Brazil Property Funds Provide an Average 375.5 Percent Return in 6 Years
Further fuel was added to the Brazil bubble debate as research – undertaken by the Rio Bravo organisation on behalf of the Exame magazine – pointed to the country’s property funds witnessing an average total return of 375.5 percent from January 2005 until June 2011. The data also stated that over the last year the average rental payments distributed by the funds was 8.56 percent.
The 13 most lucrative funds (based on the received rental income distributed to shareholders and the increased value of the shares on the stock exchange) were: Rio Bravo Renda Corporativa, Europar, Square Faria Lima, Shopping Pátio Higienópolis, Torre Norte, Grand Plaza Shopping, Edifício Almirante Barroso, BB Progressivo, Torre Almirante, Projeto Água Branca, CSHG Brasil Shopping, Hotel Maxinvest and West Plaza. It was indicated that the returns significantly higher than what was seen on average stocks on Brazil’s Ibovespa owing to the collateral force of rapid price rises in recent years.
Brazilian property funds are applied to developments which have pre-rental contracts in place and investors have the benefit of not needing to pay income tax on profits when the funds are listed on the stock exchange (and observe certain rules). There are also the advantages that less capital can be invested (in comparison to buying a property) and risk can be diversified by placing funds into various asset classes (such as shopping centres, office space, hotels and hospitals).
However, the magazine article also pointed to one of the main risks being the real time evaluation of Brazilian property stock valuation – the market remains widely perceived as speculative and time needs to be spent collating detailed information over an extended period. Whilst most fund managers and specialists in the sector did not believe that a bubble exists today – such a possibility should not be ruled out for the future. Jayme Carvalho of Santander stated that the US mortgage finance crisis showed how several real estate related investments were much riskier than previously thought – an experience that the Brazilian sector should learn from.
[...] Brazil Property Funds Provide an Average 375.5 Percent Return in 6 Years [...]
This is SURELY the average inflation over all the different sectors, not an annual growth rate!
No, not annual nor fund inflation – according to the Exame article it was the total average return of the 13 top performing funds over a 6 year period from 2005.
[...] Investing in Brazilian Hotel Property Funds November 8th, 2011 by Ruban Selvanayagam No Comments Tweet With tourism increasing rapidly in Brazil owed to impending events such as the World Cup 2014, the Olympics 2016 as well as the vast natural beauty and rise in business travel – the demand for hotels looks certain to remain high for the foreseeable future. Yet under such a seemingly interesting investment climate, it often comes as some surprise that the sector is not as consolidated as the other Brazilian property funds that we have previously outlined in this blog. [...]