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Credit Crunch, price declines and bankruptcies...where are the profits in Property?

Discussion in 'Brazil Property' started by Golfingworld, Apr 14, 2008.

  1. Dotty

    Dotty Banned

    Sorry it is more than 300,000 sterling more like 370,000 stering
     
  2. michaelbush

    michaelbush New Member

    Sorry Dotty, I was referring to reckless lending. The banks here, always have security and do not lend more than 100% of valuation like in Europe and the UK were. The bank will always win in a default, as they have the property, whether it is a car or a house. I agree the banks are now producing some very imaginative products to finance these purchases, and they are not very competitive with world markets, but my point was that there is no credit crunch here, the banks are as you say falling over themselves to lend.
     
  3. JMBroad

    JMBroad New Member

    Erm sorry but if you bought off plan with them four years ago, you have seen fabulous returns, yet the prices are the same now as they were then, where did your fabulous returns come from? Or did you make more than 25% per annum yield from rentals?

    "The prices were and still are 320,000 reais without furniture for a 2 bed lux apartment and 1.2 million reais(300,000 pounds sterling) for the for the larger apartments"

    If the prices are the same how are they now set way too high?
     
  4. Dotty

    Dotty Banned

    I think you are not understanding me!I bought from the company 4 yrs ago at incredible prices (60,000 mil reais and sold all the properties for 300,000 reais each(enormous gains!!)Now they have almost completed a different project and the properties were on the market for 320,000 and 1.2 million reais.These prices remain the same as the pre launched prices a yr ago .So what you are seeing is not increases just superficial increases created in the head.We can buy properties off plan but the increase in value is tiny as there are just too many and half will remain empty as the population of Natal IS NOT GROWING the way people think it is and there are too many properties to choose from.Also may I add that we do not have thriving industries just tourism and that is down 20+ internationally we also do not have thriving ,bustling,dynamically interesting things to do here,unlike Salvador and Rio which has a beautiful culture,fabulous architects,loads to do and see,rich theater and arts centers,a small handful of good restaurants,fab music etc,etc.
     
  5. JMBroad

    JMBroad New Member

    I do apologise Dotty but I am having trouble understanding what you are saying. Please correct me where I am wrong.

    You bought an off-plan property from a developer 4 years ago. That property cost you 60.000 R$. You then sold that property after completion this year for 300.000 R$.

    Lets take a good look at that. After paying 15% capital gains tax, you will have made net 340% returns on your investment after four years. In other words, your property showed a NET capital appreciation of a staggering 85% per annum.

    The same developer is now offering you a comparable property this year which is near completion for 320.000 R$ because they put them up for sale at 320.000 R$ at launch and were unable to shift them.

    That doesn't sound anything like property prices crashing, that sounds like an extremely common problem in Brasil which is the developers failure to understand the concept of off-plan investment.

    The reasoning behind off-plan sales is that the construction is largely funded by the revenue generated by sales, which enables the developer to spread his own financial resources into more projects than he could initially do on his own. On the other hand, the investor has to be offered a discounted price which warrants putting the money in. The developer can expand their options and the investor gets a property which will increase in value.

    What has happened a lot in Brazil and which makes it a challenging market is that the vast majority of the developers don't understand this. The only thing they see is that they sold a property to MX at 60.000 R$ and that MX was able to sell it 4 years later at 300.000 R$. Their argument then becomes "I could have made a lot more money on that instead of the investor" - the next one they do, they price the product out of the market.

    In other words, it sounds like the developer got greedy and shot himself in the foot. Once again, classic case of what is happening in Brazil - people offering product at "Gringo" prices. But there are still plenty of developments around which aren't anywhere near the 300.000 R$ mark. In other words, it's time for you to change the developers you work with.

    By the way, what was the comparable R$/m2 on that example?
     
  6. Dotty

    Dotty Banned

    No not completion this year.Bought in 2002 off plan 60,000 sold 2006 finished at 300,000 mil cada apt.The retruns then were great if you read ALL my millions of previous post the gains today are minimal and over priced to begin with.
     
  7. JMBroad

    JMBroad New Member

    So you sold those apartments with the same gains mentioned before in 2006.

    Two years later, a developer is offering you a similar product at 2006 prices and you think they are overpriced?

    I believe I know understand all of your posts since day 1. Your personal frame of reference to which you are benchmarking the market today in Natal is against your experience from 2002 to 2006. In other words, you are disheartened by the market because you can no longer earn net 85% capital appreciation per annum for 4 years solid.

    Most investors don't have that to compare to. They compare what they can get back from investing in property in Natal vs what they would get if they put it in the bank in the corner or invest in another property in another market. Add to the returns the opportunity of having a place to holiday in for 4-5 years after completion before they sell (assuming they are planning on a 10 year exit) and 99% of the time the results they can get compared to their benchmark is a vast improvement.

    So yes, I totally agree with you and it is very unfortunate that we can no longer get 340% net capital appreciation on property in Natal anymore. But there is still a lot of money to be made in the market and there are a lot of opportunities at the right price.
     
  8. michaelbush

    michaelbush New Member

    Just in yesterday, 180 hectares (fazenda) available today for R$300,000, another one in a better position (closer to the main BR101) 104 hectares for R$ 450,000. These are land investments that can and do make for large profits, land banking is where money can be made with little risk.
     
  9. Dotty

    Dotty Banned

    Not disheartened but not a fool.I do not think paying half a million reais and selling for probably the same on completion as there are too many properties is a good investment . Visit Buzios the properties are the same value as 2 yrs ago.Capuche extremely popular properties prices still low compared to margins of 2 yrs ago.Sun Family along with others are situated in ruralish,rundown areas of Parnamirim close to moterways ,so for overseas ivestors god help them and there are many more like that.
     
  10. JMBroad

    JMBroad New Member

    There always are, but there are also some very good opportunities out there too. None which offer the results you mentioned but still vastly superior to property you could buy in, my opinion, most other countries, financial institutions and more secure than the stock market taking into consideration todays economic challenges.
     
  11. JMBroad

    JMBroad New Member

    Land banking isn't really something which is open to the every day investor. Maybe it should be. But to make serious money land banking you need to buy vast areas and do a hell of a lot of research, something the typical "Joe" can't do either due to lack of time or lack of knowledge.
     
  12. Dotty

    Dotty Banned

    Depends how creative you are actually.
     
  13. JMBroad

    JMBroad New Member

    People get locked up for creative accounting! :eek:

    ;)
     
  14. wolfgang

    wolfgang New Member

    Mike,
    pm me with full details of both,
    Thanks,
    W.
     
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