Experts highlighting ‘great potential’ in Brazilian property market
While property experts in developed countries have been grasping at any signs of recovery in the struggling markets, there has been a recent flurry of reports suggesting that the Brazil real estate sector has fantastic potential for the savvy investor.
Not least are the reports of record profits from Brazilian property developers such as Gafisa and Cyrela.
Sao Paulo-based homebuilder Gafisa recently announced that its net operating revenue for the second quarter of the year rose by 54 per cent compared to the same period in 2008.
The firm’s revenues stood at 705.8 million reais (£229.6 million), up from 458.9 million reais the previous year, while pre-sales reached 835 million reais, up by nine per cent compared to the 764 million reais generated between April and June 2008.
Meanwhile, Gafisa’s earnings before interest, taxes, depreciation and amortisation, or EBITDA, which is a measure of operational profitability and cash generation, rose by 76 per cent year on year. The figure increased from 78.7 million reais in the second quarter of 2008 to 138.6 million reais in the same period this year.
“We witnessed healthy demand in all segments of the Brazilian real estate market,” said Wilson Amaral, chief executive of the company.
“Historically low interest rates, inflation and unemployment levels have prevailed, and the convergence of increasing economic prosperity, strong government support of home ownership, and substantial household formation in all regions of the country contributed to Gafisa achieving strong sales,” he added.
The firm forecasts a positive outlook for the Brazilian property market on the back of government measures such as the Minha Casa, Minha Vida scheme and the emergence of favourable macroeconomic trends.
“Importantly, there are recent signs of strengthened demand for housing in the mid/mid-high segment that is traditionally more sensitive to economic uncertainty,” the company stated.
Gafisa’s results were followed by the announcement of similar achievements by Cyrela Brazil Realty, the largest homebuilder in the country.
The firm reported a 67 per cent rise in profits in the second quarter of the year, with net income rising to 157.1 million reais, compared to 94 million reais during the same period in 2008.
Cyrela’s EBITDA rose by 37 per cent during the period, standing at 209.4 million reais, and the company put its increased income down to a rise in sales.
Meanwhile, the company’s commercial real estate arm also enjoyed solid financial results for the second quarter of 2009, posting net revenues of 60.14 million reais and gross profit of 53.82 million reais.
Given that the Brazilian property market ranks second in the world for capital appreciation, based on figures from the Association of Foreign Investors in Real Estate, it is no wonder that buyers are showing interest in the country.
The sector recently received the backing of major US real estate investment firm Equity International, whose chief strategic officer Thomas McDonald told Bloomberg news agency that the company is considering Brazilian property-related manoeuvres.
“Right now some of the most interesting investments in the world are in Brazil,” he said.
Alexander Kazan, vice president for Latin America equities at New York-based brokerage Auerbach Grayson, echoed Mr McDonald’s confidence.
“I am very bullish on real estate,” he told the news provider.
“With long-term rates trending lower and a housing deficit, there is tremendous potential for real estate in Brazil,” Mr Grayson added.
