Saturday, December 18, 2010
Dear Reader,
It's easy to forget sometimes that the economic slowdown affecting the US and Europe is not worldwide. I get the constant drip feed of bad news (banks on the edge of collapse, budget cuts and bailouts) from my home country, Ireland. But I know that while it's tough times ahead for countries like Ireland, other places are thriving...and pockets of opportunity still exist. My scouting trip in Uruguay reinforced this. Here, with a growing economy, and an attractive environment for foreign investors, the real estate market continues its upward climb. The problems elsewhere have simply highlighted Uruguay's success...and potential for property buyers.
But the star in Latin America's crown is Brazil. Brazil is unique in many ways. It's energy-sufficient, emerging as the world's breadbasket, with a solid manufacturing base and strong economic growth. The third-quarter economic figures, released a week ago, revealed growth of 6.7% compared to the same period last year. Analysts forecast growth of 8% for the whole of 2010.
Brazil's president, Lula da Silva, predicted that the country would become the world's fifth economy by 2016, if current growth rates continue. The president was presenting a review of his eight years in office. He highlighted some significant achievements. Unemployment, at 6.1%, was at its lowest rate for decades. And Brazil is now a creditor country for the first time, lending money to the IMF. In 2003, Brazil's foreign exchange reserves stood at 49.3 billion dollars; today, they total 238 billion.
Shrinking the unemployment rate is helping Brazil reach the UN Millennium Development Goals, possibly in 2012, three years earlier than their target of 2015. Reducing the gap between rich and poor also helped, as did the emergence of a new middle class, Class C. Class C now encompasses more than half the Brazilian population.
Moreover, Class C is responsible for Brazil's surging real estate market. This market is very different to those in other countries on the Pathfinder radar. In other countries, real estate booms resulted from a large influx of foreign buyers. This was the case with prime city properties in Panama between 2004 and 2007, and beachfront properties in Nicaragua during the same period, where large numbers of North American buyers snapped up condos and lots, leading to a doubling or tripling of property values.
In Brazil, those local middle classes fuel the property market. Their increasing wealth and growing numbers, along with newly available access to bank financing, means that more of them can own a home for the first time. The country's largest real estate developer feels that the property market has room to grow further in Brazil compared to other countries in the region.
Interest from foreign property investors is growing. Brazil is also starting to feature regularly in shortlists of potential overseas retirement destinations. If you want to combine both the investment and retirement angles, you should consider João Pessoa. This city with a population of 700,000 on Brazil's northeast coast isn't well-known. You probably haven't heard of it. But when it comes to retirement locations, Brazilians often choose João Pessoa over their own home towns.
Professionals and civil servants, who tend to retire in their fifties, move here. They like the low crime rate (the city is one of Brazil's safest capital cities), the small-town feel, the relaxed healthy lifestyle, and the beautiful beaches. I spent a month here last year, and loved it. It had the perfect mix of city amenities (shopping, restaurants, cafes), a great boardwalk (ideal for walking, jogging, rollerblading, hanging out), a gorgeous city beach, and even better beaches east and west of the city.
Plus, property prices (although steadily increasing) haven't boomed...yet.
A shortage of suitable rental accommodation means opportunities for rental income, too. John Curtis, a local broker we work with, sold his city condo earlier this year. He took an older condo in part exchange on the deal, and figured he'd sell it. But he soon realized that he could get a 10% rental yield on the condo, long-term (after taking his refurb costs into account)...so he rented it out. His tenants moved in a few days ago.
John has details on a new city property that could work for long- or short-term rental. Riacho Verde is a small project of 55 condos located a block from the beach. Prices for garden units (85 square meters/914 square feet) start at BRL 279,300 ($163,627). The building will have hotel-type amenities. For short-term rentals, the average daily rate could be $73. Based on a 70% occupancy rate, that means $18,650 annually.
Property management fees run around 25%--leaving almost $14,000. Enjoy a couple of months here yourself in the low season and you can still enjoy a healthy yield.
Contact John here to find out more about Riacho Verde, and João Pessoa.
Margaret Summerfield
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