Why has Brazil become attractive to European real estate investors?

Investment climate and its changes

Ekaterina Orlova from Intermark (Savills) shares current news regarding the investment climate, which is undergoing significant changes. We have seen an abundance of information over the past weeks, and the behavior of clients from various countries clearly illustrates the current economic situation.

Record transaction volumes

Last month saw record transaction volumes in the market. Investors today are concerned about the need to protect their assets, and many of them consider real estate as a reliable option for investment. If earlier the yield in the amount of8%per annum in foreign currencies was a nice proposition, now amid the instability, views on earnings have changed dramatically, with some investors reporting stock market earnings as high as30-50%in rubles.

What's important to customers?

What do you think is most important for clients at the moment: income level, the possibility of relocation or a combination of these factors? At the same time, in today's crisis, security is a priority for many people. Everyone understands this concept in their own way, and its meaning can vary greatly.

Migration opportunities and the real estate market

Migration opportunities for Russians today are extremely limited, and only one actual program remains on the horizon - these are options in Turkey, where the real estate market is now very actively developing. Nevertheless, there are still certain opportunities for those who intend to keep their savings.

Investing in Brazil

Should you consider investing in real estate in Brazil? And are many people considering moving there? I am sure that real estate properties in this country are of interest for diversifying an investment portfolio. Despite the global events affecting every country, Brazil, at a considerable distance from Europe, is now becoming something of a safe haven.

• You need to invest all your money in this country, but
• range investing5-10%of total capital seems like a smart move.

Brazilian market research

Two months ago, did you have to consider Brazil as a significant vector for investment? Yes, it is part of my job to look for new opportunities and develop my business. We started to see European investors' interest in Brazil more than half a year ago, which led us to do in-depth research on this market. The political situation in the world has also contributed to the interest in Brazil.

Trends and attracting investors

Catherine, do you think European investors can catch new trends in international markets? What exactly attracts them to Brazil? First of all, it should be noted that I do not have enough experience to objectively analyze the entire country, as Brazil is a diverse and vast market.

However, I can say that there is a specific project that has already attracted the attention of interested investors from Europe, and it is located on the northeastern coast of the country, just an hour and a half away from Fortaleza International Airport.

Introduction

As a final step, it is worth mentioning that the airport located in this region was acquired by the German company Fraport, which invested over one billion reais in its modernization and development. Last year, direct flights to European cities such as Paris, Lisbon, Madrid and Frankfurt began operating from this airport. This creates additional opportunities for European tourists, allowing them to combine vacations with real estate investments.

Description of the resort

The resort in question is located between the Atlantic Ocean and a picturesque lagoon in the state of Ceará, covering an area of 1 million square meters. We are talking about a project that is part of a broad network of resorts in Brazil. It is important to realize that this project should not be considered solely as part of the resort segment. The population of Fortaleza, the capital of the state of Ceará, is around 2.5 million people, and there are both large hotels and small towns with villages along the coast.

Location and population

This resort is located near the village of Trairi, which has approximately 40 thousand inhabitants. It has all the necessary amenities, and important institutions such as hospitals and supermarkets are available in the neighboring village. It should be noted that the population density in this area is significantly lower than in large cities such as São Paulo or Rio de Janeiro. This region, being closer to the equator, attracts mainly locals and kitesurfers from all over the planet, as it has strong and stable winds during half of the year.

Tourist flow

You also noted that Europeans have begun to show interest in local attractions in the Trairi area. The opening of direct flights was a key moment that contributed to the increase in the flow of tourists. This can be compared to the situation in Zanzibar: when I visited this island in 2016, there were very few Russian tourists. However, after the opening of direct charter flights before the pandemic, the number of tourists increased significantly.

Access difficulties

Today, getting to Brazilian resorts from Russia is very problematic and takes a lot of time. Travelers must first fly to Abu Dhabi, then fly to São Paulo, and from there to Fortaleza. The whole journey can take up to 38 hours. In the absence of direct flights to Europe, it is still difficult to call this destination a full-fledged resort destination; at the moment it is perceived more as an investment destination.

Economic relations

It should also be mentioned that Brazil is not among the“unfriendly”countries for Russia. The result is likely to be the creation of more open economic relations. Together with China, India and the Republic of South Africa, Brazil is part of the BRICS group of developing countries. At the last summit of this organization, plans were announced to:

• integration of payment systems;
• Establishment of an independent credit rating agency;
• developing financial statements.

This can be seen as an important step towards strengthening long-term cooperation and security.

Prospects of the resort

Now let's take a closer look at the project itself, which includes the territory of a five-star resort. It has promising prospects that create conditions for comfortable living, recreation and investment, which will make it attractive for both local and foreign residents.

Construction of the resort

This resort is being built by a development company founded in 1996. At the beginning of its activity it focused on Eastern Europe, in particular on the Romanian capital market, Bucharest.

