mortgages are rare but where demand could be incredibly high.  If this follows then there will be a likely surge in local demand for real estate as well as a funding of more international purchases of property which could lead to a strong appreciation in terms of underlying property prices.

4) Now that the currency is no longer artificially pegged to the dollar the real price of everything including property in Brazil has decreased effectively for US, European and British citizens in particular - and real estate that was once considered affordable is now widely considered to be cheap!  Naturally this has peaked interest levels.

5) The government of Brazil has an active National Tourism Plan (NTP) in place which has proved positive and highly successful in previous years.  For example in the three years to 2005 tourism increased by almost 50% as a result of the forward thinking and active policies within the NTP.  Going forward the NTP is proving to be an active promotional vehicle for Brazil and it is resulting in increased revenue from tourism, increased awareness of the appeal of Brazil and an increase in the number of visitors spending more and more time in the country. 

This is of course of immense interest to a property investor base keenly aware both of the attractive returns available from short term tourism related rental income, as well as the fact that today’s holidaymaker is very often tomorrow’s holiday home buyer (yes, we know we’ve said it before – but in the case of Brazil we needed to reiterate that point!)

These are just a few small factors that have international property investor interest sniffing about in Brazil’s property market and we think they prove that the Brazilian real estate economy is on the verge of exciting things.

Special Reports: Property News for Brazil

Brazil Country Guide for Property Buyers
Guide to Brazil from a real estate investor's perspective focusing on the property investment opportunities and the beauty of Brazil

Brazil Real Estate Buying Process Guide
The real estate buying process in Brazil is straightforward and well regulated which gives buyers confidence in the property market

Brazil Real Estate Investment Guide
Brazil real estate offers fantastic medium term investment potential now that the government are committed to long term economic development.