Brazil has been one of the world’s fastest growing property markets. Due to the meteoric rise of the Brazilian economy, increased national wealth has driven a significant growth both in demand and grade of housing.
As it stands Brazil has a housing deficit of 8 million homes that are required today and this deficit is widening with the vast bulk of demand within the new 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, simply put, when demand exceeds supply you have price growth making it a very favourable investment climate in housing and property. This also creates a strong demand for rental property as is common in any international market.
With increased disposable income, Brazil is also experiencing a boom in the domestic tourism second homes market with cities in north east Brazil such as Joao Pessoa experiencing a 78% growth in tourism in 2011 alone.
North East Brazil’s Property Boom
When most think of Brazil they think of Rio De Janeiro or Sao Paulo, however, these cities are highly mature markets with many areas already achieving their peak price. It is across areas such as Joao Pessoa in the north east of Brazil which is outgrowing the rest of the country and where property opportunities become particularly interesting. Considering that Brazil only offered its first housing mortgages 5 years ago, it now offers mortgages to Brazilian nationals for up to 40 years. If you include the huge growth in national wealth and GDP, you begin to see why the demand for housing is increasing so quickly with finance accessible where it was never available in the past.
The north east region of Brazil is economically increasing at a rate far faster than the rest of the country. In the city of Joao Pessoa and surrounding state of Paraiba, the accelerated demand here is illustrated in an increase in their housing deficit of 25% in the last 3 years. Another fact demonstrated with property values is certain municipalities have increased by up to 450% over the same period with major economic development projects such as the Mangabeira Shopping Complex in Joao Pessoa having a massive impact locally.
The Brazilian mortgage market is growing faster than ever before. This new access to finance (only since 2007) has increased demand even further. With the national mortgage market growing 33% in 2012 alone [source IPEA], and only a 7% mortgage debt, there exists exceptional long term positive conditions for property investments that focus on the local Brazilian market as their exit route to international investors.
Brazilian Property Culture
With mortgages being a new option, Brazilians have a distinct buying culture for housing with many opting to buy their land in private condominiums first and then build their own homes, gradually expanding and extending over time. This is because most property purchases operated on a cash only basis with buyers having to save before purchasing. Land with planning permission is highly prized as planning permissions can be very lengthy and difficult to obtain due to strict licensing laws. There are also laws to protect buyers by ensuring developers have obtained all planning and licensing before they are allowed to sell to Brazilians.
With the Brazilian national property increases achieving an average of 20% per year for the last 5 years and cities in the north east such as Joao Pessoa experiencing even higher rates due to their economic development catching up with the industrial cities of the south, there is unlikely to be a better time to purchase land and housing with such potential as right now.