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WHY PROPERTY IN BRAZIL CONTINUES ITS GROWTH BOOM…

Monday, 21 Jul 2008

As an outsider, the Brazilian economy can seem like it is doing something of a ‘crazy dance’ at present. Whilst the country’s currency has risen to great heights of strength (thanks in part to the vast investor confidence), the fact that stocks have crashed due to traders’ concern over the knock on effects of America’s dire economy.

Inflation is on the sharp rise, and thus causing concern, however, the Brazilian President, Lula, is well known for his ‘inflation busting attitude’. Therefore one can remain safe in the assumption that when all is said and done, Brazil’s property market will in fact continue to boom.

According to commercial and institutional investors that have bought into Brazil’s housing market, they have indeed done very well in recent months, thanks to the significant currency improvements in Brazil.

It is also important to note, however, that for individual investors looking to buy one or more property units in Brazil (as fly-to-let investments); the recent currency expansion Brazil is experiencing will have little or no effect on their purchases. This is simply due to the fact that the projects being targeted by such buyers are priced in pounds sterling!

The increase in construction costs will however have an adverse effect on Brazil’s housing market. These cost increases are adding ‘fuel to fire’ on the advancing inflation in this Latin American country, which many analysts see as a very real concern.

As the inflation climbs, so does the concerns around Brazils’ economy and housing sector continue to mount. Property analysts are concerned about the fact that for the medium-term the inflation in Brazil will undermine what is otherwise a very strong economy.

As is pointed out by property experts, “For fly-to-let investors who already own property in Brazil, the fact that construction costs are rising means that future releases of projects they have bought into will likely be priced higher, as will other similar developments in the immediate vicinity. If demand remains intense in Brazil, it basically means those who have bought in ahead of any significant price rises could stand to benefit from overall price expansion in the real estate industry.”

Another property portal specialist claims that “in South America’s largest country there are no signs of economic decline and ‘credit crunch’ is an unknown term among Brazil’s fervent consumers.”

Many are of the opinion that Brazil may still be affected by the global knock on effects of the American economy melting down! Brazilian stocks have already fallen because analysts and traders became concerned that ‘credit losses in the U.S. could stifle growth in Brazil and also lower demand for exports.’

As was stated in the property media recently, “Any nation that has any connection to the US in terms of imports, exports or direct investment runs the risk of being impacted by the sorry state of their economy.”

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