Why Brazil Real Estate?
Despite a slow cooling in Brazil’s residential housing market, which was one of the most successful real estate markets in the world in 2013-2014, unique fundamentals exist to support a real estate market of interest to long-term investors. What’s more, Brazil is a buyer’s market right now.
- Non-residents can own clear title to real estate in Brazil, and foreign nationals with residency in Brazil can own farmland: an increasingly popular approach offering broad potential for investment returns.
- With unemployment falling along with interest rates, and inflation rising in recent years in Brazil, Brazilians have been turning to real estate as an investment asset to offset inflation and advance their own improving financial position.
- Demand had been intense from overseas speculators in the most populous cities and most desirable coastal locations too, however short-term profits are no longer guaranteed in Brazil, and a reduction in speculative interest is being seen as good for long-term stability in the real estate sector.
- In the last seven years Brazil has enjoyed unrivalled property price gains, but the nation was starting from a point of significant undervaluation. Massive double-digit gains are no longer possible in the majority of the most popular centers for international interest, but Brazil remains an emerging market in terms of its long-term, nationwide potential.
- Many of the large-scale residential development programs created to meet demand in Brazil have come to completion over the last 12 months easing the demand / supply dynamic, and causing investors to take a much longer-term view of investment prospects in Brazil.
- Economists agree that Brazil is facing a poor economic outlook for the next couple of years, and that to kick-start growth requires wide-ranging structural reforms. The real estate market is already being affected; vendors and developers are slashing costs to attract buyers who are in the strongest position in the chain.
Brazil Real Estate Market
Please contact us for prices of real estate for sale in Brazil, as well as current rental rates.
- In the last seven years Brazil’s appeal as an emerging property market hotspot saw speculator investment interest from all over the world: the fortunate enjoyed double digit gains on stock held for the short term. Elsewhere rental yields returned on prime apartment stock in the main cities easily reached double digits.
- Now the market is definitely cooling, however experts agree that Brazil’s is not a property market that will go bust.
- The fundamentals supporting Brazilian real estate’s sustainable position include massive local demand from a large middle class, an advancing tourism market, and the fact that the huge gap between rich and poor is very slowly being bridged, driving up costs for land and real estate naturally over time.
- A short-term boost to the property market in Rio is expected as the city hosts the Olympics in 2016.
- Brazilian housing market data is not applicable nationwide because of massive wealth, education and employment gaps, as well as huge discrepancies between the level of infrastructure and accessibility which all impact on a housing market and land costs on a city by city, region by region basis.
- Anyone considering an investment property purchase in Brazil needs to consider a location’s real estate market somewhat in isolation to understand what drives its success and desirability, its potential and any risks.
- Despite being considered an emerging market in terms of its ongoing appeal, Brazil benefits from a composite house price index, FIPEZAP. That, coupled with the Royal Institution of Chartered Surveyors (RICS) presence in Brazil enables investors and house buyers to have a base of expert analysis to enable their personal research and due diligence.
- Investors have broad opportunity to buy in to Brazil’s ongoing potential. Whilst residential price appreciation has slowed from its double-digit year-on-year gains of the last seven years, demand remains, offering yields of up to 8% on well-located apartments.
- Alternative approaches to profiting from Brazil’s property economy include focusing on the commercial sector. Farmland is popular on the back of a severe drought which has forced down land value, despite the fact experts agree Brazilian farmland is prime.
- Another alternative being explored by increased investor interest is the travel and tourism economy. With Rio hosting the Olympics next year and having just hosted the soccer World Cup, Brazil has achieved significant international interest from travelers, as a result Brazil is predicted to benefit from a 6.1%pa capital investment growth for the next 10 years according to the World Travel and Tourism Council.
Real Estate Investment, Taxes and Doing Business in Brazil
- Round trip real estate transaction costs are modest at 9 – 14%. Estate agent fees can account for 5 – 6% of this. A buyer is responsible for between 6 – 8% of costs.
- Foreign buyers can purchase land and real estate directly, or via a resident company or partnership.
- There are some restrictions on the purchase of rural properties and farmland by foreign buyers however. There is a requirement for a nonresident purchaser to take up residency in Brazil within 3 years of the purchase. Or where a purchase of rural land or real estate is made through a foreign company it must be for the implementation of agricultural, industrial or settlement projects, and these must be related to the company’s defined purpose.
- There are multiple procedures involved in the correct registration of a property that’s been purchased in Brazil, and this can take up to 47 days to complete, making the buying process relatively lengthy.
- However, the good news for would-be buyers is that the property registration process in Brazil is robust. Each individual piece of real estate can only be registered at one registry. This holds the entire commercial history and the physical identification of each property.
- When researching a property before making a purchase commitment a buyer or their lawyer can publicly access all required information about the real estate in question, such as legal owner, mortgages, debts and liens. Increasingly the registration and search procedures are being automated.
- Landlord investors can be reassured by tenancy law in their favor with the majority of rentals requiring a third party guarantor in case of unpaid rents.
- For residents Brazil has a progressive personal taxation system up to a maximum of 27.5%.
- Nonresidents’ rental income from Brazilian real estate is taxed at 15% of the gross rent unless they are resident in a low tax country, these are defined as nations that impose no tax on income or impose a corporate tax rate of less than 20%. In which case such an individual is taxed at 25% on Brazilian real estate gross rental income.
Brazil Property Investment Visa
You do not need to be a resident in Brazil to buy real estate and hold free title to it. However, if you’re purchasing rural or farm land you are required to become a resident of Brazil within 3 years of acquisition of your property.
- The VIPER permanent residency visa is the most common category open to foreigners seeking to relocate to Brazil. It’s open to retirees, senior executives and investors alike.
- Qualification criteria depend upon your reason for relocation.
