On the back of a rising market, low interest rates and a good-value currency investment in Brazil property funds is soaring. The latest official figures show that the number of investors has doubled in a year. Institutional investors are also showing big interest with a marked rise in investment levels, particularly from pension funds.
Doubling in number
In April this year, the total number of investors in Brazil property funds reached 317,000. This figure represents a rise of 10.62% on March alone and doubles that registered a year ago. Interest in property funds in Brazil has grown exponentially every month since Q4 2016.
As well as a marked rise in the number of individual investors, Brazil property funds are also attracting institutional investors in drove. According to Valor Investe, in April they represented a 28.21% share of the total, up from 14.46% 12 months ago. This equates to a 95% increase.
The monthly volume of investment has also gone up. The average for each month in 2018 totalled around R$1 billion. In the first four months of this year, the average topped R$1.4 billion.
Big interest in Brazil property funds
Several factors lie behind the uptick in interest in property funds in Brazil. The general financial backdrop is undoubtedly a major attraction for investors. Interest rates currently sit at their lowest ever in Brazil – the SELIC stands at 6.5% and shows no sign of movement this year.
The Brazilian real also offers investors real value for money, particularly if they invest in US dollars. According to Forbes, the current exchange rate offers “the biggest currency saving for decades”.
Diego Siqueira, CEO of TG Core Asset and quoted by Valor Investe, attributes the new interest in Brazil property funds to the market itself. “The favourable scenario in the property market offers increasing returns for funds,” he says.
Siqueira points to three fundamentals in the Brazilian property market that make it more attractive to investors. Firstly, he notes the upward trend in prices in some markets. They include Ceará in Northeast Brazil where property sales and prices notched up impressive gains in Q1.
In terms of rental properties, a fundamental component of property funds, he believes that the improvement in vacancy levels and rise in rental rates also appeal to investors. He predicts more increases in rents throughout 2019 and 2020 as supply fails to keep up with demand.
Changes in legislation
Brazil property funds have also benefitted from recent changes in legislation, particularly with regard to pension funds. They are now permitted to invest in property funds and this change has sparked bigger interest.
Vitor Bidetti, CEO of Integral Brei, believes the assignation of pension funds to the sector could range from R$20 billion to R$50 billion. He predicts a total asset value for property funds of R$500 billion within a decade if the market fulfills its potential.
(Source: Valor Investe)