Recent News for Property investments in Brazil

Real Estate Investment Surges In Brazil:

Northeastern Brazil has begun to emerge as a viable international tourism destination for discerning travelers. The region is known for its pristine beaches, year-round sunshine, gastronomic and cultural riches as well as the incomparable hospitality of its people.

The upsurge in domestic and international tourism has sparked an unprecedented boom in tourism-related real estate development. Such projects not only include major hotel development projects, but also large-scale infrastructure development and a wave of vacation property purchases by foreigners looking to enjoy summer stays in Brazil.

Recent research by Brazil’s Central Bank illustrates this dramatic surge in foreign interest in the nation’s real estate sector. The volume of foreign investment in Brazilian real estate projects surged 410% between January and November 2006, reaching a total of US$1.35 billion. During the same eleven-month period in 2005, total foreign investment in the sector was a mere US$296 million.

Europeans represent the lion’s share of this investor base, with Portuguese, Spanish, Italian and Scandinavian capital heading the list. British companies have also shown substantial interest in the region and are actively looking for local partners to develop new initiatives.

The dramatic expansion of tourism-related real estate investment in Brazil is not merely the result of the nation’s natural beauty and tropical climate. The country boasts the largest economy in Latin America, as well as a stable democracy that respects the rights of foreign investors. Because the rules of the game are well-structured and transparent, foreign investors enjoy greater security and can more accurately forecast ROI before commercial real estate transactions are formalized.

Felipe Cavalcante, president of ADIT NORDESTE stated “Brazil offers excellent opportunities for growth in tourism-related real estate development …The professionalism of domestic players in the sector, a strong and transparent regulatory framework and a robust macroeconomic environment offer unparalleled opportunities for foreign investors. Because of this, we believe that North Americans, like the Europeans, will soon begin to capitalize on the great potential of Brazil’s tourism and real estate markets,"

Source: Brazilian-American Chamber of Commerce, inc. March 28, 2007

The property market in Bahia-Brazil:

Established real estate markets tend to show a slow yet stable growth trend, however capital growth is limited due to a higher initial valuation. Because of this, many professional international property investors are expanding their geographical horizons and expressing increased interest for more exotic emerging real estate products that offer potential for higher capital growth. Emerging markets offer a potentially high capital growth but comes with an associated higher risk.

As with all emerging markets, the earlier you invest, the greater your profit potential. Defining moments and timing are always the catalyst for any real estate opportunity and when investing in an emerging market, timing is of even greater importance. If one picks the right time to invest in an emerging market, there can be significant capital growth. Pick the wrong time, however, and you may be taking on all the risk in return for little of the reward.

As an example of “wrong timing” would be to buy in an area that is not receiving investments nor is tourism increasing. Prices might be very low, but on the other hand the risk is very big and potential gains might never materialize or it might take a very long time. A good example of this would parts of Africa. Another example of “wrong timing” would be to invest in an area where prices are flattening out and the market will slowly turn into a more established market.

An example of “good timing” would be to buy in an area where tourism has been growing for some time but the property market is still in its very early stages. For professional property investors who wants to maximize capital growth while minimizing risk, this is the best time to invest since property prices are extremely low in comparison to what they are expected to be and at the same time there are strong signs that the area will become even more popular. The property market in Bahia is now in that stage and offers investors a unique chance to get early in and benefit from several years of growth.

In the next five years, investments in new hotels, golf courses, resorts and condos should exceed R$ 4 billion (about US$ 1.8 billion) on the coastline of Bahia, the equivalent to 8% of all foreigner investments that the entire Brazilian economy received last year. The area is set to become one of the most popular tropical destinations for Europeans, and recently the Americans have opened their eyes for this area as well.

The coastline around Bahia bares many similarities to how the Spanish Costa del Sol was 30 years ago. Once charter tourists started arriving in Spain and became aware of the lifestyle the area offered, the area started to change and consequently the price level as well. Today Costa del Sol is the leading tourist destination in Europe and the general price level reflects this as well.

It stands to reason that buying early – at a time when the property market is still in its infancy and prices are as cheap as they will ever be – promises to yield the greatest possible capital growth. The property market in Bahia is still in the very early stage, and that is exactly what makes it so profitable for investors who get early in on the act.

Investors in the Northeast of Brazil can acquire beautiful properties in stunning surroundings, at prices simply unobtainable in most other destinations. For investors buying for a pure investment, as well as for those who want to buy a dream property in a stunning location for an extremely attractive price, Bahia offers an excellent opportunity to buy at extremely low prices that will never be seen again.