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Brazil Real Estate Report Q4 2011
Business Monitor International, Sep 2011, Pages: 51
Business Monitor International's Brazil Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Brazil's Real Estate industry.
An epic real estate boom continues its course in Brazil. In June 2011, BMI’s in-country sources reported that rents have been growing at double-digit rates in most of the nine sub-sectors that were surveyed. Further rent increases – if at a more measured rate – are anticipated for 2012. A rise in rents relative to capital values means that yields appear to be rising. However, taking the longer term view, yields are expected to fall as perceptions of the risks of Brazilian investments drop.
The real estate sector is benefiting from an export-led boom (which, among other things, has driven vacancy rates for prime São Paulo office space down to negligible levels.) Meanwhile, retailers and mall owners are benefiting from a surge in household incomes. BMI’s in-country sources indicate that conditions are favourable for owners/operators of industrial real estate as well.
Some of the key opportunities currently in the real estate market are:
- The government’s hugely successful ‘Minha Casa Minha Vida’ programme. This involves subsidies that enable the funding, construction and sale of affordable housing to low-income groups. One outcome is, effectively, a one-off lift in the spending power of low-income households. Plan II of the program is under way and will involve the construction of another 2mn homes prior to the end of 2014 – notably in the poorer north east region.
- Investments in infrastructure that are associated with the 2014 FIFA World Cup and the 2016 Olympics.
The relative ease of access to capital from foreign institutions, through Brazilian banks and via the local stock market, has probably never been greater.
Some key risks to the current real estate market are:
- The lingering problems of bureaucracy and a cumbersome legal system – which have acted as a barrier to entry for real estate development.
- The availability of suitable sites for construction of housing – particularly given the requirements of the ‘Minha Casa Minha Vida’ programme.
- Further tightening in monetary policy by the central bank. The peculiar nature of the boom in Brazil is such that it should be able to survive further rate hikes and restrictions on capital inflows. However, it would be extraordinary if there were no adverse effect
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