Posts tagged with Brazil

(II) CONSTRUMAT 2011: Construction fair in Barcelona

23 September, 2012 No Comments

Construmat 2011 focused on internationalization and in recapturing the refurbishment business, which is growing at a rate of 11%.

In the process of Internationalization, an agreement was reached with the China Council for the Promotion of International Trade (CCPIT)  – 中国 国际 贸易 促进 委员会 – whose goal is the promotion of international trade, developing economic agreements with foreign countries through the creation of professional networking to export the construction exhibition into China. The show took place in July, 2012 in Beijing, to which 200 local and international organizations attended, and who performed many activities dedicated to sustainable construction. The China Council promoted the participation of exhibitors, visitors and the industry associations in the country.

It is difficult for European companies to compete with the prices of major Chinese builders, however they can compete in the products’ quality. The idea was that Construmat China, besides offering sustainable products, offered finished products such as faucets, fences, painting and ceramics.

Here are some highlights regarding the current Chinese real estate market (some mentioned in previous posts):

1-For the most part, the idea of refurbishing buildings is not shared by Chinese, and as a consequence buildings degrade within few years, which are then subject to demolition, and then rebuilt from ground. In general, the quality of the materials used in construction is not good which brings to the eye the need to restore / paint facades.

2 – However, the Chinese market demands a European based design for their homes. The demand for designers / architects for residential or resort projects of a European – Spanish style can be very attractive. In fact, in one of the Chinese real estate fairs I visited last year, a leading developer requested a European technician capable of completing a Spanish-style design for a residential mega-project.

Brazil could be the next destination to host this fair with its own brand despite the deal not being closed yet. It is a country that everyone talks about. It’s a popular country given its economic growth, its upcoming sporting events (Olympic Games…), and for being an emerging market with great growth potential… The fair would be a great gateway to the Latin American market!! In the show held in Barcelona last year, ​​Brazil was the foreign country with the highest number of exhibitors.

The Manifest: The construction sector joined hands and elaborated a manifest in which they demanded support to overcome the crisis. They requested measures to support new construction, rehabilitation, and to maintain the appropriate level of investment in building as well as the level of attraction of foreign buyers for the residential sector. This was presented by the President of Construmat, J. Miarnau (Comsa-Emte), along with SEOPAN, the Association of Builders and Promoters (APCE), and the Colleges of Spanish Architects.

Sustainability: I would like to stress the European Solar Decathlon, a competition of scale models of solar buildings that involved fifteen European countries. A forum dedicated to sustainable thinking, with national and international presentations.

Rehabilitation in Spain: is the segment within the construction sector that is experiencing considerable growth.

(I) Construmat 2011: Internationalization process to China and possibly to Brazil

20 September, 2012 No Comments

(Video with English Subtitles)

Construmat 2011, the International Exhibition of construction that was held in Barcelona in 2011, renewed its biennial meeting announcing its progress despite the crisis. The Organization signed an agreement for this show to take place in China in 2012, aiming to help the brick industry penetrate in the Asian market. At the same time they were also awaiting to close a deal with Brazil, to host the show there, with the consequent impact on the Latin American market.

In Spain, it is the most important exhibition of the construction industry, and in Europe one of the largest along with Batimat. The following take place during the show:

* Is a place where builders, developers, architects, and manufacturers of materials converge.

* New processes and developments of innovative materials arise.

* It is a meeting point to analyze, discuss and present the major technology releases, market news, and new industry trends.

Due to the current crisis, demand for construction material has fallen in Europe. Companies that want to grow must go outside (which is also a way to dispose of the surplus in construction machinery that Spain currently holds). Construmat helps especially SME’s, which are the ones that present more difficulties to send missions to China, by participating on their expansion process and advising them about the peculiarities of  other markets (i.e the large Chinese market). Construction is growing dramatically in China due to the internal migration of people from rural areas to the big cities (which I explained in previous posts).

The internationalization of companies that manufacture building materials that were already positioned in other foreign markets, has allowed them to increase their sales (i.e. the group Cosentino, producer of Silestone). According to an interview published by El País, May 15, 2011, Cosentino was well positioned in the U.S. market and stated that 70% of its revenues were from outside of Spain, and hoped to reach 82% in 2013. Its main projects during 2011 were to enter in Asia and Latin America, and to have a total of 30 people in their ​​R&D department, currently focusing its research on new technologies and designs, such as ECO (its organic product, winner of a European award…) “What gives us strength is to do different things“.

(III) Mipim2011 the World’s property market: analyzing topics

14 September, 2012 No Comments

In this second post I limit myself to make a synthesis of ideas presented in Dr. N.Roubini’s conference at MIPIM 2011.  Due to the length of the presentation, I focused on what might be more relevant for the real estate investor. Nonetheless, for those who want full details about the presentation, I included the full video in its original version in my previous post.

Core Observations:

1-The question that Dr. Nouriel Roubini arises: Can countries such as China and other emerging countries tighten their monetary policy and their exchange rate to reduce inflation and maintain economic growth in order to get a soft landing of the economy rather than a hard one?

The strength of the economies of the growing emerging markets encourages the risk of a higher inflation. In these markets, there is a clear economic overheating, excessive credit growth, and note that about two thirds of their consumption basket is: oil, energy, food and transportation

2 – A vivid example would be the current situation in the Middle East: What’s happening right now in the Middle East? Nobody could foresee the political movement that took place in early 2011. We don’t know if this is going to stabilize soon, or if it will spread to other countries. This can have an effect on oil and energy prices … In such case, what would be the consequences of higher oil prices?

