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Brazil offers property investment for overseas buyers

According to a new analysis from real estate firm Savills, Brazil’s property market, compared to some of the other fast growing emerging economies, does not yet look overheated.

According to Paul Tostevin, associate director for world research at international real estate firm Savills, commercial yields currently stand at 8.5% and residential yields are at 5.1%.

He pointed out that the high profile sporting events are helping to raise Rio’s international profile. ‘It is no surprise that Brazilians are returning to Rio in large numbers. The city is now growing at a faster rate than São Paulo. The rate of annual house price growth in Rio de Janeiro peaked at 40% in 2010, slowing to 15% in 2013,’ he said.

‘This is much more in line with underlying occupier demand, matching rates of growth in rents. However, mortgaged indebtedness is low and credit control is strong, so the prospects for a substantial downward price correction seem relatively remote in the current climate of growing wealth creation,’ he explained.

He added that while São Paulo is now Brazil’s financial capital, Rio de Janeiro still boasts a major financial district. Several multinational corporations are based there, a legacy of the city’s days as the country’s capital.

Rio is also home to a significant number of oil and gas companies, as well as telecommunications, entertainment and media organisations. Office rents appreciated rapidly between 2010 and 2011, growing ?by 37% in a single year, although they have since fallen by 14%.

But there are signs that the property market growth is slowing in some locations. According to the latest edition of the Global Property Guide house prices in Sao Paulo increased by 6.71% year on year in the first quarter of 2014, the slowest growth in the past six years. On a quarterly basis, house prices in Sao Paulo dropped by 0.12%.

One firm, Luxury Estate, says that Rio de Janeiro is the most popular place for overseas buyers followed by Sao Paulo. Those seeking an investment are betting on the considerable infrastructure that has been put in for the World Cup and for the Olympic Games in 2016 will make real estate capital growth promising.

While 70% of buyers are from Brazil there is an increasing number of buyers from overseas investing in property, mostly apartments. An analysis of the 250,000 searches conducted on its website from the beginning of the year until the end of May found 7% were Americans, 6% French, 5% Italian, 4% Germans, 3% Spanish, 2% from Portugal, 2% from the UK and 1% from Russia.