Brazil has rewards for overseas investors now and in the future
As in many of the fast-growing,newly emerged ‘new world’ nations, overseas investors new wealth has been channelled into real estate and has led to high house price growth, especially in the major cities where populations are rising rapidly.
While some ‘new world’ cities in Asia can look very fully valued by reference to a variety of measures, Brazil’s are still in line with less overheated markets. Most notably, yields are high by international standards despite there having been some recent disparity between capital value and rental growth.
We expect the disparity to continue as investment activity increases and more cash drives capital values but we expect this gap between investor behaviour and occupier behaviour to be close significantly.
As a consequence, we expect to see substantial but lower than recent capital value growth and sound income returns. Overseas investors will need to have an eye on exchange rates (the ‘strong Real policy’ should help here) and beware the prospect of rising interest rates and/or inflation, but may well find Brazil more rewarding than some other ‘new world’ markets, especially in Asia.
Domestically, rising interest rates may be seen as a threat to the housing market but affordability appears not to be as overstretched as some have suggested. Credit control is strong and mortgaged indebtedness is relatively low compared to other countries, so prospects for a substantial downward price correction seems relatively remote in the current climate of growing wealth creation
UK Savills. For the full report click here.