Claims of 30% gains on land within 3 months, people buying online without viewing their investments and suggestions that people are ramping their investments on the thread – this group of posts has it all!

This thread was originally started back in February this year with a suggestion that land investments in Brazil were doing very well and the original poster had seen growth of 30% on a land investment in just 3 months. This claim has prompted an array of comments from ‘Well done’ to ‘We do not believe it’ and everything in between, but it has opened up a number of interesting debates.

One of the more bizarre claims is that people are buying Brazilian property online without even viewing the assets in question, a claim which has rung alarm bells with many on the thread. However, there are a number of posters who suggest there is nothing wrong with this if you are able to find a trustworthy agent on the ground. The opinion from those who claim to have hands on experience of the Brazilian property market vary widely with some claiming that the market is very buoyant and others suggesting that the price rises posted on the thread are a little out of synch with the market as a whole.

Interestingly towards the end of the thread a number of posters have suggested that while Brazilian property has done very well of late, there are risks to any emerging market. Past performance of the property market does not mean it will continue forever.

Summary

While there is no doubt that the economic environment and investment potential for Brazil has increased dramatically over the last decade, this is still an emerging economy which investors should be treating with care. Historically the country has been heavily dependent on the US for economic prosperity and while the balance has changed of late (with more overseas investment than ever before) the country is still very closely linked to the US economy.

As is now common knowledge, the US economy is in a state of turmoil with credit lines disappearing fast and some of the country’s oldest companies in serious financial trouble. The government has to endure expensive bailouts for troubled banks and possibly Fannie Mae and Freddie Mac – something which is sure to impact upon the short to medium term performance of the US economy. As the US economy stalls this is sure to have a knock on affect to countries in the region and while the impact may not be as large as in the past, this is sure to knock the property market in Brazil.

One alarming point from this thread is the suggestion that some investors are buying assets in the country without visiting the area. This has the feel of a property bubble, one in which every investor thinks it is easy to make money, one which is probably waiting to burst!

Medium to longer term Brazil is set for sustained economic growth but the short term picture is a little less clear. Be wary of being sucked into the final stages of a property bubble without knowing what you are actually buying.

Read the full thread about the real estate market in brazil on the forum.

As posted in the forum, Brazil has been classified last April 2008 by “Standard and Poor’s” as a country with an investment rating of BBB. This is defined with its “Capacity to service and repay debt. Many find this satisfactory, but risks increase when conditions become adverse. Previously, Brazil was given the grade of BB, which was defined with it’s “Increasing uncertainty surrounding service and repayment of debt” and “debt carries an increasing degree of risk”.

Hence, Brazil’s new upgrade signifies that there is a stable confidence of the foreign investors in the Brazilian economy, which in turn had created a burgeoning middle class and consequently a greater demand for residential properties. Amidst the fact that expenses of foreigners traveling to Brazil have also increased despite real appreciation, which could be an indication of moving away from the all-inclusive packaged traveler, there is also an increase in second residency tourists that are more likely to purchase a house and spend on the local economy. All these are good indicators for the property market, making it an ideal time for investors to buy into the Brazilian market.

Moreover, the upgrade was also supported by a news article released last April by the Central Bank that indicates transaction accounts having shown deficit but experiencing an offset due to the capital account inflows. FDI net inflows show net positive balances amounting to $3.9 billion. Net positive results for stocks have reached $5.9 billion. Net positive results for bonds are at $230 million, and international reserves are estimated at $195.8 billion.

However, not all members in the forum are confident in the upgrade. This is due to the high interest rate of 12.25% per annum and inflation. In fact, this can be seen in the high increase of prices, especially in flour, beans, and other staple food items.

Such doubts about the status of Brazil were also supported by a few members who have cited the phenomenal performance of three of the BRICS countries–Russia, India, and China. These three countries continue to grow 2% faster than what was predicted, thus collectively amounting to 16% of the global GDP. Although Brazil was mentioned to have seen an increase in its growth rate in the past six months, the status is considered quite unreliable since detractors claim that optimistic predictions on BRIC economies actually ignore major hurdles in their development. This would include future political instability and rampant corruption as well as worn-out and non-updated infrastructure.

Amidst the differing views presented in this forum, several members contended that Brazil is relatively doing well in spite of its increased interest rates and increased food prices.

Hence, after “Standard and Poor’s” upgrade on Brazil’s investment rating to a “BBB” last April, another private independent rating service delivered Brazil’s credit rating in less than a month. Fitch Ratings is the second large rating agency to have upgraded Brazil’s credit rating. In fact, they have raised it from a BB- to a BB+.

According to the rating agency, this improvement in Brazil’s credit rating is an indication of the dramatic improvement in the country’s external and public sector balance sheet as well as the dedication of the government in keeping a lowered inflation rate and a budget surplus that would dispel concerns on medium-term fiscal growth.

