This year, 2013, is a particularly appropriate one in which to focus attention on Brazil’s real estate markets. As the football World Cup and the 2016 Olympics in Rio de Janeiro draw attention from over the Atlantic, it is interesting to contrast the state of Brazil’s housing market with those of the North Atlantic countries and also the fast-emerging Asian markets.

South America, in general, and Brazil, in particular, have enjoyed the benefits of fast economic growth, but apparently without the attendant excess house price inflation that has become associated with so many of the ‘new world’ real estate markets of the East.

Although house price growth over the last five years has averaged 23% per annum in Rio and 17% per annum in São Paulo, residential rental yields are on a par with many of the troubled ‘old world’ economies and house price to income ratios are much lower than many of the Asian ‘tiger’ economies.

In this Spotlight, we examine the drivers of housing demand in Brazil, comparative indicators of affordability, international comparisons of pricing levels and an assessment of how the residential property markets might behave in future.

Brazilians, alongside other South American nationals, are poised to become more significant players in international residential real estate markets. As the domestic market grows and as investors have prospered at home, so they will become more inclined to invest overseas.

As Brazil’s wealthier classes have grown in number and are increasingly looking for avenues for investment, real estate becomes an increasingly attractive store of wealth and investment medium.

Already North America, particularly the more cosmopolitan cities of Miami, Los Angeles and New York, is becoming a familiar marketplace for South American buyers – but not yet Europe and Asia.

•Should Americans, Europeans and Asians also be looking to South America for capital growth and rental returns?

• When it comes to residential real estate, should Brazil be viewed as a growth stock with fewer dangers than many other emerged markets?

Are the fundamentals of strong economic and capital growth but seemingly greater affordability coupled with a young, growing population the perfect ingredients for a housing market boom?

This document attempts to answer some of these questions and, to do so, looks at the fast-growing and economically important locations of São Paulo, Rio de Janeiro and a small, fast growing petroleum economy town of Macaé which is symptomatic of the rapidly developing and fast-growing nation.

As the foremost of the ‘BRIC’ economies, Brazil enjoys all the hallmarks of success; a fast growing domestic economy, vast natural resource and a stable, democratic government. It is the world’s fifth most populous country, with a youthful population – the average age just 30 – and a growing middle class.

Taken from
Spotlight: Brazil Residential Property Market