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Double whammy joy for Brazil investors

International investors in Brazil are enjoying a significant uplift on prices thanks to the double whammy effect of a strengthening currency and steadily rising costs of construction.

12 months ago, the Brazilian Reais was sitting at around 3.8 to the pound, but since then the Brazilian currency has been steadily strengthening, increasing by 16 percent to its current level of 3.2 to the pound.

Investors who locked in to the currency 12 months ago will therefore have seen a big increase in the sterling value of their investments, regardless of any local price rises. And the local price rises are not insignificant, for two notable reasons.

- Firstly, the rising affluence of Brazil's 190 million population is seeing an increased demand for residential property, particularly among the young professional classes.

- Secondly, the global commodity shortage is impacting the cost of construction in many emerging economies, as prices for raw materials are squeezed by a lack of supply.

The cost of construction jumped by 2.67% in June, up from 1.1% in May, as costs corrected to more realistic levels.

Good news for investors

This is good news for investors who are able to contractually agree prices in Reais, but it does mean that prices on many residential projects are set to rise in the near future.

One such project is Residence Assisi in Joinville, a buy to let investment aimed squarely at the local market, which is being marketed by E-Quity.

Prices there have been held back by the developer in spite of aggressive increases by other developers in the area, but are finally set to rise at the start of August.

Short term surges

Dan Johnson, director of E-Quity said: "For investors looking to make an immediate equity gain while linking their investment to a strengthening currency, July is a pretty good month to be looking at the Brazilian residential market.

"The Reais looks likely to continue strengthening in the short term, while construction costs also look likely to go on rising for the next couple of months, albeit at a reduced rate.

"In the current global climate of price volatility, it's important for investors to maximize the effect that short term surges in price can have on their capital as global markets rebalance."

For more information on the project in Joinville, visit: www.E-Quity.com/brazil/