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.