More strong growth for the Brazilian real estate market - Emerging Real Estate

More strong growth for the Brazilian real estate market

17/09/2011

 More strong growth for the Brazilian real estate market

Brazil continues to go from strength to strength with annual property price growth in the region of 20%. This growth rate is predicted to continue for at least the next 5 years and the unique challenges the country face suggest this prediction is accurate.

There is still a chronic property shortage in Brazil with approximately 1.5million new houses required each year. The Government social housing scheme Minha Casa Minha Vida will go some way to addressing these issues – by 2014 the aim is to have 3million new homes built but the demands are still there. Brazil’s population as a whole has grown by approximately 70 million since 1980 and the rising middle class is another contributing factor with nearly 7 million Brazilians over the past 10 years entering the middle classes. With a reported deficit of 7 million properties already, it could take decades to be able to fulfil all the requirements.

So what are the risks? Following the housing market crashes in many European countries, it would be prudent to consider the idea of Brazil being in a property bubble that could also be set to burst. However, Brazil’s growth is not driven by speculators or property investors, but rather by the increasing demands of a growing population. Should foreign investors in Brazil decide to pull their money out, as happened in countries such as Spain and Dubai, the domestic demands are a real safety net for the Brazilian market to ensure they can avoid a similar fate.

 For example, the North East in particular has been a historically poor region with low home ownership rates, and this is changing quickly with areas around Bahia showing some of the country’s fastest growth rates. Bahia has always been a huge tourism draw for Brazil and is the most popular area for Brazilians to holiday – again, ensuring constant domestic demand and excellent rental potential.

To discuss any of our properties in Brazil, please give us a call.