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1/28 Brazil A Safe Option for Real Estate Investment Nelson Germanos Secovi-SP Development and Real Estate Association www.secovi.com.br November 2008.

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Presentation on theme: "1/28 Brazil A Safe Option for Real Estate Investment Nelson Germanos Secovi-SP Development and Real Estate Association www.secovi.com.br November 2008."— Presentation transcript:

1 1/28 Brazil A Safe Option for Real Estate Investment Nelson Germanos Secovi-SP Development and Real Estate Association November 2008

2 2/28 SECOVI-SP represents a broad spectrum of the real estate industry since 1946 SECOVI represents over 13,000 real estate companies and 37,000 condominiums in the State of São Paulo. Active member in most governmental committees in housing and urban development. Provides reliable market analysis and indexes to the industry. Maintains a broad real estate database for commercial purposes. SECOVI-SP is a solid and comprehensive gate to real estate developers.

3 3/28 Brazil as an option for foreign investment The country is a consolidated democracy. Stable institutions. Independent judiciary system. Free capital flow. Foreign capital is welcome. Financial benefits to some activities. 400 of the Fortune 500s biggest world companies have branches in Brazil. No risk of earthquakes, hurricanes or other natural disasters.

4 4/28 Brazil – some figures Area Currency Population Population density Urban population Population growth rate Unemployment 8.5 M sq km (3.3 M sq mi) R$ - Real 188 M (2008) 22 inhabitants/ sq km 81.3% 1.2% (2006 – 07) 8.1% (July/2008)

5 5/28 Economic Outlook (2007) Achieving self sufficiency in oil. Investment grade by Standard & Poors and Fitch Ratings. US$ 200 bn in international reserves. One of the biggest producers of agricultural and mineral commodities.

6 6/28 Energetic Matrix BRAZIL: Renewable sources: 45.8% –Sugar cane: 15.7% (became the second main source of energy in 2007) –Hydroelectric: 14.9% –Wood: 12.0% Oil: 37.4% Natural gas: 9.3% Others: 7.5% RenewableNot renewable

7 7/28 World GDP (PPP) ( ) Source: IMF Emerging marketsDeveloped economies

8 8/28 Brazilian Foreign Debt US$ bn SOURCE: Banco Central do Brasil (est.)

9 9/28 Source: IBGE Plano REAL Inflation rate (est.)

10 10/28 Source: Banco Central do Brasil Basic interest rate May/05 = 19.75% Oct/08 = 13.75%

11 11/28 Unemployment Rate 2002 – 2009 (est.) Source: IBGE / Bradesco

12 12/28 International Reserves US$ bn Source: Banco Central do Brasil

13 13/28 Gross Foreign Direct Investments Source: Banco Central do Brasil US$ bn (est.)

14 14/28 Source: UNCTAD / Bradesco Foreign Direct Investments Ranking 2003 – 2006 (US$ M)

15 15/28 World Population Distribution In bn persons Source: UN

16 16/28 Worse Better Gini Coefficient 1993 – 2007 A low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient indicates more unequal distribution. Ratio ranges from 1 to 0 SOURCE: Banco Central do Brasil/ IBGE

17 17/28 Real Estate Market

18 18/28 Regulation Brazilian real estate credit market was excessively regulated. Important regulatory changes were carried out by the government as from Private banks gained access to the real estate credit market, increasing competition. Nonetheless, strict requirements always applied (and currently applies) to personal credit assessments. Among others, risk analysis by financial institutions include frequent and thorough inspections of the project, worksite, proposed schedule, legal and environmental documentation.

19 19/28 Owned vs. Rented houses (2005) and Housing Deficit Owned45.6 M (86%) Rented 7.4 M (14%) Total53.0 M (100%) Housing deficit 7.9 M Source: IBGE

20 20/28 City of São Paulo Area : 1,530 sq km GDP : US$ 157 bn GDP (per capita) : US$ 14,000 Population: São Paulo City: 11 M Metropolitan Area: 19.8 M

21 21/28 Atlantic Ocean São Paulo Metropolitan Area

22 22/28 Foreign investment in the Brazilian real estate market

23 23/28 Foreign Investment in Real Estate Capital markets (listed companies, investment funds); Direct investments in unlisted Brazilian companies; Direct foreign ownership of real estate (restrictions to rural areas may apply). For many years, real estate investment in Brazil and other emerging markets were only possible through direct investment in specific projects. In Brazil, recent financial deregulation and strong development of capital markets stimulated IPOs, as well as the institution of dedicated investment funds. Investment options include:

24 24/28 IPOs in 2007 by sector 1 st Real Estate:28.1% 2 nd Financial:21.9% 3 rd Food & Beverage: 7.8% 4 th Agribusiness: 6.3% Total: US$ 34.6 billion Source: ANBID – Associação Nacional de Bancos de Investimento

25 25/28 Who invested in the IPOs 1 st Foreign investors*:73.8% 2 nd Local Investment Funds:19.6% 3 rd Private investors: 6.6% *Origin: USA = 61.1%; Europe = 35.3%; 3.6% other Source: ANBID - Associação Nacional de Bancos de Investimento

26 26/28 Corporate Office Space City of São Paulo (AAA Buildings) Total stock (2007): New stock (2007): Estimated new stock (2008): Vacancy Rate (q ): 2.2 M sq m 136,000 sq m 179,000 sq m 7% Source: Jones Lang Lasalle

27 27/28 Brazil: Shopping Malls Source: ABRASCE / SONAE / ENPLANTA / National Research Bureau Cidade Jardim Mall São Paulo State = 123 (2008) In USA: 48,700 malls

28 28/28 Second Home Purchases % of foreign buyers have already visited the country. For most foreigners (76%), the main attraction for investing in the country were climate and natural beauties. Source: Folha online Property purchases by foreigners in Brazil totaled US$646M U.S.A. US$ 102 M Europe US$ 450 M Spain US$ 82 M Italy US$ 63 M

29 29/59 SÃO PAULO

30 30/59 SÃO PAULO

31 31/59 SÃO PAULO

32 32/59 RIO DE JANEIRO

33 33/59 RIO DE JANEIRO

34 34/59 BELO HORIZONTE

35 35/59 BELO HORIZONTE

36 36/59 PANTANAL

37 37/59 AGRIBUSINESS IN MT: SOY

38 38/59 VITÓRIA

39 39/59 SALVADOR

40 40/59 SALVADOR

41 41/59 RECIFE

42 42/59 PORTO DE GALINHAS

43 43/59 MACEIÓ

44 44/59 MACEIÓ

45 45/59 JERICOACOARA

46 46/59 PORTO ALEGRE

47 47/59 SANTA CATARINA

48 48/59 SÃO JOAQUIM

49 49/59 BLUMENAU

50 50/59 50 Thank you Nelson Germanos


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