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Brazilian property a good opportunity for investment?

Date added: 19th April, 2011 at 10:49
(view all articles from April, 2011)

Brazilian property may present a good opportunity for investors, as one expert has said emerging markets with a high rate of urbanisation are some of the best places to speculate on real estate.

In an article for the Asset, international director at LaSalle Investment Robin Goodchild explained that people ploughing their money into buildings look for countries with strong economic growth and rising employment rates.

Brazil's gross domestic product jumped by 7.5 per cent in 2010, according to figures from the country's institute of geography and statistics (IBGE), representing the largest yearly expansion of the economy since 1986.

Separate numbers from the body show that the number of formal workers in the private sector increased by 1.8 per cent in February, while the unemployment rate fell to 6.4 per cent from 7.4 per cent during the same period a year before.

This compares to Britain, where the unemployment rate was at 7.8 per cent in April, with 2.48 million people out of work, while the economy shrunk by 0.6 per cent in the fourth quarter of 2010.

Property speculators are also attracted to markets where the supply of new buildings is limited, Mr Goodchild wrote.

Head of real estate investment at Standard Life Investments David Paine recently remarked that good quality new space is at low levels across the world and vacancy rates are falling.

While Mr Goodchild's comments suggest that this kind of news is a good sign for those looking to buy into property, Mr Paine's prediction that yearly returns from the global commercial real estate market will almost hit double-digits in the future medium-term could provide extra encouragement.

Mr Goodchild went on to say that individuals want to put their money where they do not have too many competitors and that investors may be best off by pouring their cash into developments in emerging markets that are being quickly urbanised.

One mark of a sprawl of man-made structures may be the rate of civil construction in a country and Caixa and the IBGE's national index of this sector rose by 0.52 per cent in March, seeing a yearly increase of 6.88 per cent.

The highest rates of civil construction occurred in Rio de Janeiro and were 4.92 per cent over March and 5.45 per cent over the past 12 months.

According to the IBGE, the rises in the city can be attributed to salary hikes, which also saw the south-east region experience the highest rates of civil construction compared with other areas at 1.05 per cent.

Mr Goodchild noted that, despite the occurrence of natural disasters in Japan and New Zealand as well as political unrest in the Middle East, projections for growth around the world in 2011 and 2012 "remain remarkably robust", which could be good for those looking to invest in Brazilian property.

"Despite all the shocks that the world has experienced recently, prospects for global real estate investing look very promising particularly for those seeking a reliable stream of dividends for the long term," he concluded.

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