Developers like the Related Group of Florida, in a joint venture with the Related Companies based in New York, and Donald J. Trump, as well as real estate investors like the billionaire Sam Zell, are working to build residential housing and commercial spaces in Brazil, Uruguay and Colombia.
For decades, those countries were not seen as very safe bets by many foreign real estate developers. Now Brazil, especially, has become the object of a lot of attention. Take a gander at the numbers and you quickly understand why.
The average price of a four-bedroom apartment in Ipanema, one of the posh beach neighborhoods in Rio de Janeiro, rose nearly sixfold from 2008 to 2012, exceeding $2.5 million. The rise was helped by hype over large offshore oil finds and the announcement that Rio had won the 2016 Olympics. Even in Rio’s grittier downtown, one-bedroom apartments saw a threefold increase in sales price in those years. In São Paulo, Brazil’s largest city, average residential prices doubled during that period, to $335 per square foot. Construction of residential buildings, especially in São Paulo, where I lived in 2011 in the latter part of my time as a correspondent in Brazil, seemed to be nonstop only a few years ago. In the upscale neighborhood of Itaim Bibi I was literally surrounded by the construction of high-end condo buildings, with workers toiling away on Saturdays and sometimes Sundays.
In the past Brazilians with money may have been thinking solely about how to park it outside their country. Today rising incomes and one of the longest sustained periods of economic stability in the country’s history have given many Brazilians the confidence to invest at home as well.
“Someone from the interior of Brazil, who in the past would have bought a home in Paris or New York, will now buy it in Rio,” said José Conde Caldas, president of the Association of Directors of Real Estate Companies in Rio de Janeiro, who predicts strong growth at least through the 2016 Rio Olympics. In his 41 years in real estate, he added, “this is the best time of all the times.”
The hot Rio property market “has much more to do with demographics than any one-time events like the Olympics,” said Pedro Seixas de Corrêa, a professor at the Getúlio Vargas Foundation in Rio who lectures on real estate management. “This is because of the country’s rising incomes.”
Fortunes were made in the recent economic boom. São Paulo and Rio are now the 9th- and 10th-ranked cities in the world for high-net-worth individuals with at least $30 million in wealth, according to Knight Frank, a real estate company in London.
But are those times ending? Lately, sales of new residential properties have tapered off. In both Rio and São Paulo the number of new residential development units peaked in 2010. Residential sales in São Paulo fell by nearly 5 percent last year.
Construction costs are rising, in large part from a shortage of skilled labor that is causing construction delays. In Rio, costs rose by 39 percent per square foot over the past five years.
“This is a serious problem,” Mr. Caldas said, adding that developers were recruiting laborers from other Brazilian states. The end next month of a major project to upgrade Maracanã soccer stadium for the 2014 World Cup should free up some 6,000 laborers.
The political will to cut down on red tape and keep the construction boom going seems to be there, at least in Rio, Roberto Kauffmann, president of Rio’s Civil Engineering Industry Syndicate, said in a recent interview in Rome, where he spoke to Italian investors about opportunities in Rio. “We have created conditions to be able to overcome bureaucracy,” he said.
In any event the challenges haven’t dissuaded developers like Jorge Pérez, chairman of Related Group, based in Miami, who is making a sizable bet on Brazil’s need for new upscale housing over the next decade. Related established a Brazilian subsidiary a year ago and is developing its first mixed-use projects in São Paulo, with an eye to the Rio market as well.
“São Paulo had a period of overbuilding and has quieted down the past few years,” Mr. Pérez said. But “we feel that Brazil over the next decade will have a much greater growth rate than the United States, and definitely than Europe. There will be bumps on the road, like all development markets.”
Taylor Barnes contributed reporting from Rio de Janeiro
Article source: http://www.nytimes.com/2013/03/24/realestate/americans-invest-in-south-american-real-estate.html?partner=rss&emc=rss