While some are voicing concerns about inflation and the potential for an overheated economy, projected GDP for the next year remains between 3.5-4 percent, exhibiting healthy, not overheated, growth. Moreover, inflation has been moderating month-to-month during 2011. Rising wages prices account for much of the inflation pressure, along with elevated prices for raw goods. While inflation is on the high side, Brazil remains in a state of nearly full employment, with wages continuing to rise.
A strong employment environment is providing Brazilian workers with more disposable income. The financing environment has also become more accessible, with legal reforms in 2005 and the government-sponsored Minha Casa Minha Vida program for low income homebuyers. The result is a growing pool of homebuyers in market that currently lacks adequate supply of suitable housing.
According to Mr. Lynn, the fundamentals for real estate look good for the next decade:
In the first half of 2011, the real estate markets have gained speed and Brazil was among the top 10 markets in the world by transaction volume in the first quarter. Through the first six months of 2011, real estate transactions in Brazil were 79% higher than during the first half of 2010.
This is evidence of a “flight to quality” and the strong demand for quality properties in Brazil. In the medium term, the Brazilian national growth acceleration program is supposed to develop R$104.5 billion in logistic infrastructure throughout the country from 2011-2014.
The Olympics in 2016 are expected to attract at least R$8 billion in transport infrastructure, which may create new attractive locations for industrial infrastructure.
The homebuilding industry continues to boom, and demand continues to outstrip supply. The housing deficit of the country remains and is not expected to be resolved in the next decade.With global economic growth waning, Brazil continues to outperform with solid projections for the coming year. Even so, in the current global environment, investors need to be selective in order to protect capital and maximize return.
In the northeastern state of Ceará, MDMY Investment sees tremendous opportunities for residential housing investments near major new infrastructure developments. Their Altavila project in Caucaia is designed to cater to middle-income homebuyers in a rapidly-growing district of Ceará state.
Altavila in Caucaia
As with David Lynn, MDMY Director Jamie MacDonald-Murray foresees solid growth in the area throughout the next decade. "In this area of Brazil, large-scale investment has already been committed and is assured for the next five years at a minimum. We have tens of billions of reais coming into Pecém and tourism development at the beach centers. For international investors, the situation is ideal. Local real estate provides extremely high probability of return. Moreover, in the current global environment, considering the Brazilian government's investment plans, I would even call Ceará real estate a safe haven investment."
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