The recognition given by these two major credit agencies is due to Brazil’s solid fiscal position, thus proving that it has the capacity to grow with stability. The announcement of this upgrade in the country’s investment rating would further increase the number of foreigners who would buy Brazilian securities.

Thus, upon the announcement of Fitch’s upgrade, the Real exchange value against the US Dollar has reached 1.639 per dollar.

Read more about the awarded investment rating of Brazil in the Brazil Forum.

Brazil’s stable economic and political conditions are contributing factors in the country’s current emerging property market. This is along with the predicted exceptional returns in the next ten years. For foreign investors who would like to take advantage of the incredible potential of Brazil’s property market, finalizing the location for an investment is what makes the difference in this lucrative business.

Members who responded in this forum have agreed that there are different metrics for determining the perfect location for an investment in Brazil. Foremost of these would be the motivation for investing as well as the amount that the investor is willing to lay out. These two aspects can help determine the type of property that would be most suitable for the needs of the investor. This would then go hand in hand with the market base together with the location.

Each location can provide you with different reasons for investing, such as the area’s infrastructure, the climate, the locals and the neighborhood, and the price of these properties. Most importantly, when choosing a location, one should look at the tourist figure within the area. This is to ensure capital appreciation and high demand of the investment, which can be appropriate for both second homes and letting properties.

With the specific locations that members have cited, the most common denominator between these locations is the fact that they are all tourist-frequented areas. Among the specific areas given were Natal, Fortaleza, Rio Grande do Norte, Ceara, Bahia, Cumbuco, and Pipa—all of which are either established tourist destinations or have been growing increasingly popular with tourists.

Hence, Brazil ranks as one of the top countries in the property investment league wherein investment properties in the country are easily snapped up by investors who are taking advantage of the incredible potential of Brazil’s property market. With the country’s favorable political environment and stable economy together with the relatively lower property rates in the country, Brazil will continue to attract investors. Aside from this, it will consequently bring with it the so-called property boom that has long been predicted for Brazil.

Property investments in Brazil are pouring into the country’s most frequented tourist locations. The areas of Natal, Fortaleza, and Rio Grande do Norte are long established tourist destinations. The influx of tourists has created a steady demand for rental accommodations.

The coast northeast of Natal is currently receiving much attention from tourists. One village in this area that has received such attention is Praia da Pipa in Rio Grande do Norte. It is about an hour south of Natal, along the district of Tibau do Sol. Thus, Pipa’s attraction lies in its great waves, which was discovered by surfers as early as the 80’s. Its miles of quiet beaches that offer excellent facilities for various outdoor and water activities as well as its lively nightlife was voted as the best in northeast Brazil.

With property prices being relatively inexpensive and having a stable rental market, the charming region of Brazil holds a tremendous potential for those who would view it as a new tourist and property investment hotspot.

More about the economy of Brazil in the Brazil forum.

Based on the contending views that have emerged from members, particularly with regards to the current state of the cost of living in Brazil, two general statements can be made in order to describe their standpoint.

The first one pertains to the view that the prices depend on the location of the property. Living in Brazil’s tourist hotspots such as Pipa, Natal, and Fortaleza can be quite expensive. This is since these areas primarily cater to the tourist market. In addition, these areas are regularly visited by tourists. Plus, its resources are always in demand or in use, making it apparent that these areas follow the law of supply and demand.

The high rates for air fares, car rentals, hotel accommodations, and dining expenses are actually reflective of these demands. Hence, these areas really generate relatively higher expenses as compared to other less known tourist hotspots in South America, which seem also reflective of Brazil’s popularity with tourists along with its position as an established tourist destination. Therefore, if one should decide to live in a tourist area, then a buyer should also pay like a tourist.

Secondly, Brazil is seen as an inexpensive destination for those who are planning for a short stay or just for the holidays. This is opposed to those who choose to relocate in the country and earn their living there. Thus, since Brazil has one of the world’s lowest paying salaries along with the fact that the most basic needs in the region are also quite expensive albeit at local rates, one should really work hard to earn a decent living in Brazil. This is especially true if you wish to survive in Brazil. For instance, a couple living in relative comfort and having two school-aged children, a house of their own, a housekeeper, and a gardener, their expenses would mount up to approximately R$ 10860. However, if it is converted into Euros or Pounds, the monthly expense would only sum up to a little over 4,000 or 3,000, respectively.

Therefore, living expenses in Brazil vary greatly on where and how one intends to live in this country. Thus, in the thread, what remain noticeable are the contradicting views given by most members about their ideas that the cost of living in Brazil is inexpensive.

Thus, Brazil is not included in the list of countries that a foreigner can move into in the hopes of making a better life solely based on financial gains. Foreigners who come to Brazil to relocate may find it difficult to secure a job that pays salaries comparable to the wage rates in their own countries. Unless they are skilled foreign professionals being transferred to this country with expatriate contracts, these people will be forced to find a source of income. Thus, it is a known fact that Brazil offers one of the world’s lowest salary wages and has a high unemployment rate.

