Following on from our email yesterday which was the first in a 5 special Brazil Investment 5 Part Series, we bring you today Part 2 which focuses on the Brazilian housing & mortgage market.
Why Invest in Housing in Brazil?
As discussed yesterday, Brazil has been the fastest growing property market in the world over the last 3 years (2010, 2011, 2012 according to the Knight Frank Index). Due to the meteoric rise of the Brazilian economy, increased national wealth has driven a significant growth both in demand and grade of housing in Brazil.
As it stands Brazil has a housing deficit of 8 million homes that are required today, and this deficit is widening. The vast bulk of demand is within the middle class sector. This is unsurprising as the economic middle class in Brazil is now 100 million people, almost doubling in the last 6 years, making it the fastest growing middle class population in the world. This has driven a significant need for homes for over 30 million people (8 million homes). Simply put, when the demand exceeds supply you have price growth, making it a very favorable investment climate in housing and property. This also creates a strong demand for rental property, as is common in any international market where demand is high.
With increased disposable income, Brazil is also experiencing a boom in domestic tourism and thus also second homes, with regions such as Paraiba in the north east experiencing 78% tourism growth in 2011 alone. Historically Brazil is a country that has sustained self-sufficient tourism, however with the arrival of the 2014 FIFA World Cup and the 2016 Olympic Games, one can imagine the additional increase this will put on demand for housing and facilities not just now, but also in the coming years.
When most think of Brazil they think about Rio De Janeiro or Sao Paolo; however these cities are highly mature markets at their price peak. It is across regions such as Paraiba in the north east of Brazil, which is outgrowing the rest of the country, that investment opportunities become particularly interesting. Brazil only offered its first ever housing mortgages 5 years ago, and now Banks in Brazil such as Santander, Bradesco, and Banco Do Brasil (to name but a few) are offering up to 100% mortgages to Brazilian nationals for up to 40 years. With that in mind you can begin to see why the demand for housing is increasing so quickly now that finance is accessible where it was never available in the past.
Due to the fact that Brazilians never had mortgages until recently, they have quite a distinct buying culture for housing with many opting to buy their land in private condominiums first, and then build their own homes afterwards, gradually expanding and extending them over time. This is because most property purchases operated on a cash only basis, with buyers having to save to buy. This has seen a surge in Brazilians buying into condominiums on a land plot with planning permission basis. This is due to the planning permission process being very lengthy and and often difficult, causing problems to obtain due to strict licensing laws. In Brazil, the law also protects buyers, ensuring all developers have obtained all planning and licensing before they are allowed to sell to any Brazilians.
In summary, the Brazilian national property growth has achieved an average of 20% per year for the last 3 years, and regions in the north east such as Paraiba have experienced even higher rates due to their economic development. This means that these regions are catching up with the industrial cities of the south, and there is unlikely to be another time when purchasing land and housing is going to be as potentially lucrative as it is right now.
There is a distinct process to buy safely in Brazil and we will give you the key things to look out for in order to buy land and property safely in Brazil in Part 3 tomorrow…
If you would like to request information on our Brazil opportunities, or a copy of our fantastic free Investment Guide: The Definitive Guide to Investing in Brazil, please ‘click here’.