The world’s hottest place to invest in property is Sao Paulo, Brazil, according to the latest global house price survey.
Prices in the city soared by more than 15% in the year to the end of July 2012 as official interest rates were cut to 8%, according to the Global Property Index, which tracks house prices in 34 countries.
Sao Paulo is also a key venue for the forthcoming World Cup in 2014 and the Olympics in 2016.
However, as investors flood in, estate agents are warning some asking prices are unrealistic and beyond the financial grasp of many local workers.
Some firms are offering incentives like 32-inch TV’s to try to attract buyers.
City is prime target for buy to let investors
Although home values are booming, the rate they are rising is slowing and some agents are reporting stagnant or falling prices in some neighbourhoods.
International property firms are pushing investors towards buying in Sao Paulo and other cities as sounder buy to let opportunities than those offered by resorts on the coast.
Savvy overseas investors are aware that resort developments are often awaiting infrastructure to catch up, and if an area does not take off for buyers, that investment may never be forthcoming.
The result is declining prices and a lack in demand from prospective tenants.
“Buying in Sao Paolo or another Brazilian city is a much better investment prospect,” said one international agent. “The infrastructure and tenants are already there. It’s more of a case of picking the right property to give the desired return rather than rolling the dice and hoping for the best.”
Brazil’s housing market is thriving on the back of the economy, but the global downturn is beginning to catch up. GDP growth in the second quarter of 2012 was just 0.5% against a forecast of 0.7%.
Tax and interest rate cuts
The central bank and government have tried to counter the effects of financial problems elsewhere by cutting official interest rates from 12.5% to 8% in the past year, while the government has slashed taxes to encourage Brazilians to spend more.
The likely result is a continuing slowdown in house price rises, but as Brazilians feel richer and money is cheaper to borrow, buy to let investors offering good value properties at competitive rental prices are unlikely to feel the pinch.