Hence, there are many bureaucratic procedures that a foreigner needs to comply with, especially if the purpose were to secure employment and to live in Brazil. Unless one is married to a local or possesses a special skill, securing a resident’s permit (vista permanente), which contains a foreigner’s registration number, can be very difficult to acquire. In addition, a tax registration number (CPF) and a work permit (carteira de trabalho) should be acquired in order to work and live in Brazil. Furthermore, one has to contend with the low salary wage, which usually fails to merit the responsibilities that come with the position. Since the minimum wage in Brazil is R$240. Because the salary is often calculated as a multiple of the mentioned wage, many people cannot get by with their salaries and are forced to find different jobs. This even includes professionals.

Aside from this, companies also face heavy overheads under the Brazilian labor laws. They are obliged to provide their employees with health insurance, travel allowances, holiday payments, and food baskets, which would generally double the value of their actual salary. These companies are also heavily taxed and are quite unable to access credits. This is since the Brazilian interest rates are quite high.

A foreign national that has a heavily demanded product or service may opt to work alone. Although setting up a company may be expensive and extremely bureaucratic, such an endeavor is a good alternative. In fact, Brazil has one of the world’s highest rates of self-employed people. Plus, Brazilian companies are used to dealing with such entrepreneurs. They often offer tailored services and even save their client companies from the cost of employing extra labor.

Thus, the streets of Brazil are certainly not paved with gold but one can live a life of relative comfort and contentment if one strives hard and works for it.

Learn more about the low cost of living in Brazil in the Brazil forum.

When keen in investing in a property in Brazil, or in any foreign land, getting a permanent residence may not immediately be the best step to undertake. There are several options that a foreigner can explore that can afford flexibility and less time to process.

Types of Temporary Visas:

1. Tourist Visas

Citizens of most European nations require only a valid passport or either a return or onward ticket. Sometimes an evidence of funds that can prove that you can afford a ticket is needed in order to enter Brazil as a tourist. The processing of their tourist visas is quite straightforward as well, where in they simply fill in a form upon arrival. After which, a visa is granted allowing these visitors to stay for 90 days. This may be extended only once, granting another 90 days when applied at least 15 days before it expires. Should one desire to stay longer, he or she should leave the country and re-enter again.

Australian, New Zealand, Canadian, and US citizens, as well as citizens from other nations may require a visa in advance. This is available in Brazilian consulates, in their respective homelands. Additional requirements include a passport photo, an accomplished visa application, and a processing fee.

2. Short Stay Business Visas

This visa is ideal for people who wish to visit Brazil for the purpose of making and attending business contacts, attending trade fairs, or conferences. Continue reading ‘Visas and Permits in Brazil’ »

The Cumbuco banana resort, which is a new development near Fortaleza, has been receiving mixed remarks by members on the project’s potential for capital appreciation and rental revenues. This is in comparison with the various developments found in Natal as well. As Fortaleza is an established holiday city, having four times the size larger than Natal, a well-developed night life, and a long standing popularity with Spaniards, continental Europeans, and most recently with the British tourists, investing in the said property has the largest potential for significant rental income rather than with properties in Natal. Although natal has more beachfront properties and amenities geared towards tourism, the thousands of on-site properties and hotels found in the city would pose as competitors for the short-term leasing market. Some members even commented that the proximity of Natal with the airport would provide little difference as Fortaleza has direct flights from Miami, which is another attractive feature for the North American market. Continue reading ‘Cumbuco Banana Resort’ »

The central issue in this thread revolved around the assumption that property valuations is a determinant factor in the return of investment provided by Brazilian properties. A general consensus was voiced out by most members in support of the view that rises in property values is neither a 100% assurance for a return of investment, nor does it represent the overall state of the Brazilian property market.

Forum participants reiterated the importance of research and first-hand observations on the properties offered before making any investment. This is because hearsay and speculation have produced two distinct sectors in the Brazilian property market. One, the market exists for the locals and second, it exists for the foreigners. In which, the latter usually sport much higher values as compared to what is really sold in the local market. Therefore, it is essential for foreign investors to be aware of these local market prices in order to prepare for the event of reselling their properties. Hence, since the locals will most certainly make up the majority of the potential buyers, a high-priced property wouldn’t sell as easily as compared to the properties priced according to the local’s expectations.

Moreover, in terms of expecting a good return of investment, many participants purported that selecting a location where a strong demand for real estate properties exist would present a more realistic outcome. Such prime locations in Brazil are the local and international tourist’s hotspots of Natal, Fortaleza, Bahia, Recife, and even Aracaju. Continue reading ‘Return On Investment in Brazil’ »