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Everything you need to know is included in our Brazil Property Pack
Are you considering buying real estate in the land of Samba? Are you pondering if the prices are at the desired level?
When it comes to market timing, there are varying opinions. Your Brazilian acquaintance might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from São Paulo, might have a different view and recommend waiting for more stability.
At TheLatinvestor, when we create articles or update our pack of documents related to the real estate market in Brazil, we base our work on facts and data we can trust, not opinions or rumors.
We've done extensive research on official reports and government website statistics, resulting in a comprehensive database. Here's what we've learned, which can provide valuable insights for your decision-making process regarding real estate purchase in Brazil.
We hope you find this helpful!
How is the property market in Brazil now?
Brazil is, today, a relatively stable country
Neutral
Stability should always be the leading factor to consider when you want to invest in real estate because it ensures predictable and reliable market conditions. It is an information you need as a foreigner buying a property in Brazil.
In today's context, Brazil can be regarded as a country that has achieved stability to some extent. The last Fragile State Index reported for this country is 73.9, which is a respectable number.
Brazil has a strong economic base and has implemented a number of important reforms to reduce corruption and improve its political and social institutions, making it a relatively stable country. Additionally, Brazil has a large and diverse population that has helped to create a vibrant and resilient society.
Let's analyze other data now to assess whether it's a favorable time to purchase property in this country.
Brazil is positioned for growth in the coming years
Positive
Before investing in properties, make sure the country's economy is in good shape.
In line with IMF predictions, Brazil is likely to finish 2023 with a growth rate of 0.9%, which is somewhat disappointing. Regarding 2024, the figure we're looking at is 1.5%.
However, this low number is just for the short-term, as Brazil's economy is expected to increase by 7.5% during the next 5 years, resulting in an average GDP growth rate of 1.5%.
A moderate growth rate in Brazil is a good thing for investors because it indicates that the economy is stable and will continue to grow, but at a sustainable and manageable rate. This provides a good opportunity for investors to make a return on their investments without the risk of over-inflation.
Nevertheless, there are other indicators to watch.
Brazilian business owners have become skeptical of the economy
Negative
While the GDP forecast is significant, it's important to recognize that it's formulated by the IMF (as mentioned before), which is an international entity, therefore not reflecting the perspectives of Brazilians regarding their local economy. Luckily, in Brazil there exists an official metric that is consistently published. This doesn't apply to every country, so we're in luck.
The Business Consumer Index (BCI) serves as a metric to gauge business leaders' confidence in the current and future economic conditions, based on surveys and assessments.
According to the Confederacao Nacional da Industria (CNI)'s data, the latest Business Confidence Index value is 1 for Brazil. For interpretation, it's quite low.
Taking a more in-depth look at the data, we notice a troubling pattern: the score has experienced a decrease in 12 months, it was indeed at 16.
Business Confidence in Brazil is currently facing some challenges. However, this does not automatically mean that the property market will crash. A lower confidence score often indicates a temporary period of uncertainty or caution within the business sector, which is a natural part of economic cycles.
It is crucial to consider additional metrics before deciding whether it's the right time to buy property in Brazil. This is what we're doing in this article.
Property values in Brazil have been climbing for 39 months
Positive
Brazil's home prices have increased by 17.6% in 5 years according to FipeZAP.
It means that if you had bought a beachfront apartment in Rio de Janeiro for $650,000 five years ago, then it would now be worth around $764,000.
Investors in the property market have likely enjoyed positive returns for nearly three years, providing them with a sense of confidence and reassurance in the stability of the market.
It's definitely a positive signal for whoever wants to invest in the Brazilian property market. However, you might want to wait for the next market correction.
You can find a more detailed analysis of the real estate prices in our property pack for Brazil.
Everything you need to know is included in our Brazil Property Pack
Brazil's population is getting (a bit) richer
Positive
When buying real estate, it's important to consider population growth and GDP per capita, because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Brazil, the average GDP per capita has changed by 3.2% over the last 5 years. It's not much, but the growth is here.
This means that, if you purchase a beachfront condo in Rio de Janeiro and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be an increase in rental demand in Brazilian cities like São Paulo, Rio de Janeiro, or Brasília in 2024.
Rental yields are average in Brazil
Neutral
Moving forward, let's examine the rental yield.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Brazil is purchased for 1,000,000 BRL and generates 60,000 BRL in annual rental income, the rental yield would be 6%.
According to Numbeo, rental properties in Brazil offer gross rental yields ranging from 2.7% and 5.4%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Brazil.
It means that your income potential is relatively moderate.
Everything you need to know is included in our Brazil Property Pack
In Brazil, inflation will intensify
Positive
Inflation is when your money buys less than it used to.
It's when your go-to plate of feijoada costs 35 Brazilian reais instead of 30 Brazilian reais a couple of years ago.
If you're considering investing in a property, high inflation can bring you several advantages:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
According to the IMF's estimations, over the next 5 years, Brazil will have an inflation rate of 17.5%, which gives us an average yearly increase of 3.5%.
This data shows that Brazil could experience inflation, resulting in rising prices. Therefore, it's worth considering buying property now as a potential opportunity.
Is it a good time to buy real estate in Brazil then?
Time to conclude !
2024 presents a compelling opportunity for property investment in Brazil due to several positive indicators. The country's favorable growth prospects in the near future signal a conducive environment for real estate appreciation. A noteworthy trend is the consistent climb in property values over the past 39 months, highlighting the potential for sustained value growth and long-term investment gains.
Brazil's improving population wealth further bolsters the argument for property acquisition. As the population becomes slightly more affluent, the demand for housing and property could rise, potentially contributing to increased property values over time. Moreover, the anticipated inflation intensification can work in favor of property investors by potentially driving up property prices, enhancing potential returns on investment.
While Brazil is currently stable, this aspect serves as a neutral signal in the investment decision. Coupled with average rental yields, this suggests that immediate returns might not be extraordinary but should be balanced against the long-term growth potential of the investment.
Despite these positives, the skepticism among Brazilian business owners about the economy is a notable concern. It's important to carefully monitor the economic landscape to ensure that potential investments align with evolving market dynamics. Overall, 2024 offers a promising window for property acquisition in Brazil, given the country's growth prospects, upward property value trends, improving population wealth, and the potential benefits of inflation on real estate.
We sincerely hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Brazil.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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