11.05.2008
Signs of Life: Real estate and construction
Newly available mortgages and the rise of the
middle class are fuelling a construction boom but, as ever, wealth is failing
to reach the favelas
Nowhere is
the gap between rich and poor in Brazil more graphically illustrated than in
the favelas of Rio de Janeiro or São Paulo. Rural Brazilians in search of
employment have flooded into the major cities over the past few decades, only
to end up living in squalor. The shortfall in housing is now estimated at up to
10million homes.
Yet Brazil's construction industry is booming. In
São Paulo, it is impossible to find cranes to rent, complains Sérgio Newlands
Freire, who heads the estate agency group Brasil Brokers.
Brasil Brokers is one of a number of real estate
companies that have joined the IPO rush over the past year or so. Around a
quarter of the record Brazilian stock offerings in 2006 came from the real
estate sector, including house builders Gafisa and Cyrela, bringing much-needed
foreign investment into the industry.
The growth of a new middle class, along with the
introduction of long-term mortgages, previously unavailable, is expected to
fuel a boom in housing construction. That will have a knock-on effect on
employment in an industry that traditionally employs large numbers of unskilled
workers. Many construction companies are starting to introduce training
programmes for their workers.
In commercial property, emerging markets will
continue to attract "healthy levels" of investment, according to the
recent Rics global property survey.
"The emerging giants of Brazil, India, China
and Russia now account for more than 50% of the world's GDP, and have started
to devour ever-increasing proportions of global property transaction
activity," the report says.
Investors eager to gain exposure to these booming
markets have been "unfazed" by the volatility and economic weakness
of financial systems, which so far have largely been confined to the developed
world. Indeed, emerging economies such as Brazil are in better shape, according
to Rics, as buffers of reserves have been built up on the back of rising oil
prices and trade gains.
As well as attracting overseas interest, the new
economic stability in Brazil has encouraged longer term investments. But the
real estate industry still has a long way to go, says Jose Auriemo Neto,
president of property development group JHSF.
"It's a country in which there's still a lot
to be done," he says. "It's important that Brazil has a positive
outlook and is able to gain the long-term trust of investors."
Fiona Walsh
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