Brazil’s Northeast Coast: The Beachfront Deals in the World Right Now
I have just returned from a two-week, 540-mile scouting trip along Brazil’s northeast coast. I had to see this place for myself, after hearing reports from my colleagues at International Living, Laura Sheridan and Eimear O’Driscoll, who traveled there in January to scout property deals east and west of the city of Fortaleza. You wouldn’t believe this place—hundreds of miles of virgin beach, interrupted only by quaint fishing villages and rivers that meet the ocean.
Clear, tropical ocean waters maintain a year-round temperature of 80˚ F. Fortaleza is the capital of the state of Ceara. This city of almost 3 million, a major domestic tourist destination, boasts its own beautiful city beaches, a buzzing nightlife, and great restaurants.
Brazil has the reputation for having the best beaches in the world. Ask a Brazilian and they will tell you that Ceara has the best beaches in Brazil. I cannot disagree. Kitesurfers and windsurfers have long kept this stretch of coastline a secret. Looking east and west and seeing virgin beach stretch as far as the eye can see, you have to wonder how they kept it secret for so long. In places along the coast, these wide, white-sand beaches reminded me of parts of Florida’s coast—without the crowds.
Hear and see more about Fortaleza for free
If you missed our webinar on April 30, you still have a chance to tune in to find out more about the opportunities available in Fortaleza today. Pathfinder’s Executive Director Ronan McMahon and IL’s Editorial Director Len Galvin had some interesting stories to tell about the real estate and lots they came across while on their scouting mission to Brazil. Tune in now.
Today, the state of Ceara is seeing the collision of a momentum event of foreign investors with a rapidly expanding local economy. A rare event, but a proven signal that real estate prices are set to rapidly appreciate.
Several factors drive global real estate prices upward. Foreign investment, GDP and population growth, inward migration, infrastructure developments, political stability, and an emerging middle class can all create solid profits for the real estate investor.
You need to step back, take a deep breath, and pay attention when a number of these factors are at play in the same place at the same time. Don’t get distracted. This may not happen again…anywhere…for another decade.
This stretch of coastline represents the best beachfront buy on the planet right now—beachfront lots for $30,000; second-tier ocean-view lots for $16,000; sea-view two-bedroom, two-bathroom condos from $83,000. You can even build your own luxury home with a pool on an ocean-view lot and still have enough change from $100,000 to pay a full-time gardener for a couple of years. In the city of Fortaleza, you can buy luxury ocean-view condos for $120,000 and expect annual rental yields of 12%.
Preconstruction opportunities are available with varying terms and payment schedules. One developer I met with was offering a genuine discount of up to 30% for the first eight buyers who paid 100% of the purchase price before a sod was turned. In this case, you could pay $70,000 for a condo that would sell for $100,000 today if construction was complete. You will be waiting up to a year for your unit to be delivered, and, of course, you are bearing some of the development risk. However, a 20% uplift in the market would see you take possession of a condo worth $120,000.
Paying 100% of the purchase price for preconstruction only makes sense when you can get this type of discount. But it’s possible to find payment schedules that require you to pay a far smaller down payment on a preconstruction deal.
If you have the right access to the big Brazilian developers, you can buy preconstruction for as little as 0.5% down.
With this payment schedule, you won’t enjoy the large preconstruction discounts I mention above, but build period is typically longer. In this scenario, you would pay as little as $500 down on a $100,000 condo. Monthly payments over a three-year period would also be in the region of $500, with the balance due when your unit is handed over to you. In most cases (but you do need to check), your contract will be assignable, meaning that you can sell on your contract. As soon as a project sells out, which can be in a matter of hours, a market quickly emerges for the contract you have purchased. An immediate uplift in prices of 10% in this case would mean that you could sell on your contract for $10,000—netting you a 2,000% return in a matter of days. Of course, signing a sales contract with a view to following this strategy is highly speculative, but it’s happening today in Fortaleza and people are using this strategy to generate fantastic returns.
For an investor or developer, this stretch of coastline holds opportunities to buy bigger pieces of land (100 acres with 300 meters of beachfront for $1.5 million, for example) to develop or to just sit on. Smaller beachfront development sites are also available for small condo or boutique hotel projects.
Lock down land today
European developer contacts I speak with have been quietly snapping up development parcels under the radar of mainstream attention. For example, 337 beach plots (with villas planned) were sold to a major developer from Spain. Another Spanish group bought six miles of beach. A luxury-homebuilder from the U.K. has bought two miles of beach. These are the guys who learned their trade on the costas of Spain in the 1980s. At the time, it was a coastline of quaint villages, modest holiday towns, and beaches that stretched for hundreds of miles in both directions. During the two decades that the developers focused on Spain, property prices there rose an incredible 726%.
Now these European developers are setting their sights on Brazil’s northeast coast. It will be two to three years before these projects are released at a retail level. These groups aren’t in the business of selling raw lots. They want to develop high-end, master-planned resorts. The big boys will raise the bar and price their projects more in line with offerings in the other markets they have been successful in. Lock down land today and you will be ideally positioned to get a piece of this upside. These guys are staying quiet now, but when they start selling at a retail level they will create some noise. One piece of land that sold to a major Spanish group, who plan a mega-resort, is so vast, there’s talk of them building their own runway to accommodate flights from Europe—for vacationers and second-home owners.
