Risks And Rewards Of Brazilian Real Estate

With a strong legacy in place courtesy of the FIFA World Cup, investors are assessing the risks and rewards of the Brazilian real estate market. James Matthews reports

Home to Sugarloaf Mountain and Copacabana Beach - Brazil’s exotic landmarks, year round sunshine and carnival atmosphere have helped pull in high volumes of overseas visitors in recent years, with record numbers (6.4m) during 2014 World Cup year and an equally rousing footfall expected at the Summer Olympics in 2016.

Hailed as a top-ranking world economy (and overtaking Russia and India in the BRIC league table), the country’s upward trajectory is no accident; a firm handed government under President Dilma Rouseff has implemented a reformist economic agenda, of which inward investment is a key growth area. “It’s one factor behind real estate investment returns now looking strong,” explains property consultant Martin Gajewski. “Major infrastructure improvements, such as transport links are also boosting investor interest, with the upgrading of the country’s regional airport network opening up access to foreign buyers.”

Comments Nito Dantas of Terra Brazil: “Our overseas client base has evolved post-recession from one that was predominantly second-home orientated to more investor led purchases. It’s a shift we put down to high profile events such as the World Cup which translated to strong rental revenues but it’s equally attributable to the country’s burgeoning middle class sector for which millions of new homes are needed with ensuing changes to real estate legislation including the introduction of mortgages for domestic buyers.”

First time visitors will understand the country best as a series of micro-markets, the Rio Grande do Norte state and its capital Natal currently one of the fastest growing areas, witnessing property price gains of 10% per annum; the area attracting year-round tourism, with locals coming through the December to March holiday season and European and US visitors in the summer. “Residential property is a good 30% below Spain or Portugal,” adds Teresa Harden-Ringo of Hoosier Homes and Land. “The region is one of Brazil’s most successful attempts to date at residential tourism with interest in second homes from both the domestic market based in the south (Rio de Janeiro and Sao Paulo) and foreign investors.”

Property choice is also vast and highly affordable; spacious turnkey villas in lively locations like Ponta Negra and Pirangi starting from £200,000. Head to Brazil’s most easterly state meanwhile, and improvements to road infrastructure have increased accessibility to this scenic region with its cluster of beach paradises such as Tambaba, Tabatinga, Coquerinho and Praia Bella. Comments Benoni Rodrigues of consultancy Brazil Prime: “A small, exclusive beach community Tabatinga and its neighbouring beaches have only recently been discovered by international visitors. Located near the historic city of Joao Pessoa and international airport, they are recognised as being among the coastal resorts with domestic holidaymakers with palm trees dotted along the shoreline and coral reefs some 20m high.” Increasing levels of tourism development are delivering a number of stylish developments including Tabatinga’s latest ten unit villa development where 30% of plots have already sold to a mix of Brazilian nationals and overseas buyers.

Boasting a prime front line location with the option for private landscaped garden and pool, four–bed open-plan, bespoke build residences start from £200,000, with designer furniture upgrade packages available.

Buying in Brazil

Ownership of land and property is permitted, and all property is freehold. Foreigners have the same legal rights and entitlement to property as Brazilians.

Buyers require a Catastro de Pessao Fisica (CPF), a tax registration number, which can be obtained from overseas through the embassy or in Brazil through a lawyer.

Land registry costs, when buying property in Brazil can vary depending on the state the property is purchased in. We usually state the approximate registration costs within the property details. The taxes are as follows:

Stamp Duty Tax (or Registration tax) is around 2% of the purchase price (payable to the notary)

Property Transfer Tax (ITBI) is around 3%

Navy Marine Tax of approximately 2% (generally only if a property is located front line beach although there are other cases where this is applicable)

Taxes can vary (only by fractions of a percent) depending on which State you buy your property in.

For off plan purchases, due diligence is essential with regards to checking that building licences are in place, that the land is properly registered with a certificate (copia da escritura publica) from the notary.