Brazil has its fair share of quaint old homes and new urban glamour


recife Bahia Long term investors should find Brazil


particularly attractive. The strong currency is unlikely to depreciate against sterling, while yields are good: four to seven per cent for apartments in cities such as Forteleza, Bahia and Brasilia, nine per cent plus in Sao Paulo and Rio de Janiero, according to Property Frontiers. However it’s not the yields that motivate buyers, but the potential for capital appreciation. Brazil is also getting its act together in


terms of promoting tourism and property, with ADIT (the Assocation for Real Estate and Tourism Development) expanding from its original north-eastern base to cover all 27 states. ADIT’s investment events have focused attention on the country and have proved a useful resource for UK agents and developers.


No loaNs for foreigNers However, there is one big difficulty facing the investor in Brazil, finance. The mortgage market is extremely immature, even though President Lula de Silva’s reforms created a functioning market for home loans. Brazil’s mortgage lending has increased for the last 16 months, currently rising at a rate of nearly 20 per cent. However, the mortgage market remains purely domestic; property loans are not available to foreigners. This has led to developers creating their


own funding offers, with 12 to 60 month instalment plans. Invest in Brazil offers a


28 OCTOBER 2010 PROPERTYdrum


Long term investors should find Brazil particularly attractive. The strong currency is unlikely to depreciate against sterling.’


five year, interest free purchase payment plan. However, this limits buyers to those with either cash or strong enough cash flows to finance an accelerated repayment over 4-5 years rather than 20 or 25, or to those able to remortgage their UK properties (not as easy as it was). Even for cash purchasers Brazil can


present difficulties. “The Real is a strong currency, but transferring it can be a challenge. You have to get the process right; to make a legal freehold purchase in Brazil it is vital that you do so,” Richard Cash says. “It’s something we have worked very hard to get right with our partners. Nothing’s ever straightforward in Brazil!” Vasilios Dimarakis of Moneycorp warns


that the Central Bank of Brazil is tightly linked to the tax authorities, so that the initial transfer of funds needs to be correctly registered. If it isn’t booked through the right CPF tax number, it can be difficult to repatriate it, and vendors may find themselves paying capital gains tax on the whole amount of the proceeds, rather than the profit they’ve made.


Simply transferring currency is not enough, the conversion system is complex, too. Sterling has to be sent in dollars, then converted to Reals. Demarakis says buyers’ banks are unlikely to be able to cope. “As far as a High Street bank goes, once it’s sent the SWIFT payment and that has reached Brazil, it’s done its job,” he says, “but in fact, the process is far from finished.” The length of the process exposes clients


to currency risk as there has been a severe appreciation of the real in recent years. Moneycorp manages the whole process


in partnership with a local bank, Banco Rendimento, guaranteeing its clients a rate in Reals, not in Dollars, which can be held for days. The partnership also offers non- resident bank accounts; many Brazilian banks don’t want the business. The authorities have stated that they are


moving towards deregulation of the currency, which would certainly make an impact on the market. However, Dimarakis says, “I think they’re enjoying the Real’s appreciation and things won’t change in the short term.”


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