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Article by: info@premierinvestmentproperty.com (Mr.Clive Holt) Published: 30/08/2011

Brazil - Investment Rationale.

While many countries in the world continue to make economic news headlines for negative reasons – Greece, Portugal and Ireland are among this year’s most notorious, with mounting concerns over the larger economies of Italy and Spain and the long term viability of the Euro; Brazil continues it's burgeoning growth, making it the buzz word on every savvy investor’s lips.

Brazil has been under the watchful eye of savvy investors during the economic crisis to see how well it would cope and it’s passed the test with flying colours, being one of the few world leading economies to avoid recession in 2008 - 2010.

It used to be "one to watch" for investors, however, over the past few years, it has proved it is now in a period of sustained long term growth, finally fulfilling it's enormous potential, having already become the world's 8th largest economy and soon to move up to 5th.

At the beginning of this year, the Brazilian Institute of Geography and Statistics (IBGE), reported that the GDP increased a massive 7.5% last year, which is a record high since 1986 and the growth hasn’t stopped there. The economy continued to expand fuelled by record-low unemployment and higher wages that allowed families to boost spending, creating a virtuous and sustainable economic growth circle, forecast by many to have 20 more years to run.

Brazil's gross domestic product increased by 4.2% in the first quarter compared with the first quarter last year. The latest snapshot of Latin America's largest economy "confirms that the Brazilian economy is in a cycle of sustained expansion, at a pace that is harmonious with internal and external balance," Central Bank President Alexandre Tombini said in a statement. The data also showed that the rapid pace of growth recorded last year continued in the first half of 2011.

Subsequently, Brazil is attracting more and more attention from national and international investors who are keen to follow the world's leading institutional investors.

With less than 5% of property mortgaged, compared to 40% - 60% in most developed countries, Brazil has phenomenal potential to grow for decades.

The world’s 5th largest land mass is completelysufficient in fuels, thanks to its world leading bio fuel development and has recently made huge oil finds to turn it into a top 20 oil producer.

Unlike other warm climates, it has a rich abundance of natural water and food; is the largest exporter of coffee, sugar, orange juice, and airplanes, has 50m new middle class citizens since 2003, and very little public debt, combined with high cash reserves - Brazil is the country to invest in now and no sector of its economy is benefiting more than the property market.

The north-east has become Brazil’s star economic performer. According to a recent article in The Economist, across the past decade the region’s GDP rose by 4.2% a year, compared with 3.6% for the country as a whole, yet investment opportunities remain most attractive.

Southern Paraiba is arguably the North East's "jewel in the crown", located south of Natal, Joao Pessoa and Recife are two of the regions most sought-after cities; with the dynamic and prosperous city of Recife just an hour to the south of the natural beauty of Joao Pessoa.

Premier Investment Property Ltd. are currently recommending two coastal development land investments in southern Paraiba to take maximum advantage of these favourable investments conditions.

Clive Holt, Managing Director of Premier Investment Property.com comments :

" Timing is critical to maximise returns and the advantage with our investments is they are in areas at an early stage of development, whilst being in locations that are desirable, with proven re-sale markets and genuinely within a few minutes walk of the beach, with built property, infrastructure and amenities adjacent.

Be aware, there are some other similarly structured land investments where real value has yet to be created, as they are located where land is generally less valuable ( inland and with no amenities close by), with no proven resale demand - therefore value has yet to be substantiated and is wholly dependent upon the resort's successful development.

However, Brazil is a vast country and some of the best growth opportunities in the South of Brazil have already passed, as rental and sales prices for both commercial and residential property in major cities such as Sao Paulo approach those of other world leading countries, although the fundamentals remain in place to support continued growth even here.

Therefore, in areas where prices still remain favourable, we are urging clients to buy in to one of the safer asset classes, land now and wait, rather than waiting until the best returns have been made.

Coastal development land, which has full approval offers maximum versatility and returns if bought in the right location - be careful where you buy as many land options are not within walking distance of the beaches and are located where no real value has yet been created, so, as ever, the maxim location, location, location holds true.

It is realistic to expect returns of up to 100% by the time the 2014 World Cup comes to Brazil and development land offers the most versatile property investment for investors as long as it has full approval for development, which is a pre-requisite for all our land investments.

Larger gains can be made by buyers wishing to build a luxury villa, either now or in the future and we can project manage construction for investors, allowing them to benefit from the majority of the construction profit which normally goes to the developer.

Furthermore, north-east Brazil is the most popular destination for the 50 million market of internal tourists, and currently there is a lack of luxury resorts in this area to cater for this demand. This is further exacerbated by it's established and growing appeal to investors worldwide and growth is supported by continued infrastructure improvements ahead of the 2014 World Cup."

 

External Article Link: http://www.premierinvestmentproperty.com/News/?id=353

Article Link: http://www.premierinvestmentproperty.com/News/?id=353

Please contact the author at info@premierinvestmentproperty.com for more information.

 

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