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One of the most frequently quoted destinations for the overseas property investor exploring Brazil, Natal’s popularity has grown due its rapidly growing economy; its’ close proximity to the US and Europe; a thriving tourism industry and year round sunshine amongst several other factors.  However, as with many capital cities in Brazil, Natal and the state of Rio Grande do Norte have been recently quoted as undergoing a speculative boom period – with several launches reaching prices in line with those of the wealthier regions of the south.  We spoke to Aldemir Freire from the Brazilian Institute of Geography and Statistics (IBGE) (a government organisation) about has views as well as a number of topics related to the growth of Natal and Rio Grande do Norte in general.

Can you explain your role at the Brazilian Institute of Geography and Statistics? I am head of state management for the Rio Grande do Norte area, responsible for all technical and administrative activities within the state

What were the major differences seen in Rio Grande do Norte during the time between the censuses of 2000 and 2010? The 2010 census data has still not been fully disclosed and published but some of the information that is already in the public domain can be highlighted:

• The population has seen its general income level grow and poverty has reduced;
• Rio Grande do Norte has the lowest percentage of population below the poverty line among the north-eastern states;
• Natal has seen notable economic advancement and infrastructure installment making it a more competitive Brazilian city;
• As a result of the success of Natal, there has been witnessed a growth of a number of cities surrounding the capital – notably São Gonçalo Amarante, Macaíba and Parnamirim;
• The state population is ageing and the birth rate that is falling.

As you would know, there have been a significant number of foreign real estate investors in Natal – do you think house prices have subsequently become overvalued? No, I do not believe there has been an overvaluation of property prices.  Foreigners have had a strong involvement in a local real estate market for quite some time but their presence is certainly a lot lower compared to what was witnessed in the middle of the last decade. I suspect the global downturn in its various forms and the strength of the Real has caused this to happen in recent years. Currently the real estate industry is very much focused on meeting local demand, especially with the presence of programmes such as Minha Casa, Minha Vida (My Home, My Life) but also with the overall growth of employment, income and credit.

Has Natal become a speculative real estate market? I do not think we’re living in a speculative market – we’ve had this not too long ago when there was a boom in the level of foreign participation. The mega projects that were planned for the coast and never left the drawing board were the main signs that the bubble point has passed – mainly because they didn’t have any long term sustainability.  Although the wide scale launches of small properties (usually less than 50 m²) targeting the second home market located on the Ponta Negra beach (which are empty for the majority of the year) are also perhaps a sign of a mini-bubble forming for this type of real estate.  Whilst such projects have served to saturate the market there is no major bust on its way to the region – although of course this does not mean that your readers should not be vigilant.

What about affordability levels – are more people being out priced by the property market in Natal in particular? There are now real estate offers for almost all income levels – particular as a result of the housing programmes supported by government grants.  There is also an increasing emergence of high-end property reaching prices of up to US$ 3 million.

Is there enough supply of housing in the state – and in Natal in particular? Whilst the state, like the rest of Brazil, still has a significant housing shortage (in the case of Rio Grande do Norte, it is estimated at between 120 and 140 thousand units) –  the supply is also debatably heated especially in Natal, Parnamirim, Macaíba, São Gonçalo do Amarante, Mossoró, Caicó and Pau dos Ferros.  Some regions in Natal, for example, may witness some form of temporary saturation.

Is the low-income sector being served effectively in the region? Despite the lower level of foreign investors, the beginning of the Minha Casa, Minha Vida programme has meant that real estate capital and credit has continued to flow to this segment.  Demand for low income housing is extremely high and forms the majority share of the state deficit – so I believe the signs are encouraging.

What are the main changes that you imagine will happen in Rio Grande do Norte in the medium to long term? I have an overall positive view for the local economy: growing urbanisation to support the rising and aging population as well as rising incomes, low poverty levels and more employment opportunities.

What are the main risks for the economy? I see more risks filtering through via the problems facing the international climate: the slow recovery of several developed economies; global exchange rate turbulence; balance of payments issues due to over-valued currencies and a crisis in the international commodities market. There is also the possibility of a crisis in the Brazilian economy that will result in difficulties for Rio Grande do Sul but I don’t think any impact will have a major effect.

How can investors interested in the region to minimize these risks? A lot depends on the type of investors and their risk aversion but there are certainly good opportunities for foreigners who understand the market, despite the issues mentioned above.