However, the focus of the business soon shifted to the United States, where the main emphasis began to be on renovation projects.

Interestingly, the Brazilian plot of land was purchased by the company's Dutch-born owner ten years ago, but actual construction only began five years ago. To be honest, it is hard to even imagine the difficulties they faced at the start.

The sales director shares that in the beginning, a property located in an empty space amongst the Brazilian dunes was offered and surprisingly, many investors were interested and started buying!

Current status of the resort

The process is now much simpler. The resort has been successfully operating for three years and has about 700 reviews on the Booking platform. There is a beach club, as well as various apartments and villas for rent. You have the opportunity to visit this place and realize its charm with your own eyes.

A new zone of attraction

Thus, we are witnessing a new center of attraction that is gradually filling up with resort infrastructure near a small town. Both small hotels with 50 rooms and large resorts can be found in this area.

The project itself is a mini-city of sorts, which in completion style will include:

• about 350 apartments,
• 200 villas,
• a Radisson hotel,
• Several beach clubs with developed infrastructure including swimming pools, restaurants, bars, fitness centers and spas.

Investment opportunities

The resort is currently in the final stages of completion and from my point of view this is a great investment opportunity.Initial risks are minimalbut there is still the potential for value appreciation.

Project development in a pandemic environment

Catherine, how has the project developed over the last two years, especially in the context of the pandemic? As I mentioned, domestic tourism in this region continued to grow strongly. That is why construction and sales did not stop - a similar situation was observed in the UK, which we talked about recently.

Uniquely, more than 90% of the resort reviews on Booking come from Brazilians from the southern regions where the climate is colder.

Resort Reviews

What do people write about the resort, what are the positive and negative reviews? Most of the negative feedback is due to the fact that the project is still not completed. For example, a few years ago guests complained about the need to walk a long way to the beach, but now electric cars have been introduced for the convenience of guests.

The issue of power outages was resolved by installing generators. There were also complaints about the poor condition of the access roads to the resort, but a new road is now being built.

As for the positive reviews, they note:

• great location of the resort,
• stunning natural scenery,
• variety of local cuisine, especially seafood dishes.

A lot of guests praise the level of service, getting a wonderful experience at the resort.

Investment options: a brief survey of opportunities

In the area of investments there are many options, among which we can highlight the key areas: the purchase of land plots, duplexes, hotel rooms in Radisson and villas with attached territory. Starting prices for these properties range from $39,200 to $277,000. Potential rental yields also vary: investors can expect to receive cash returns of up to 10% of the property's value in the first four years, after which these figures can drop to 6%, 7% and 8% over the next eight years. Note that in some situations there is not even a guaranteed rate of return.

The size of the property varies from property to property: land plots can range in size from 398 to 760 square meters, duplexes occupy approximately 50 square meters, and rooms can vary between 38.2 and 46 square meters.

Unique duplex apartments

A duplex apartment in a project with unique characteristics already initially includes all the necessary furnishing elements for short-term rentals. This greatly simplifies the process of preparation for renting.

Cooperation with Atlántica

This aspect is realized thanks to the developer's cooperation with Atlántica, which holds leading positions in the South American market and manages such famous hotel brands as Hilton, Wyndham and Sheraton. Investors have the opportunity to profit from various schemes:

• payments may be made on a quarterly basis;
• every six months;
• once a year - the choice depends on the owner's preference.

Flexibility is also offered regarding the personal use of the apartments: there are no strict restrictions on the time you can stay there; however, it is worth remembering that this may affect the level of profitability. Any funds received can be transferred to your accounts, including those opened in Russia. However, only those who have obtained a permanent residence permit can open a bank account in Brazil.

Investments in villas

As for the villa program, there is no promise of a fixed rental income. This is probably due to the developer's uncertainty about their demand in the market. Unlike duplex apartments, which have clear parameters such as meterage and location, each villa structure and plot of land is unique. Owners can choose between three standard designs from the developer or create their own individual design, which adds an element of personalization.

Partnership with Radisson

The relationship between investors and the Radisson hotel chain also has its own peculiarities. The contract at Radisson contains strict conditions, for example:

• you won't be able to live in the room you bought on your own;
• 15% discount on reservations is possible.

Interestingly, there is a guaranteed return for 12 years and after that period, a mandatory number redemption for both the investor and the developer.

Number redemption conditions

As for the terms of the buyout, the developer engages an independent expert to assess the market value of the room, which ismay not be lowerof the original purchase price. Given the upturn in the real estate market, the room rate should double in reals over the period.

Selection of investment proposal

Which of the proposed investment offers looks the most tempting? The answer to this question depends on the investor's personal preferences. Villas, especially those located on the first line, seem to be an excellent investment option, as their number is limited and the views are truly stunning. The cost of investing in such real estate is not less than$500,000 to $600,000.

