| Brazilian real estate market set to explode
Brazil didn't realize its huge tourism potential until only a few years ago - but now has understood it can create an enormous influx of capital and has started to exploit its touristic potential.
And what a potential! Just reflect on what makes destinations interesting for tourism, and you'll realize that Brazil literally has it all - sunshine, nature, culture, access, and infrastructure.
First of all, sunshine. With almost 8000 km of coastline, stretching from just above the equator to milder climates further south, Brazil has lots of sunshine, all year long.
Its beaches, usually white sands lined by palm trees, and often with stunning views over some islands just outside the coast, only compete with the beauty of the tropical rainforests.
Brazil also has more than one third of the world's fresh water reserves - and that is visible in the thousands of rivers and waterfalls, suitable for bathing or rafting...
The Carnaval of Rio and Salvador , the famous 3 km wide waterfalls of Iguaçu, the Amazon, the Pantanal, and now the Sertão of our northeast, the Brazilian music add attractions of a level and range that can simply not be found in most destinations of the Caribbean .
And of course, the Brazilians themselves are one of the country's greatest assets - their happy, friendly, welcoming and Christian culture makes any visitor feel at home! |
High rewards for private capital due to limited availability
Brazil 's financial institutions are burdened with an enormous debt burden from the past, and both the national bank and the commercial banks have only limited resources to fund investments in the country's industry.
Western banks collect cheap money via the savings deposits from the average consumer, and then make them available to the entrepreneurial world. Brazilian banks can not rely on this cheap source of money, and the rich minority has taken over the role of financing industry - and real estate - directly.
And obviously, as demand by far outstrips the available supply, the premium offered to capital investors is high.
Many projects have exits in 18 to 24 months
We, as an association, generally invest in projects that have a relatively short time horizon and like to free our investors' money up quickly, often 12 to 18 months after the initial investment. Long term capital appreciation and/or rental income may be interesting, but we have found that quick rotation of our investments usually delivers higher returns while it limits the exposure of your capital.
Low property transfer costs
Brazil only applies a 2% transfer tax on real estate property - which keeps the transaction costs among the lowest in the world.
|
|
Safe legal ownership system with land registry and notary
Brazil has a legal ownership based on the European system i.e. a state 'land registry' keeps track of the owners of land and buildings, as well as any liens and encumbrances or debts associated with the property.
It is easy perfectly legal for foreigners to assume full ownership of land in Brazil . You will only need to apply for a 'CPF' registration number and transfer the money into Brazil via a bank account. The incoming funds should be registered with the Central Bank.
Before you buy land or a building, your lawyer or agent will check with the land registry to make sure that:
- You are buying from the legitimate owner
- The property (and any buildings on it) corresponds to the description in the land registry
- There are no debts, liens or encumbrances registered on the property
When you buy, you would typically exchange a private sales-purchase contract, paying a small deposit; and after verification you would have an official title deed, registered by a notary public in the land registry which proves your full ownership of the property. He will also check that the owner has no debts with any state, justice and labor disputes that could affect his ability to sell the property freely.
Usually, your lawyer will also obtain a set of certificates ("certidões") from the seller confirming that there are no smaller debts (to entities like the community of house owners in a condo, local city taxes, electricity companies etc.)
Most land around the big cities and the tourist areas has already been entered in the land registry. Occasionally, you may stumble on land which hasn't been registered yet. In this case, it suffices to have the latest sales transaction (before yours) registered before you proceed with the purchase.
|
Low taxation on value increase, and high flexibility
The Brazilian taxes are relatively low and even for speculative investors (who buy property and flip it around in the first 5 years after purchase) taxes are only 20% of the value increase.
Yet very often buyer and seller agree to declare only part of the real value in the official sales contract, which offers additional flexibility. If you keep a property for 5 years or longer, there is no tax at all on the value increase of your property!
But there are a few creative tax planning tricks that allow for exceptionally interesting operations.
- Under certain conditions, real estate professionals can buy and sell a property within the same fiscal year with little or no taxes. Using this rule, you can buy a property for, say, US$ 100,000 and sell it soon thereafter for US$ 500,000 - resulting in a clean US$ 400,000 profit that can be re-exported... Obviously, such operations require the highest confidentiality. If you are interested, please contact us for a private conversation about this matter.
- Low visibility for European / US taxes - Brazil is very happy to receive foreign investments and doesn't really care whether money coming from abroad has been taxed in its source country or not... As long as the money enters Brazil via an international (even offshore) bank account (which proves that it is not 'black money' earned in Brazil itself) they are happy with the investment. And they have no motivation to communicate this to any other countries. Obviously, there is no way for European or American authorities to find out you own property in Brazil - unless you tell them or are very sloppy with your paperwork. And if need be, you can also own Brazilian property via a local or off-shore company, for even further privacy.
Brazil is a highly catholic, peaceful, democratic culture, quite unlike other South American countries.
In spite of huge social inequalities, and well-known corruption, there is almost no social violence.
For the past few years, Brazil has been wisely and successfully using western monetary and fiscal policy, and it has mastered the control of inflation and currency rate, in spite of astronomic international debts from the past.
Finally, nature is generally benign; there is no risk of hurricanes and the abundance of water (and hydro-electric plants) is an additional asset. |
|
Real estate investments in Natal , RN
Tourism in Natal is on the rise - from 732,000 airport arrivals in 2003 to 921,000 in the first 8 months of 2004 only! During the same periods, the number of international tourists increased from 72,000 to 145,000.
Its international airport has a weekly average of 14 international flights (3 to 4 from Lisbon , 2 from Amsterdam , and 1 each from Milan , Madrid , Stockholm and Oslo ) as well as 25 national chartered (tourism) flights.
Almost 1.5 hours south of Natal lies Praia de Pipa, a small, charming, village with great views, pink cliffs, dunes and a beautiful river; but relatively little front-line beach property for larger hotel or residential operations.
Extremely advantageous exchange rates
Until early 1999, the Brazilian currency was linked 1:1 to the US $ - and most prices still reflect these old price levels. When this link However, over the past few years 1$ has stabilized around 3 real. As a result, US$ 100,000 will buy a house that would cost about US$ 300,000 in other locations.
|
The Brazilian GDP hides a sizeable upper class with world-class buying power
While the Brazilian GDP is only some US$ 4000 per inhabitant, it's social inequality hides a large affluent class that has a buying power that at least rivals the European and US consumers.
In fact, wealth in Brazil is extremely badly distributed. 10% of the population owns no less than 50% of all resources, and on the other hand 50% of the population must make-do with no more than 10% of the countries resources.
If one applies these ratios to the GDP, the wealthiest 10% (some 16 million consumers, concentrated in the South: Rio , Sao Paulo , Belo Horizonte ) have a GDP per capita that is quite comparable to most of Europe or the US . And in fact, their standard of living is even higher: as the cost of living is much much lower, buys a lot more luxury than we can imagine...
Moreover, the rich keep getting richer; not surprisingly if you realize they have a labor force at their disposal whose monthly wage is just some US$ 150-200 ...
As a result, the Brazilian upper class (not forgetting the upper class of other South American countries, who love to holiday and invest in Brazil ) generates a strong a growing demand for holiday homes and investments by itself. |
