Brazil hailed as an exciting opportunity for buy to let property investors
Brazil is one of the world’s most exciting emerging property markets for investors looking for buy to let real estate that brings in a regular income, according to a new report.
The report highlights how this years FIFA World Cup and the 2016 Olympic Games means that the country will attract more visitors which increases rental prospects in the major cities, especially those hosting these sporting events.
The information in the report from Colordarcy is gathered from several independent sources, to give a clear overview of the main property hotspots and the kind of returns investors can expect, according to managing director Loxley McKenzie.
‘With an economy that has grown rapidly, Brazil looks set to continue offering investors high emerging market returns at low risk. Our latest report is designed to give investors, who may not be too familiar with Brazil, advice on where and how to invest,’ he added.
Overall the outlook for property prices in Brazil will depend on how many people want a particular property and what they are prepared to pay for it, according to the report. When it come to rents at the moment the volume of rental properties in major cities is very low and vacancy rates are only 10%, according to real estate portal Zap Imoveis.
‘This creates an unique opportunity in Brazil property and see rental yields of 8% to 11% per annum and an increase in the price of property of between 10% and 15% per annum,' the report says.
‘In the major cities young professionals are struggling to afford the kind of prices now being asked for properties in good areas and even with the mortgage rates falling into single figures, affordability is unlikely to improve,’ it claims.
‘As a result those who purchase buy to let properties in Sao Paulo, Rio de Janeiro and Brasilia are cashing in by doubling the rent when tenants come to renew their contracts,’ it adds.
The report suggests that the most attractive investments in terms of yields are smaller one and two bedroom apartments in new developments. 'Despite the shortage of rental properties, older developments that lack modern amenities are unlikely to see the dramatic increases in rents seen in new developments,’ the report explains.
‘A 50 square meter apartment will generate yields of 9.6% whereas larger units would be 5.4% to 7.2%. Apartments in the suburbs of Sao Paulo offer yields of between 4% and 8% and in more central areas close to transport links yields can be up to 11%, making it one of the world’s most attractive destinations for buy to let investors,’ it adds.
When it comes to looking ahead the report points out that some of the dramatic increases in property prices seen since 2009 are now beginning to stabilise, adding that this is not a surprise as construction has accelerate to meet demand. Indeed, in 2013 price growth slowed from around 20% year on year to 12% and 10% to 12% is forecast for 2014.
It also points out that rents are expected to grow in good areas of major cities in the run up to the Olympic Games in 2016 and the football World Cup later this year.
‘If you missed out on the first wave of growth, there is still plenty of life in the Brazilian property market. However, in our opinion, the best time to invest in property that pays for itself in Brazil will be in the next 12 months as the property market matures,’ the report says.
‘This will ensure that you are at the beginning of the next phase of sustained growth and ready to take advantage of the feel good factor that the forthcoming sporting events will bring,’ it adds.
The report also covers the potential for buying in popular coastal areas to rent out for short term holiday lets. ‘The downside is Brazil has many miles of coastline and vacancy rates will be higher. Unless you are investing purely as a lifestyle choice, properties in areas close to business districts and regional transport connections are best,’ the report says.
It reckons that the best areas for foreign buyers to invest in coastal areas away from the big cities are Natal and Fortaleza. In Natal properties around beach resorts close to the city are seeing yields of around 10% a year.