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Brazil is fast becoming one of the best options for international investment, both for internal and global situations. Diversity and vastness are its main features, besides its really low prices, compared to the global market.
When comparing a property in Europe, with another one with exactly the same features in Latin America, we can talk about prices differences that range from four, six, or even ten times cheaper. For example, a two bedrooms apartment in London costs about US$600,000, while a similar one in Brazil City, is around US$150,000.
In the long term, terrorism and environmental issues are just some of the reasons to see the whole of Latin America as one of the most safe and sustainable resources in the world.
The Prices for Property in Brazil
Property prices in developed countries can’t grow forever. They are more likely to stabilise, if not, to drop after the well known “real estate bubble” bursts.
On the other hand, in Latin America property prices have just started to react to the increase of demand. Despite circumstantial economic ups and downs, price tendencies are definitively on the raise.
Profits for Brazil Properties
The average rental yield for a property in Brazil is about 10% to 12% a year, over the value of the property, for permanent rentals. For holiday rentals, it may vary, depending on the area the property is located and the demand it faces in a particular period of time. It is commonly higher, but seasonal variations it make it harder to estimate average profits.
In case you need more information or have doubts on any of these issues, the specialised staff in January First Real Estate will be glad to answer all your questions, click here.
Buying Real Estate in Brazil
Increased foreign interest in Brazil
Brazil’s tourism is undeniably doing well, and as more people go into the country, demand for short-term rentals increases. There is also a noticeable increase in interest in foreign property ownership. Some of the tourists opt to buy vacation homes for their frequent visits, or even buy to move into the country.
Rio de Janeiro still remains the more popular city for foreigners. This former capital of Brazil is world-famous for the samba-filled Carnival that ends on Mardi Gras Tuesday. Other known spots in Rio de Janeiro are Copacabana, Ipanema, and the Corcovado Mountain, on top of which stands the giant statue of Christ the Redeemer.
Apartments in the centres of Sao Paulo and Brasilia can cost around US$1,000 per sq. m. On the other hand, apartment prices in Rio de Janeiro are more expensive, at US$1,250 to US$1,600 per sq. m.
Despite the influx, foreigners still make up a small portion of property buyers in the market. This could be caused by the several restrictions on foreign property ownership in Brazil, which include restricted areas and limited property sizes. Foreign nationals need the approval of the Brazilian government when acquiring property. A tax registration number from the Cadastro de Pessoa Fisica (CPF) is required.
Hungry for growth
With a GDP per capita increase of 8.32% for the last five years, Brazil is growing much slower than its neighbors. Nevertheless, it has a well-maintained GDP per capita, which is estimated at US$5,518 for 2007. Brazil has been successful in fighting inflation as well, decreasing it from 14.8% in 2002 to 4.1% in 2006.
The Brazilian currency is surging, now almost 2-to-1 to the US dollar. The real has shown impeccable performance in the last few years, with a 69% increase against the US dollar in four years. This is impressive growth from an exchange rate of R$4 to the dollar when President Lula da Silva won office in 2002.
Salvaging the housing market
The government is still continuing to address the excessive housing deficit in the country. The recently re-elected Lula announced a “growth-acceleration package”, which includes housing and infrastructure investment of around US$236 billion for the next four years.
Mortgages are increasing together with the expansion of the housing market. However, mortgage loans still occupy a very small part of Brazil’s GDP.
The reduction in interest rates also greatly helps with the growth of mortgages. The government lowered the rates after inflation was tamed. The overnight federal funds rate was brought down from an average of 23.35% per annum in 2003 to 16.25% in 2004. The rate was 16.45% in April 2006.
About 14% of the 42 million housing stock is rented; home ownership is at 75%, while other categories make up for the remaining 11%.
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