The “World Cup effect” is a phrase that has been used a lot in the past month. While Brazilian real estate has enjoyed a surge in demand from overseas buyers, some investors caught up in the hype found themselves victims of a fraudulent land banking scheme.
The opportunity allowed buyers to pick up plots allegedly close to World Cup stadiums to benefit from rising land prices, but the plots turned out to be worthless.
As many as 600 buyers put in a total of up to £19 million, according to the BBC’s Today Programme . It is not the first time that such schemes have taken in buyers. In the run-up to the 2012 Olympics, more than 100 people bought into similar land banking opportunities surrounding London’s Olympic Park in Stratford. Indeed, the FCA tells The Telegraph that land banking schemes have cost UK investors an estimated £200m.
The “World Cup effect”, though, is still true, says Landcorp International . Brazilian property has seen enquiries jump 15 per cent year-on-year in June 2014 on TheMoveChannel.com The firm, which specialises tells us that they have also seen a “greater level of interest in Brazil both before and during the World Cup”, not just from UK and Ireland buyers but also those in the Middle East.
“Clearly the World Cup has increased awareness of Brazil and people are interested in the possibilities that this growing nation has to offer,” comments Managing Director Ailse MacFarlane .
Investors should be cautious, though, warns MacFarlane, whose company specialises in land investment opportunities.
“In common with investing in any real estate opportunity in any country, buyers should always do their homework. Check the credentials and team history of the development company. Ask for comfort letters from the lawyers. Check the zoning of the land and what can be built on it. If construction is underway, ask to see photos.”
While such schemes rightly put investors on their guard, though, MacFarlane says that Brazil is still a market ripe for returns. There has been some slightly negative news about the slow growth of the Brazilian economy, high inflation and over-building in recent months, but she explains that this is “not the reality across the whole of the country” and is isolated to the South of Brazil – to São Paulo and Rio de Janeiro.
“In the northeast of the country the economy is still growing strongly,” MacFarlane continues. “Infrastructure is being installed and there is a huge need for quality accommodation. Almost 50% of the 60 million Brazilians that holiday in Brazil go to the Northeast of Brazil but there is a lack of quality holiday accommodation.
“We are introducing a limited opportunity for overseas buyers to purchase an off plan plot in a 5 star residential and development being created in NE Brazil by Pure Hotels Resorts and Residences. This is the 1st of 5 resorts that are being built to cater to this huge pent up demand from internal tourists. The developer is so confident of the secondary market at exit that he is offering a guaranteed buy back on the plot. Alternatively, clients can keep their plot and build a second home.”
Football fans may be downbeat as Germany went on to lift the trophy this weekend, but buyers are still keen. The 10th edition of the 3-day Real Estate Fair recently sponsored by Caixa Economica Federal (the main Government owned financial institution) was held across several cities across Brazil during May and June 2014 and produced R$15 billion in property sales, an increase of 12 per cent compared with the 2013 fair. In Teresina [one of the larger internal cities] alone, the 2014 fair generated R$500 million of property sales.
Interest is not just limited to overseas investors, she adds. “This opportunity was launched in, Teresina, at the Pure Resorts Showroom in NE Brazil in May. Local buyers snapped up 50 plots in 2 weeks!”
Nonetheless, it is important to be careful when taking a punt overseas.
“Make sure the facts stack up in terms of how you can exit from the opportunity,” advises MacFarlane. “Is there a clear secondary market? A sizeable local population? Good transport links including proximity to an international airport? Is it politically stable?
“Investors should check these facts and make their investment decision based on this information.”
For more advice and information, read our article on land investment .