Conservative Investors Believe Sao Paulo’s Housing Market is Safe for Two Reasons
- The FGTS (Fundo de Garantia do Tempo de Serviço) a Brazilian Government entity which provides loan guarantees, housing subsidies and other services for Brazilian workers – recently increased its funding release cap to 500,000 Reais. This means more workers will be buying homes with this price range in mind. Construction companies know this and are therefore building houses and apartments to cater to those needs. This in turn is creating more jobs and more money is circulating in the Brazilian real estate sector.
- Lower interest rates. Real interest rates in Brazil have dropped dramatically in the past couple of years and the tendency is for them to keep dropping. According to Mauricio Catelli, Owner/Director of Imper Assessoria Imobiliária, at present “real interest rates can actually be as low as eight (8) percent when you discount the value of inflation”.
Brazil is no longer that volatile speculative market where currency and interest rates were unpredictable. The country’s economic situation has recently become much more stable and both foreign and domestic investors are starting to see that. Amir Makansi says that investing in property in Sao Paulo right now is not only safe but it would also have these additional benefits:- The ROI on Rental property in Sao Paulo is very healthy. Buying property in a good location and renting it out can potentially make you from 10 to 12 percent yearly.
- Today’s Investors will most likely see healthy gains in home value appreciation. At this particular moment, there is a high demand for housing in Sao Paulo so prices are expected to keep going up.
But Where Exactly in Sao Paulo Should You Buy? What are the Best Neighborhoods?
“There are some well-known and consistently well performing neighborhoods, such as Morumbi, Perdizes, Moema and Vila Nova Conceição. These are already high valued neighborhoods, offering no risks for the real estate buyer.
In every business, including real estate, the profitability is directly proportional to the risk you are willing to take. If you buy a property at Perdizes, for example, the probability of having problems is zero. This is because Perdizes is a consistently well performing and valued neighborhood. On the other hand, you will pay a relatively high price, with less appreciation potential.
Another option is to bet on neighborhoods that tend to gain more value over time, such as the western part of Marginal Pinheiros, Casa Verde, or other neighborhoods that are growing.If you choose places that are not totally established, there is a huge possibility that you will have greater home value appreciation over time; much higher than in the currently well performing neighboorhoods. Of course you will run a higher risk; the neighborhood may not fully develop and you may have problems with liquidity. All things which probably won’t happen in high value areas.”
Photo provided by: Fernando Stankuns taken from http://www.flickr.com/photos/stankuns/2646182539/
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