10/05/2010

News: Brazil

Brazil prices to rise as UK sales hit £30m

UK investors looking for cheap deals sent more than £30 million to Brazil for property sales last year – and agents are scrambling to cash in.

But some argue rising prices and a strengthening currency could see the country competing with destinations closer to home.

Around £30.1 million was exchanged into Brazilian reals by UK buyers in 2009, up from £4 million in 2004, according to Central Bank of Brazil figures obtained by Moneycorp.

The currency broker launched a dedicated Brazilian exchange service in October 2009 and has seen a 40% annual rise in enquiries about property in Brazil so far this year.

“A lot of our clients one or two years ago were big investors but now we’re seeing more £20,000 land deals with people for whom that is a large part of their savings,” said the firm’s Brazilian account manager, Dean Roe.

“Last year it was better to have liquid funds – now the economy has started to recover people have more confidence to invest.”

Market shift
Agents have jumped on the shift towards cheap development land plots fuelled by promises of rapid price growth, with many focusing on the less-developed northeast of the country. And some, such as Experience International, claim enquiries and sales are up slightly.

But the window for cheap investment may not last long thanks to the country’s housing shortage, growing middle class demand for holiday homes and the attention brought by the upcoming Brazilian World Cup and Olympics.

“We could find if the exchange rate keeps going up and prices rise enough that there comes an equilibrium where Brazil is as expensive as closer destinations such as Bulgaria and Turkey,” said Clive Hawkes of Bond International – which has sold Brazilian property for seven years.

New-build prices rose by 25% year-on-year in the third quarter of last year, according to Global Property Guide.

The exchange rate has also seen a big shift, said Roe. “The pound was worth around BRL4 just a year ago, but as sterling has weakened it’s now closer to BRL2.7.”

Strong competition
However, the reasons behind the price rises will keep returns strong, said Hawkes. “Brazil’s very big market for internal tourism and growing local demand for property will help it compete as an investment destination.

“When we reach this equilibrium, Brazil will probably be so in people’s minds that it will still be a favourite because of its tourism potential.”

Northeast Brazil’s real estate and tourism investment conference, Nordeste Invest, takes place on 10-12 May in Natal.

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