Property in Brazil - General buying and selling tips for Brazil

Brazil seems to be very much an up and coming area of the world for property investment, having received a fair amount of coverage on the forum of late.  As informative posts go, there are very few which can beat this thread for detail and useful information, whether you are looking for confirmation of the laws, finance restrictions or just information on the country.  For a country which has received more than its fair share of bad press with regards to sky high inflation in the past,  the property market seems fairly well developed and structured.  This thread contains some great tips and advice for investors looking at this area of the world.

It can be no coincidence that Brazil is proving more and more popular on the forum, with a number of members expressing interest, and many publishing very detailed information on various aspects of the country and property purchase process.  However, many people seem concerned that Brazilian agents are tending to try and steer buyers away from legal representation, which would be suicide in a market alien to the investor.  The only weakness in the property investment chain seems to be finance, but there are signs that the domestic mortgage market is progressing, and increased overseas interest can only speed up this process.  A very interesting and most informative post. 

Brazil - Resales Vs Offplan

This thread has sparked quite a debate about Resale v Off Plan property investment, and why many people seem to avoid resales.  It does bring in the matter of cheap local labour and materials, which can transform a relatively cheap resale over a very short period of time.  However, there are risks associated with buying a “second hand” property which include the possibility that there may be debts associated with the property - which can sometimes come back to haunt a buyer.  Legal fees may be a little higher with resale properties and there may be some added risks, but for those looking to stamp their characteristics on a property, it may be the perfect opportunity.

As the clamour for new properties continues unabated in all areas of the world, many people do seem to be discounting the attractions of the resale market, and the potential rewards.  In areas such as Brazil these attractions may actually be a little great due to cheap labour and material costs in the region.  There is no doubt that the chance to stamp your ideas and character on a home can be attractive to many, but will your style sell? Will your style be popular? Will it actually make you a profit?   There are many factors to take into consideration, but there is no doubt that as the Off Plan market continues to become ever more saturated, investors will at some stage look elsewhere for value.

Real & pound exchange rate

While this thread has in places descended into a slanging match between a couple of posters, there is a real debate to be had about the currency exchange risk when dealing in overseas markets.  As most are probably aware, Brazil was plagued by high inflation and high interest rates in the 1980s and 1990s, and nearly went “bankrupt”.  However, there have been some major improvements in the economy and the authorities seem to have the situation under control.  A number of posters have used the currency fluctuations over this period as a warning, which is quite correct, but is this period of volatility likely to be repeated in the foreseeable future? Highly unlikely.

When property investors deal in so called developed areas such as Spain and Portugal, etc, while there is a form of currency risk, it is no where near as marked as that of Brazil over the last decade.  As a consequence, currency risk is often discounted by many investors, even though they should be taking this into account in their risk assessments.  Looking at Brazil in particular, the last decade has shown a marked improvement in the currency, and while it can be used as a warning to others, is it correct to show this as the norm? To use it as a scare tactic? There are many risks which investors should be aware of, some within their control and some out of their control.  It is how you mange these risks which will determine how successful you will be.

Egypt - New & Original Content

This older thread has received something of a boost of late, with a number of posters adding to the already interesting mix.  We have detailed information on the country, the economy, the property market and the legislative side of property investment.  As with any “new” markets which are attracting worldwide attention, there are a number of differing views and comments (something which actually makes a forum!).  It seems as though the potential for growth in the Egyptian property market is there, but there are issue with regards to registration and resale rights.  A tricky market which will require local and detailed assistance when entering.

From the array of official reports and forecasts about Egypt, there can be little doubt that the building blocks to a lucrative property market are there, increased tourism, increased foreign investment and a growing economy to name but a few.  However, as with so many emerging markets there do seem to be issues with regards to the legislative side of property investment which need to be cleared up and streamlined at some stage.  Unless you take detailed advice there is the potential to make errors which could prove costly, or tie you up for potentially 5 years - something which no property investor would be attracted to.

Egypt: Rental prospects for owners???

Even though the potential rental income on any property investment should be one of the major considerations prior to purchase, there are many people who chase the capital gains element, often forgetting about rental income.  This thread offers an interesting lesson in how prices can be manipulated to secure “guaranteed rents”, resulting in the investor actually paying over the odds.  As many parts of Egypt are new to the international property market, the rental market is even more under developed than the property market as a whole.  As a consequence, acceptable rental returns will not be available until the market has grown and developed further, and there is a balancing of the property supply / demand equation.

Many property investors seem to think of rental income as a bonus, when in fact it should form a major part of the decision making process when looking at an investment.  Rather than chasing capital gains, which can often be volatile in new markets, investors should consider a balanced approach by taking in the potential for capital growth, and long term rental income.  In new property markets it can take some time for rental values to approach “sensible” levels, due to the in balance in the supply / demand chain.  As more properties are built, and less space is available for new developments, this should see the emergence of a sustainable, long term rental market - something which should not be forgotten.