Radisson with long yield guarantees will be more attractive to conservative investors. Duplex suites, on the other hand, have a low entry threshold and offer higher yields, but may show less predictable results compared to hotel rooms.

Introduction

An example of an outstanding 170 meter high villa is a project that can be used as a basis for considering the process of buying real estate in Brazil. This raises a number of issues regarding the transfer of funds and titling of property.

Ownership

It is important to note that in Brazil, foreign nationals can own real estate on a freehold basis, which guarantees them full and unlimited rights. This possibility is confirmed by a specialized document from the Land Registry.

Ownership is granted by the developer, who realizes all residential units. The transaction is subject to notarized procedures to ensure the legitimacy and safety of all stages.

Financial transactions

Payment is made on the basis of the sales contract via swift, which ensures a fast and secure financial transaction.

Investor documentation

An important aspect for investors is the minimal list of documents required to complete the transaction process. It should be noted that compliance requirements in Brazil are much less stringent than in European banks, which allows for faster processing. In some cases, the transaction can be finalized in as little as a week.

Real estate sales

If the owner of a property suddenly needs to sell it, an interesting point is that the developer has its own real estateagency. This gives sellers the opportunity to use the services of this agency, which takes a 5% commission and conducts the sale at a price agreed with the owner.

Additional expenses

When valuing a property, such as a 215 square meter villa, there are additional costs to consider. These include:

• tax on acquisition
• notary services
• translation costs

All these additional costs can add up to the sum of 6-7% of the total cost of the object, and when buying a plot of land - a little less.

Permanent residence

At the final stage of the discussion of buying real estate in Brazil, it makes sense to consider opening a bank account and obtaining a permanent residence permit (PRP). This scheme becomes particularly attractive:

• Since last year, the possibility of obtaining a residence visa has been introduced for investors who purchase real estate in the northern parts of the country.
• The condition is an investment from 700 thousand reais, equivalent to about 145 thousand US dollars.

Most of the properties from our project meet these conditions.

Taxation

Nevertheless, it is necessary to take into account the peculiarities of taxation. When obtaining a residence permit in Brazil, the investor automatically becomes a tax resident.

• It is important to realize that the Brazilian tax system has its own peculiarities.
• Although dividends are not taxed, all global earnings will be taxed.
• If you are earning income from different sources as an individual, this can create some difficulties and reduce your overall income.

Therefore, it is important to properly structure your financial assets before making a final decision.

Brazilian nationality

In addition, it should be noted that it is possible to obtain Brazilian citizenship four years after obtaining a permanent residence permit. This will allow visa-free visits to 171 countries, including EU states and the UK.

However, this requires staying in Brazil for at least five to seven months of the year. Thus, it is important to carefully consider all the pros and cons of making such a decision.

Comparison with the UK

It is interesting to note that in the UK it is also possible to earn considerable income, for example, from investing in... loggias, which is also worth considering when planning investments. It turns out that both Brazil and the UK offer unique opportunities for foreign investors, and the choice between them should depend on the strategies and preferences of each individual.

What kind of initiative is this?

If you are attracted by the opportunity to invest in an unusual project that is actively developing in Brazil, Savills specialists are ready to provide you with professional advice and support. To get started, please fill out the form below: provide your name, email address and contact phone number. Our company is represented in different parts of the world, so you can contact us by selecting the region you need.

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Conclusion

In conclusion of my research, I want to emphasize that the current situation in the investment market compels us to rethink our approaches and strategies. As recent events have shown, the focus onsecurityandstabilityIt is becoming increasingly relevant for investors. Decisions that once seemed risky now appear more attractive, especially in the context of global changes and uncertainty.

Brazil, with its diverse opportunities and absence of the risk of "unfriendly states," is becoming an important destination for those who strive fordiversificationDespite the significant distances and the complexity of transportation links, the interest of the first European investors in the Brazilian market is quite evident. Projects like the new five-star resort, which is designed to harmonize with nature, attract attention with their infrastructure and recreational opportunities, which could further stimulate interest in this region.

Why should Brazil be considered as an investment destination?

• The absence of risk from "unfriendly" countries.
• Asset diversification for capital security.
• The presence of attractive investment projects, such as resorts.
• Interaction within the BRICS framework and possible security guarantees.

It's important to remember that every investment is not just a financial transaction; it's a strategic move that should align with the personal goals and priorities of the investor. In a situation where immigration opportunities are limited, investing in...real estateAbroad can not only be a way to preserve capital but also an opportunity for future relocations and the creation of a new lifestyle.

It is essential to continue closely monitoring changes in global markets and to adapt strategies according to new challenges. Brazil and other BRICS countries are opening new horizons for those seeking security and stability. It is time to assess risks and benefits, making informed decisions in a world of instability, where securing one's future means becoming a successful investor.