- A retired person will need to have certified proof of having retired and of their retirement income, as well as certified proof that they can transfer a minimum of 6,000BRL (~$2,100) to Brazil monthly to live on. This will entitled the successful applicant to take up to 2 legal dependents to live in Brazil with them.
- Additional dependents will require a further transfer of a minimum of 2,000BRL per month (~$700).
- An investment subclass of this visa requires an applicant to invest a minimum of 150,000BRL (~$52,250) in Brazil upon successful processing of their application. The application procedure has to be initiated in Brazil either by the applicant or by a representative with power of attorney through the Brazilian Ministry of Labor and Employment.
[Source: Brazil Institute of Geography and Statistics]
Brazil Real Estate Markets of Interest
Rio: this is the second largest city in Brazil, represents the second largest GDP in the country, and is one of the most visited cities in the Southern Hemisphere. Like much of the rest of the country Rio has recently witnessed an unrivalled property price expansion, however its housing bubble is deflating. Fortunately this is occurring through a gradual moderation in prices rather than a sharp and sudden crash that would destabilize the market.
Rio’s is more a buyer’s market today than it was just 6 – 12 months ago, which is great news for investors. With mortgage finance still available and Brazilian labor data reporting GDP per head having increased by 60% since 2008, the fundamentals exist to support ongoing local demand for housing, which in turn supports an investor taking a long-term approach to Rio.
Florianopolis: this is the capital city and second largest city of the state of Santa Catarina in the Southern region of Brazil. Florianopolis comprises a main island, the Island of Santa Catarina (Ilha de Santa Catarina), a continental part and surrounding small islands. It has the nickname The Magic Island. In 2009 Florianopolis was dubbed ‘the party destination of the year’ by The New York Times, and Brazilian magazine Veja named it ‘the best place in the world to live.’ The extended city is a significant tourism destination on Brazil’s map. It has 42 destination beaches and has become a second home center for wealthy Brazilians, as well as foreign buyers from as far afield as Europe and North America. Florianopolis is home to everything in terms of real estate – from stunning high-end villas to affordably priced condominium stock. It’s a popular destination with expats and investors alike because of the appeal of the location, and the long-term prospects for property supported by strong demand.
São Paulo: this is the most populous city in Brazil and the Americas, and the state of São Paulo is Brazil’s most populous and wealthiest state. Just as they are in Rio, house prices in São Paulo are considered to be growing in line with CPI inflation and nominal GDP growth now, with the housing bubble of recent years gradually deflating rather than crashing. Demand in São Paulo is incredibly intense for residential and commercial property, and this demand is unlikely to abate – the strong demand supports a long-term investment commitment. Real estate for sale spans all property asset classes and the market will undeniably benefit from the city’s Master Plan that was approved last year. Some of the highlights of the Master Plan include: encouraging construction in areas that are already well served by public transportation and allowing larger buildings in such areas, whilst inhibiting the concentration of buildings inside neighborhoods where urban mobility infrastructure is more sparse. Opportunities for international developers definitely exist in São Paulo.
Bahía: this is the fourth most populous of Brazil’s 26 states and it’s a coastal state offering some of the best beaches and hotels in the whole of Brazil. It is located in the eastern part of the country on the Atlantic coast. With over 600 miles of largely unspoiled coastline Bahía represents almost unrivaled opportunity for any investor or expat alike wishing to find some of the most beautiful scenery in Brazil. Improved infrastructure and accessibility have pushed up prices, but nowhere near as high or as fast as in some of Brazil’s better-known areas for foreign investment. Opportunities exist for developers looking to target the growing tourism interest, or from investors seeking to renovate or just rent to short or long-term residents.
Ceará: located on the Atlantic coast of Brazil in the northeastern part of the country this is one of the main tourist destinations in the entire nation. The state has 370 miles of sandy coastline as well as lush valleys and dramatic mountains. It has become something of a real estate investment hub for international investors over the past 7 years; investors who were seeking to leverage the nation’s economic expansion and growing tourism prospect. Some of the speculative investment has led to unappealing real estate developments, but investors can easily find well-priced, attractive stock ripe for rent to the strong tourism market. As the climate is hot almost year round and Ceará has its own international airport and has benefitted from a lot of investment in infrastructure in recent years, it remains a strong contender for international investment interest in Brazil.
Fortaleza is the largest city in Ceará and fifth largest in Brazil: it experienced an influx of foreign real estate investment interest but today some of the smaller beach towns outside the city represent better opportunities for investors and certainly for expatriates. They are certainly more affordable. Canoa Quebrada and Majorlândia and Cumbuco are all areas to consider in Ceará.
Agriculture and Farmland in Brazil: a special report by CNBC last year dubbed farmland and the agriculture sector the best long-term real estate investment approaches possible. The fundamentals driving this are obvious and stem in large part from a rising global population and a shrinking supply of high yielding land. Considering Brazil has the nickname “the bread basket of the world” it’s unsurprising that its farmland sector is so acutely in demand at the moment. The good news for investors is that a recent dramatic draught has forced land prices in some areas right down making now a good time to move in.
Brazil Location and Geography
Brazil is the largest country in South American and the Latin American region, and the fifth largest country in the world. It is bordered to the east by the Atlantic Ocean and has borders with 10 different nations.
Brazil is one of the world’s 17 megadiverse countries and has an incredibly fascinating ecological offering. Home to the Amazon River basin with its impenetrable tropical rainforests, which have the greatest biological diversity in the world, Brazil also has hills, mountains, plains, highlands, scrub lands and some of the largest most populous cities on the planet, not to mention stunning scenery and incredible beaches.
The climate spans a wide range of weather conditions across a large area with varied topography, but most of the country is considered tropical.
[Source: For more information Wikipedia Brazil]
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