Before setting out on my trip I hadn’t banked on a booming domestic economy fueling demand. Even without the surge of foreign investment, I would rate Fortaleza a buy.
On the second day of my trip, one of my local developer contacts and one of Fortaleza’s biggest builders held a pre-launch reception for his latest development: 222 condos on a beachfront site close to a planned golf course. The reception was attended by friends, family, and contacts of the developer (almost all Brazilians), and sold out within 24 hours.
The Fortaleza story is big.
As global demand and prices for Brazil’s natural resources soars, inflation has fallen to the lowest level in the country’s history. Interest rates, and therefore the cost of money, is high but falling, and the S&P has just upgraded Brazil’s long-term foreign currency debt rating. Brazil is Latin America’s biggest economy, and is attracting record levels of foreign direct investment…and became a net foreign creditor for the first time in January. Brazil makes its own airplanes and cars…as well as its own food, clothing, shoes, and appliances.
BOVESPA, Brazil’s major stock exchange, is the largest in Latin America, and has been in a strong bull market for nearly six years. Brazil’s currency has nearly doubled in the past four years—making the real one of the strongest currencies in the world..
In March 2007, Ceara’s Secretary of Tourism Bismarck Maia was elected to the presidency of Brazil’s National Forum of State Secretaries for Tourism. One of his first initiatives was to entice Delta Airlines to open a direct route from Atlanta, Ga., to Fortaleza (flight time will be about 6.5 hours). This represents a bold signal of intent to put Fortaleza on the map for North Americans.
Although the roads are excellent, we chose to drive along Ceara’s beaches to get a better view of the topography. Depending on tides, you can drive much of this coast without touching the four-lane highway. Fishing villages and scattered weekend retreats dot the coast. For a refreshing drink, pull up outside one of the many beach bars, where you can enjoy fish straight off the boat and fresh coconut water. Wind turbines dot elevated sand dunes generating a healthy income for the landowner. It really is hard to believe that what I’m talking about is within an hour’s drive of a First-World city.
Bio
Ronan McMahon is the executive director of Pathfinder (International Living’s preferred real estate advertiser), a global real estate scouting and marketing company. He has just launched a new product called Real Estate Trend Alert—a service dedicated to giving you the best investment opportunities in the world, before most people are even aware of them.
Fortaleza itself sits on 12 miles of coast. The city’s boardwalk stretches for a few miles along the beach, a wide street where you can walk, shop, relax, close business deals, or watch a free concert. Walkers and joggers, young and old, pass up and down. Families congregate in the many cafés, while groups of surfers relax over beers after a day in the water. The market bustles, with vendors selling everything from craft jewelry to leather goods. Nightly, I enjoyed a stroll along the boardwalk or a meal in one of the restaurants taking in the sights and sounds of the city. The beachfront apartment buildings that run along the boardwalk are the most sought-after in Fortaleza.
No doubt, Fortaleza and the miles of beach that surround it is worth your attention right now.
What the press says about Brazil
Here at International Living, we believe Fortaleza is the next up-and-coming hotspot. That’s why we dispatched two groups of staff since January to scout the property bargains we had been hearing about. And guess what? The reports are true. Fortaleza may be the world’s No. 1 property destination. The beachfront deals here are an investment that not only can you personally enjoy with your family…but one that will appreciate enormously in the years to come.Today, Brazil is emerging into a 21st-century nation, with all the amenities, infrastructure, and conveniences you would naturally expect in a Western First-World country—and more.
Newsweek reported in February that Brazil’s fast-growing economy keeps booming even as the American economy continues to slow.
As the Financial Times put it, “Brazil seems to be immune from market turbulence.”
According to Reuters: “Brazil has the chance 30 years from now of being a bigger economic power than China.”
“There is nowhere in the world that you can find beachfront property at these prices and at this quality.” —PR Newswire
Bloomberg recently reported on Brazil’s soaring fortunes: “Brazil’s stock market reclaimed its lead over the world’s 20 biggest equity benchmarks this year after Standard & Poor’s awarded the country an investment grade credit rating, pushing the Bovesa index to a record. The Bovespa jumped the most since October 2002 yesterday after S&P’s unexpected upgrade boosted shares of banks and real estate companies. The rally turned the Bovespa’s 2008 loss into a gain of 6.2%, better than the S&P 500 Index, the U.K.’s FTSE 100 Index and France’s CAC 40 Index.”
BBC News: “Brazil is South America’s most influential country, an economic giant and one of the world’s biggest democracies.”
“Slowly and without great fanfare, Brazil’s economy has turned a big corner. Already a global power in agriculture and natural resources, Brazil has added a key ingredient that had long eluded it: a currency with staying power. In turn, that’s helping unleash the greatest burst of prosperity the country has witnessed in three decades, attracting foreign investors by the score and providing a growth engine for a flagging global economy.” —The Wall Street Journal