Has Brazilian Property Bubble ended after a Decade of Growth?


2016 ended with residential property prices down nationally by 5.5%, compared to 2015. This year, it has been a buyer’s market, with plenty of distressed property around. And the market is still deflating, at least according to date released by the Brazilian Institute for Geography and Statistics (IBGE).

A weak economy, high interest rates and news that many of the country’s biggest developers are in difficulties have taken their toll on investors’ confidence. Demand for housing is as high as ever though. Indeed, average values for residential property rose by 0.13% in December 2016, compared to the previous month, and judging by how quickly property sells in hot spots like Fortaleza for example, there are signs that both domestic and international demand is as strong as ever, despite a downward adjustment of home values.

Rio de Janeiro continues to be Brazil’s most expensive city, despite price falls of 2% recorded in 2016. All twenty of Brazil’s largest cities have seen prices for real estate fall sharply. The capital Brasilia for example saw house prices drop by 1.2% year-on-year in 2016 and there has been no indication so far that they will go up again any time soon.

Yet, compared to other world class cities, the average price per square metre in commercial hub São Paulo for example is rather low. At the end of last year, it stood at US$ 2,675 or R$8,641 (one Brazilian Real equals US $ 0.31 or £0.23). In Rio de Janeiro, the average square metre cost US $3,191 or R$ 10,214 at the end of 2016. A fairly average 5 bedroom duplex apartment on the top floor of an apartment block with resident caretaker and located along Avenida Atlantica near the seafront costs around £2,225,000, and a 4-bedroom flat in a less favoured location would be around £960,000. “Cheap as chips”, as house hunters in London, Paris or New York might say!

By contrast, a 2-bed luxury apartment in Fortaleza starts from just £72,000 at the Catu Residence Development. Fortaleza is the state capital of Ceará, which lies in the north east of the country, along Brazil’s Atlantic Ocean coast, some 1,420 miles distance from Brasilia. Here international investors and people in search of cheap holiday apartments near the beach can still find bargains with good capital gains potential.

Boasting some of the finest beaches in the state, Fortaleza is seeing a mini boom, recording the second highest price rise in Brazil in the second quarter of 2017, with June a particularly busy month for home sales.

Prices shot up by 6.42% in the period January to June 2017. Here the average price per metre now stands at around R$ 4,702, although in some parts of the city prices went up by 11.3% (district of Cidades dos Funci�narios for example). According to VivaReal statistics, Fortaleza’s house prices saw the second highest increase among the 30 cities that are covered by the study.

Fortaleza Holiday Rental Yields are rising, too

This sector saw high demand in the first six months of this year. Although the long-term rental market for Fortaleza apartments and houses remained fairly static in the second quarter of 2017, holiday letting saw a great season. Demand in July increased by 7%, with newspapers like O Povo quoting overnight rates of R$ 200 for furnished apartments with swimming pool access and located near a beach. With the US dollar riding high against the Brazilian Real, staycations drove the holiday lets market this season.

Land for Sale near Fortaleza

Land can be surprisingly cheap in this part of Brazil. Cumbuco is a well-known paradise for surfers. A 920 square metre corner plot of land, just a short journey from Carmel Cumbuco Resort and within a 100-metre stroll of the beach, can cost as little as R$ 250,000 (ca. US $ 77,500). Cumbuco is a small fishing village, sitting snugly along the north east coast of Brazil. There are only 1,600 permanent residents, but the village is within a 25 kilometre drive of Fortaleza, where shopping, bars, restaurants and other amenities await.

With beautiful Cauipe Lagoon on its doorstep, the village enjoys excellent side shore wind conditions for kite- and windsurfers, so is a great favourite with the international surfing community. Building a small complex of apartments in Cumbuco promises excellent holiday letting yields for investors.