Boost for Brazil Property
Further confirmation of the buoyant Brazil property market comes with the news that Equity International is raising US$500 million for investment in Brazil real estate. These funds add to the already booming property industry, set to see at least 13.7 million homes built by 2016.
Owned by billionaire Sam Zell, Equity International is already a major player in property in Brazil and a huge advocate of the investment potential to be found there. Speaking about this latest raising of funds to Bloomberg Businessweek, Equity International CEO Gary Garrabrant said, "Our enthusiasm for Brazil could not be higher" and quoted "local demand that is unparalleled".
A major engine behind this unprecedented demand is the fast-expanding middle class. Having grown from 42% of the population in 2002 to its current 53%, the Brazilian middle class is increasing affluent - average monthly income has grown a massive 40% over the last five years.
And top of middle class Brazilians' wish lists is property. Mr Garrabrant stated that at least 1.5 million new households are formed every year in Brazil with developers building around half that figure. This imbalance of demand and supply for property in Brazil leads Equity International to believe that "there are no constraints to growth for the homebuilding sector".
Equity International has shares in Gafisa, the second largest property developer in Brazil by revenue. Gafisa is a majority shareholder of Tenda, one of the biggest low-cost property builders in the country and the only developer catering specifically for homes aimed at the lower income bracket.
Along with many developers including Obelisk, Tenda is part of the social housing programme, Minha Casa Minha Vida, benefitting millions of low-income Brazilians. The scheme, which aims to build 3 million homes by the end of 2014 (one million this year) is widely acclaimed as one of the major factors behind the current boom in the Brazil real estate market.
Hand-in-hand with the thriving property market in Brazil goes a booming mortgage market. Equity International also sees strong potential for growth and investment here. The company has a stake in Brazil Finance & Real Estate Participacoes SA with the aim of developing the still-emerging market for mortgages in Brazil.
According to Mr Garrabrant, Brazil has fewer than 400,000 home loans, which he believes is the equivalent to the number in the Upper East Side of Manhattan. When asked if Brazil will catch up, he adamantly replies, "No question".
For Obelisk, the latest move by Equity International consolidates the wide-ranging consensus that there is huge potential to be found in property investment in Brazil. And we believe that this potential comes at all levels - exciting opportunities are available in social housing as well as in luxury properties. Whatever your choice or entry level, Brazil real estate offers potential for high returns right across the spectrum.
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