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Brazil Property Investment to the Tune of 13.7 Million

However you look at it, Brazil is huge. Not only is it the world's fifth largest and most populated country, its immense resources and buoyant economy give investment in Brazil enormous potential. And real estate represents one of the biggest opportunities.

Described as a powerhouse and magnet by PricewaterhouseCoopers, the Brazil property market is on the brink of an unprecedented boom. Three main engines are behind this - the 2014 World Cup, the 2016 Olympics and the major housing shortage.

According to the Brazilian Association for the Construction Materials Industry (ABRAMAT), investment in infrastructure and services for the two sporting events will run to almost R$60 billion. The World Cup needs R$30 billion for the construction of stadiums, upgrading of airports, transport systems and increasing Brazil's network of hotels. The Olympics require a similar amount.

However, ABRAMAT also points to the residential housing sector as a major driver behind the forthcoming boom in civil construction in Brazil. In their Macro-economic Scenario 2009-2016 report, ABRAMAT describes the current housing shortfall and the forecast increase in population.

ABRAMAT reports that the current population of around 190 million is expected to increase to 209.3 million by 2016. The number of families in Brazil will grow by 2.5% to 74.1 million and the number of homes by 2.7% (from 57.7 million to 71.4 million).

Using what it describes as "conservative estimates", ABRAMAT expects an annual growth of 2.7% in the number of homes built between 2009 and 2016. During this time, annual average investment in residential construction will run to R$227.2 billion - R$147.8 billion for the construction of new homes and R$79.4 billion for refurbishing existing stock.

Over this 8-year period, Brazil is set to see an unprecedented real estate boom. ABRAMAT's "conservative estimates" quote the construction of 13.7 million homes. In a country where, according to Reuters, 27 million homes are needed over the next 15 years, the chances are that many more will actually be built.

This boom has already started with the government social housing programme, Minha Casa Minha Vida (My House My Life), leading the way. With a budget of R$34 billion, My House My Life has the ambitious goal of building 1 million homes this year. The programme plans to eventually reduce Brazil's housing shortage by 14%. The President of the Brazilian Chamber of Construction Industry (Câmara Brasileria da Indústria da Construção), Paulo Simão, believes that much of 9% growth forecast for the civil construction industry this year will be due to the My House My Life programme.

At Obelisk, we believe the estimate of the construction of 13.7 million homes is somewhat conservative. According to our market research, this figure is likely to be considerably higher, particularly as investment in Brazil gains in popularity among foreigners. But regardless of the final figure, Obelisk remains convinced that investment in Brazil real estate currently has the best potential anywhere.

 

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