Rio’s Real Estate Market
It’s no secret that Brazil’s relationship with high interest rates has been a long and turbulent marriage, one that has made long-term lending almost nonexistent. However, Rio’s real estate market has seen a bit of a revival in recent year. With the introduction of stabilization policies such as ‘Plano Real’ in 1994, new sources of financing became available and mortgage lending became cheaper and easier.
Today, Brazil’s interest rates are lower than ever; from 20% in 2002 down to 10 to 12%. For the savvy investors, Rio’s real estate has become a good alternative to traditional saving in banks. This has also increased the ability to build credit and has led to an expanding middle class.
The 2014 World Cup and the upcoming 2016 Rio Olympics gave the government even more incentive to change things up. In an attempt to rid this beautiful country of its infamous reputation, the government is now focusing on cleaning up its cities and taking on a zero-tolerance attitude for crime. Police are working on defusing crime, especially in the favelas, previously controlled by notorious drug-gangs.
Thanks in part to the 2014 World Cup and 2016 Rio Olympics, Rio’s city center has undergone a massive revitalization project by the name of ‘Porto Maravilha’. This project aims to make Rio’s downtown an attractive destination and to boost its position in the global economy. A new growing sector for investment in Brazil is the introduction of affordable housing projects. Since 2009, according to the government, re-housing the favela population by creating affordable housing for people has been a priority. This 20 year project called `Minha casa, minha vida´, while successful in parts, hasn’t solved the country’s growing housing deficit.
Brazil is not only famous for its beautiful beaches, samba beats and tourist hot-spots, but also its fast growing economy and reputation as a new ‘world economy’. The country stands toe-to-toe with the French and British economy and is bigger than the Australian economy. As a result there is treasure trove of opportunity to invest in Rio’s real estate market. This has also resulted in rapidly growing population as many Brazilians return home with the promise of attractive employment prospects and investment opportunities. These exciting changes in the economy have propelled Brazil as a significant player in the international real estate market, alongside other South-American countries. The housing market is thriving and investors are bent upon investing money, especially in the urban area Rio de Janeiro, which next to São Paulo is leader in the residential property market.
Rio de Janeiro is the continent’s most glamorous city, and its real estate market is a honey-pot for many, primarily the area of ‘Zona-Sul’. Here residents and visitors enjoy everything from luxury beachfront Copacabana penthouses to designer Leblon apartments all with great views of beaches, delicious restaurants and trendy bars as well as a host of other activities. During the World Cup investors, both home and away, benefited from the flocks of visiting tourist and the attentive gaze of a global audience. As a result of this and the upcoming 2016 Rio Olympic Games, the Brazilian government set up a fast-tracked public spending program of $526 billion dollars. These new changes in Brazil’s economy will provide more jobs and will lead to greater consumption, fueling inflation, and slowly but surely tackling the poverty level in Brazil.
This is a country that has a lot to offer, and while investments and cash driven capital will continue to grow, we will not exclude the possibility of rising interest rates and/or inflation. However future investors have good reason to keep their fingers crossed as a substantial downward price correction is not far off. This means that investors may find Brazil more rewarding than other `new world´ markets, thanks to strong credit control and low levels of mortgaged indebtedness in comparison to other countries.