So what’s in store for 2011? The majority of international investors continue to remain bullish about Brazil – an entirely justified perspective for many reasons including rising incomes, lower unemployment, an asian-driven commodity boom, gigantic oil discoveries, up and coming major sporting / high profile events, oil findings, a vigilant banking system to name a few. However, as with any inflationary market, business risks need to be taken into account – from a macro-economic perspective, examples include a highly valued currency that is continuing to lose international competiveness (whilst weighing down the trade-weighted exchange rate and boosting consumer costs); a growing current account deficit; low comparative international savings levels; the ever rising need to improve infrastructure as well as low comparative innovatory and education levels. In 2010, perhaps more than ever before, it has become clear that the key to Brazil’s continued success is for the nation to not become complacent and take advantage of the wave of ‘feel good factors’ that have been sweeping the country in recent years.
For the real estate and land investor – despite possible issues related to over-supply, rising mortgage finance costs and ownership – industry professionals within the country remain positive that, for at least the next few years, the housing market will remain buoyant. In terms of overseas interest, 2010 events such as the financial turmoil in the Eurozone and the repercussions of the credit crisis in countries such as the USA and the UK have made property / land investing in Brazil a challenge – particularly combined with the fact that real estate finance for foreigners is not available (bar some development finance programmes are offered by some constructors). Other issues commonly noted include excessive bureaucracy, title protection, exchange rate issues, obtaining a sufficiently valid investment visa and acquiring real estate related assets transparently in accordance with international legal standards.
Nevertheless, as these issues are unlikely to disappear any time soon, investors – including an increasing amount from other so-called ‘emerging’ nations such as China, India and South Korea – have been striving to work through the complex system. We believe that it is a task that is well worth undertaking considering the wealth of opportunities available in a country with such strong medium to long term growth prospects.
What follows takes both macro and micro based outlooks on factors facing the Brazilian real estate and land industry at the close of 2010.
Below is the section breakdown: