Brazil Real Estate Issues and Prospects 22 March 12 · Why invest in Real Estate? • Social...

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Brazil Real EstateMain Issues and Prospects

Chris HowardMD, 4:Property Brazil

22nd March 2012

Brazil Real Estate – the issues and prospects

• What the current state of the real estate market • Which regions are strong• Which sectors are strong• What are the strengths or underlying weaknesses?• What are its prospects for the next 5-7 years?

To do this

Brazil • Where are we now : A quick profile

Real Estate• What is being done• Why is it being done• Looking ahead

Brazil

The headlines : Resources – wealth drivers

UK Brazil

Size 94,000 sq m 3.2m sq m 30x UK79th largest 5th largest

Population 62m 195m 3x UKAverage age 42 25

Natural Resources§ Energy 70% imported Self sufficient§ Food import 42% 95% home grown§ Water Self sufficient 15% of world supply

Strong economy compared to the UK and the EU

GDP Growth 2005 - 2012 Brazil, UK, EU-27

-6

-4

-2

0

2

4

6

8

10

1 2 3 4 5 6 7 8

Brazil UK EU-27

Comparing with the UK : The Outlook for the UK

§ Exports§ Mainly US and Europe, troubled

§ Consumer Expenditure§ Declining, savings increasing

§ Government Spending§ Cutting

§ Company Investment § Based on the above backdrop, low

So where is economic growth to come from?It won’t be quick

§ Exports§ Increasing: doubled to the EU in 10 years

§ Consumer Expenditure§ Driving the economy: 86% GDP growth

§ Government Spending§ Using $375bn FX Reserves § Housing/ Infrastructure Investment

§ Company Investment § Large inflows§ Sovereign wealth funds, Banks, § Corporations, individual investors

The Brazilian economy – continuing growth

Given the difference ……

…..it is a real challenge to effectively portray how different the position of Brazil is:

§ Consistent economic growth§ Young population§ Rich in raw materials – rising world demand/ prices§ Profitable and unique property market

Only mildly affected by the ‘North Atlantic’ credit crunchThese advantages are structural and will last

Brazil Real Estate

§ Infrastructure§ Residential§ Hotels§ Retail§ Commercial

What are the drivers?

The Main regions of Brazil

North East

Sao PauloRio

The interior

Percent of population living in cities

• World 57%• Europe 60%• UK 89%

• Brazil 83%

Why invest in Real Estate?

• Social Policy/ Vote winning§ Housing Policy§ Infrastructure

• Long term economic growth§ Economic efficiency/ inflation§ New sectors§ Consumer demand

• New market sectors§ Agribusiness§ Tourism – short term and long term§ Domestic/ International Tourism

Economic Success by sector

• Oil and Gas• Food• Consumer products• Retail/ Logisitics• Housing• Agribusiness• Pharma• Sustainable Energy

Short Term : World Cup and Olympic Venues

Brazil Real Estate

§ Infrastructure§ Residential

§ Hotels§ Retail§ Commercial

Prospects for each sector

§ Infrastructure/ Residentialsubstantial investment and continuing demand

§ HotelsCountry under-resourced and high incentives for growth

§ RetailPopulation growth and age profileConsumer demand growth

§ CommercialGrowing urban economy

4:Property Brazil Portfolio – the current projectsCoroa da Maio 1 - completedFirst apartment site completedOn plan/ On budgetInvestment return as projected

Villa Solare – now selling31 Apartments 1km from the AirportSegments C/D

Piabeta96 apartmentsKey worker : Satellite suburb

Socorro 200 unitsKey worker Villa/ ApartmentsSegments C/ D

We are seeking further investment in three ways

Profit Share 4:Property Portfolio share in profits of whole portfolioReturn : in excess of 25% p.a.3 year investment

Fixed Return Secured investment in single project20% p.a. return1 year investment

Joint Ventures Private Investment Fund as LLPshare in profit of single projectin excess of 25% p.a. joint project2-3 years

Capital Guaranteed Fundprojected 15%+ p.a.

In conclusion

Why should we look ahead?

Firstly : Strong economy, strong property market

Secondly : in Brazil there are compelling reasons for stability

: The favourable conditions are structural, and will not go away from year to year§ Food prices rising/ Agriculture underexploited§ Energy supply long lasting§ Improving commercial base and performance§ Age profile so Rising housing deficit§ Demand exceeds supply

Thirdly : Government aim to house the population in 15 years: Government policy/ supporting PP and mortgages: Continuing opportunities

and in addition …..

• Bank mortgages• are now readily available • at reasonable interest rates, • for the first time!

• These have only been available since 2007• Only 2.6 % of house owners have mortgages currently

• the majority of the population can now buy a home• and are keen to, • creating immense demand for the foreseeable future

So the property market is strong

• fast growing Brazilian economy and young population

• Housing deficit of 7m units and growing …..so continued demand – it is a secure market

• Demand will exceed supply for the next few years making development a profitable activity

• We have strong projects in process already

• The investment is available now

We are seeking further investment in three ways

Looking ahead we can all benefit, whatever our aims :

§ Fixed Return

§ Profit Share

§ Joint Ventures

Looking ahead

Country• Strong economy• Sustained/ growing demand for exports

Real Estate• Low age profile population• Growing housing demand• Infrastructure needed

Continuing GrowthGoldman Sachs/ O’Neill

“Brazil is not a BRIC but now a ‘Growing Economy”

Let’s discuss in more depth later…

Thank you

4:Property Brazil Contact : Chris HowardTelephone : 0800 1601004Email : invest@4property.uk.com

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