Class Investment in Brazil

Emerging markets are favourites for investment for many reasons and one of them is their growing middle classes. Brazil is perhaps the best example of this phenomenon – here, the middle class is one of the world’s fastest growing.

Since 2005, 91 million Brazilians have joined the middle class and 36.1 million more are expected to become part of it by 2014. In Brazil, the middle class is divided into two sub-classes – Class C with a monthly income between R$1,115 and R$4,807, and Class A/B with an income of over R$4,807. Experts believe that over the next 5 years, Class A/B will see the biggest growth.

This burgeoning middle class is the main driver behind consumer spending, expected to reach a record R$2.2 trillion this year. According to the Sao Paulo consumer federation, Fecomercio, Class A/B represented 56.2% of consumer spending (some R$1.1 trillion) in Brazil last year and Class C accounted for 19.1%. Unsurprisingly, the middle class and their consumer aspirations are a major focal point for foreign investment in Brazil.

Research carried out by market analysts, Ibope Inteligência has found that owning a car and a house are the most visible signs of economic aspiration in the middle classes. Within Class A/B, 83% own their own home and 92% have a car. In Class C, these percentages drop to 79% for property ownership and to 55% when it comes to owning a car.

However, although a significant proportion already owns a car and a home, middle class aspirations do not stop there – most middle class Brazilians want a better model of car and a larger home. It therefore follows that two of the largest growth industries in Brazil are real estate and car manufacturing. In 2009, Brazil saw a huge increase in its car industry – both the numbers of cars made and sold were among the highest in the world. Sales of property in Brazil also rose spectacularly. And sales this year are expected to reach even higher proportions.

Real estate sales are powered both by the huge government investment in social housing through the Minha Casa Minha Vida programme and by middle class aspirations to own a bigger and better home. Under Minha Casa Minha Vida, 3 million low-cost homes will be built throughout Brazil in five years, but this figure pales in comparison with the number of properties to be constructed for the middle classes. According to Ernst & Young, 37 million homes will be built in Brazil over the next two decades. This averages at 1.6 million properties a year. And all this investment in new homes is to help satisfy demand from the middle class.

The bulk of property construction (over 57%) in Brazil will take place in the south east region, home to Sao Paulo, Rio de Janeiro and 77.9 million Brazilians. The second largest slice of property investment will be centred in the north east. For Mundo Corporativo, one of Brazil’s top business journals, the north east with its fast-growing economy, represents “a new frontier for business”.

At Obelisk International, we believe that for those looking at investment in property in Brazil, the growing middle class seems to provide endless possibilities. Whatever your entry level and investment timescale, Obelisk International’s market research shows that there are clear openings for investment throughout Brazil for at least the next 20 years.

For more information on investing and to find out about Obelisk International's latest projects, contact us on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.

Party Time for Affordable Housing in Brazil

As word gets out about the Minha Casa Minha Vida phenomenon in Brazil, more of the world media are talking about it. The latest to report on Brazil’s affordable housing scheme is the BBC who broadcast a series of mini-documentaries from Brazil on the News at 10.

The report titled ‘Will Brazil’s economy keep growing?’ looks at the shortfall of property in Brazil. It focuses on the booming economy in Brazil and how this has boosted the middle class – according to the BBC, the increase of the middle class is “the cornerstone of President Lula’s administration”.

Like most things in Brazil, the scale of Minha Casa Minha Vida is massive – this affordable housing programme aims to build 3 million low-cost homes by the end of 2014, reducing the housing shortage among the lower classes in Brazil by over 40%. The financial and social implications are huge. With a budget of R$105.7 billion, Minha Casa Minha Vida offers something for all participants – not only for the new homeowners but also for developers and investors. According to BBC reporter, Matt Frei, “While the rest of the world may be regretting its property bubble and slashing handouts, in Brazil the party has only just started.”

Featuring footage from a packed property exhibition publicising Minha Casa Minha Vida, the report shows happy Brazilians able to buy a home through the scheme. Minha Casa Minha Vida is not only reducing Brazil’s housing shortage; it’s also giving millions of Brazilians a chance to leave poverty behind. One beaming woman whose application for one of the three million homes had been successful, said, “I’m still poor, but I’ll get to the middle class”.

The report then moves to the economy in Brazil. “Brazil has always had the beaches; now it has the numbers,” says Matt Frei before he goes on to list Brazil’s ‘numbers’. These include a growing economy, the third largest airline industry in the world and over half its cars running on biofuel. And, as he adds, “that’s before you even get to the World Cup and Olympics”. The report finds that Brazil is “a power to be reckoned with” and although Brazil may not have the same economic standing as China, it does have democracy.

The BBC also looks at the negative side to property in Brazil – the infamous favelas, home to thousands of families. According to the report, over 1 million people live in slums in Rio de Janeiro alone. Matt Frei describes these as a “warren of violence, drugs and unemployment” and the pictures speak for themselves.

The prime objective behind Minha Casa Minha Vida is to offer an affordable alternative to the favelas. The bulk of the new low-cost homes are destined for Brazilians at the lowest end of the earnings scale – some 1.6 million properties will be owned by families whose salaries fall between zero and three times the monthly minimum wage. As the BBC points out, “if it really wants to succeed, Brazil must reinvent whole neighbourhoods from scratch”. The huge success and popularity of the Minha Casa Minha Vida scheme suggest that Brazil has found a way of doing this and Obelisk International is happy to be associated with the scheme.

For more information on investing and to find out about Obelisk International's latest projects, contact us on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: www.obeliskinternational.com.