Edition nº 27
Real Estate Expansion
With a 39% growth projection and the expectation of selling 930,000 financed properties in Brazil by the end of 2010, the industry attracts the attention of major foreign investors and increases market share of Canadian companies
Buying one’s first house is no longer only a dream for most Brazilians. In fact, many are betting on buying a second property to add it to their equity. There is good reason for optimism. The Brazilian real estate industry is experiencing its best phase, with the booming of stocks and stock offers in the Stock Exchange, which in recent years, and for several reasons, has attracted the attention mainly of foreign investors.
Unanimously experts point to the country’s so praised economic stability as the main leverage factor for the industry’s growth. Another factor mentioned is the upcoming “C class” that has attained purchasing power through access to credit and incentives provided by the government, through programs such as “My House, My Life” managed by Caixa Econômica Federal (CEF). According to data published by the School of Economics, Administration and Accounting of the University of São Paulo (FEA-USP), in Brazil, the expected growth in this industry between 2009 and the end of 2010, is 39%, with the expectation of 930,000 financed properties. In 2005, the corresponding amount equaled only 1% of Brazilian GDP. Currently, this index is at about 4% and the forecast for 2014 is that it will reach 11%. The main sources for real estate financing are the FGTS program (employee unemployment compensation fund) and savings accounts, which allocate 65% of their reserves to that end, totaling about R$ 70 billion.
The outlook encourages foreign companies to invest, particularly Canadian companies, that predict continued expansion in the coming years, due to new business opportunities brought about by the near-in-the-future sports events – the 2014 World Football Cup and the 2016 Olympic Games. “The investment will surely foster new construction projects and increase the number of clients, attracting investors from other countries”, believes Marcelo Brognoli, vice-president of the Brazilian Association for the Real Estate Market (“ABMI”), which represents 27 companies in the industry in the main Brazilian cities.
Such is the case of Canadian company Brookfield Incorporações, which, in only four years, was able to increase revenues from R$ 365 million to R$ 3.2 billion – its sales in the past 12 months. The company’s financial executive, Cristiano Machado, emphasizes some of the initiatives that justify the success achieved. The first is the intelligence department that monitors the market through analyses and comparisons. Furthermore, the acquisition of MB Engenharia, in 2008, that strengthened Brookfield’s presence in the midwestern region, which currently accounts for 40% of the business.
Recently, the company issued Certificates of Real Estate Receivables worth R$ 158 million. These are fixed income securities tied to real estate credits, used to obtain funds for two corporate office complexes at Barra da Tijuca – Rio de Janeiro, the Barra Business and the Barra Prime projects, to be concluded in 2011. According to Machado, Canada’s experience contributed to the company’s success. “To have a Canadian company as a major shareholder helps in exchanging experience about what is new in the global real estate market”, concludes Machado.
The performance achieved in terms of the number of residential and office building launches in the Greater São Paulo area also helps the industry´s growth. The expectation is that in the final three months of 2010 real estate launches worth R$ 8 billion to R$ 10.7 billion were registered, according to the real estate class entity in the State of São Paulo (SECOVI). Cyrela Brazil Realty, for example, in the first semester, reached R$ 1.97 billion in sales, a 103.4% increase in comparison with 2009. Of these properties, R$ 1.27 billion refer to launches, an increase of 40.8% in relation to the same period of the previous year.
SERVICE QUALITY – To meet clients’ growing demand across the country, Colliers International, specialized in office real estate, for this year foresees opening an office in the northeastern region, in addition to the offices it operates in São Paulo and Rio de Janeiro. At the beginning of 2010, the company also decided to invest in its sales staff, under a program named “Accelerating Success”. “In order to stand out, besides needing a strong brand, one must offer excellence and qualification”, states Sandra Ralston, the company’s vice-president. Last year, the company enjoyed a 12% increase in business transactions, with a 20% growth of its staff, in comparison with the same period in 2009. “In order to stand out in the market, one must increasingly expand activities, because what we are faced with are clients from several countries wanting to invest in Brazil, explains Ralston.
The presence of Canadian companies in the real estate industry has contributed to strengthening the sector even more. Proof of this is the arising of a new niche: industrial condominiums. This type of real estate is built horizontally, in modules, aimed at a group of companies wanting to set themselves up at site, while sharing the costs of the common spaces, such as the dining hall, first aid unit, and entrance. According to Simone Santos, director of corporate services at the Herzog consultancy, given that it is a large investment, the industrial condominium is only interesting for an investor if there is a growth perspective, which is what currently is happening in São Paulo. “In this region, there is an inventory of 2.27 million square meters, an increase of 43% in comparison with the previous year”. In 1997, when the first units were sold in the country, capital was entirely local, “now we are already seeing foreign company funds”, reveals Santos.
The boom in the real estate market also generates business for Canadian service providers. A supplier of constructive systems, known as concrete-PVC systems and PVC profiles for molding manufacturers, the Canadian company Royal Technologies, is also keeping pace with the market’s growth. According to the company’s director-general, Carlos Eduardo Torres, three factors drive sales: government incentives, the search of construction companies and real estate developers for new technologies and the hard work performed, both by the company itself and its commercial partners. “With that, in 2011, we intend to supply our product across the country, and we are developing other plans”, concludes Torres.
Although the number of properties sold in 2008 decreased, the real estate market actually grew
2004 - 20183
2005 - 23810
2006 - 28324
2007 - 36615
2008 - 32847
2009 - 35832
2010 - 20182*