* There will be a severe problem of inflation of the overheated emerging markets.

* A lower risk of inflation in developed economies since the recovery from the financial crisis is very slow

* It also has an impact on economic growth. Specifically a destabilizing effect in the investor and consumer’s confidence in particular…

3 – In recent years there has been a massive injection of liquidity into the global economy. There were massive fiscal stimulus in the US, Japan, Europe, and other emerging markets, but if we take a look at the current market (as of 2011) we realize that we are in the opposite side: there is less monetary stimulus and more fiscal austerity (countries in Europe and the UK started to cut on spending and tax incentives, as well as the US, who began to cut costs ….. The question is: Will the private market have the possibility to consume in order to have economic growth when some of the fiscal and monetary stimuli are gone?

Areas with potential growth: the U.S. at a 3%, some parts of Europe at a 1.5 to 2%, and emerging markets, eastern countries and South America at a 5-8% growth rate.

4 – TURKEY

Turkey’s growth prospect is very optimistic for the medium to the long term. There is still growth in its population and as a consequence there is a significant domestic market (As a contrary, China’s population is decreasing). It can be a fast-growing economy although structural reforms need to be done. If these reforms are made at a regular pace, the forecast of growth for the future is very positive (real estate growth comes along).
5-RUSSIA

Prices will increase reasonably which will improve Russia’s fiscal balance, and consequently its economic growth. However, the fact that Russia is not a very well-diversified economy prevents growth of being even greater. For example, in 2010 where there was a global economic recovery countries such as India or China grew at a 9% rate or Brazil at a 7.5%, but Russia instead, grew at a 4.5% rate.

Its current situation (as of 2011) is slow growth and a 2 digit inflation, and unless structural reforms are put in place to accelerate growth, the former will be slowed down. Even though Russia has great potential for growth given its vast natural resources, a good education system, and good scientists, there will be a direct relationship between what happens to oil prices and the growth of Russia. If oil prices rise the Russian economy will be stronger because it will improve the country’s economic balance. But, what should really be a concern is the long-term growth of their economy, and foreign investors are aware of it, and with it, aware of the risk of expropriation.

6-USA

Currently there is an oversupply of existing houses. Home sales fell up to 80% of its highs, even though now are gradually increasing. However, home prices are still adjusted downward, inflation is present in the economy, unemployment is still high and people who are forced to leave their homes because they can’t pay their mortgages. Prices have adjusted by a 30%, but may have not bottomed out, and it might require a longer period of time for these adjustments to run out.

7 – EUROZONE

Fiscal austerity is urgently needed in the Euro zone, the UK and Japan. Even though a period of austerity is a “must”, it will have in the short term a negative effect on economic growth. Austerity means to cut on government spending, to fire public officials… but it will make the economic recovery more effective in the long run.

(II) Real Estate Investment in Punta del Este – URUGUAY

15 September, 2011 No Comments

Uruguay is a tourist destination where people who went once, usually like to repeat. This makes a positive effect on the return of any real estate investment, especially of vacation properties.

Uruguay finds itself in a full expansion that has allowed, after a period of growth, to achieve economic stability. It focuses on low public spending policies, competitive tax rates, in addition to an improved tax collection, and a relatively open trade regime.

Besides the economic stability and the country’s strong legal system, the Uruguayan government has an open attitude towards foreign direct investment (FDI), by eliminating unnecessary paperwork such as previous registrations and authorizations, as well as restrictions that discriminate against local or foreign investors. This allows foreign capital to have no restrains in case they desired to participate in local companies. The legal and mercantile procedures to establish a corporation in Uruguay are simple, and the initial capital invested can benefit from tax exemptions, or VAT.

Punta del Este is emerging as one of the best business opportunities in the country. It is the most attractive real estate investment due to its location, like a “VIP real estate destination”. Despite Montevideo, Punta del Este has registered the highest number of transactions of second hand/vacation homes, whose main buyers come from Brazil, Argentina, United States or Europe, with an increasing number of Uruguayans as  their society gains purchasing power.

This part of the country offers virgin landscapes, combines nature and a very well designed modern city, with  its commercial and residential neighborhoods while respecting the area’s coastline natural beauty, which enables you to enjoy countless “first line views to the beach”, adding value to the property. Usually, properties acquired in Punta del Este are occupied most of the time, fostered by a climate that has an average temperature of 30 º C in January, which compared to Barcelona or Madrid, is “a bit warmer”.

As a relevant fact, I would like to highlight some investment figures that attempt to develop different markets with less conventional structures. They base their functioning in ways that are more secure in contrast to the potential risks, promoting a more efficient development:

* Building Trust at cost, which would be associated to the market of residential housing.

* Condo Hotels, associated to the development of second homes in tourist areas and for selling purposes.

In a future post I will make a deep analysis of these figures that are increasingly becoming more powerful in this housing market.

Property investor show & OPP Live, Excel London Oct 2010

31 August, 2011 No Comments

You make your money When you BUY, NOT When You SELL.

This is one of those phrases that professional real estate investors believe and follow …. and the places with more supply per square meter is at the fairs.

The Property Investor Show & OPP Live was held in London in late 2010. The most relevant facts during this real estate exhibition were:

1 – There was a live auction with more than 200 properties. Even if you previously hadn’t participated in real estate auction, I encourage you to go see one to learn its dynamics, the purchase before and after the auction, the closing of good business, or the rules to perform this type of purchase, etc..

2 – In the English market, and in the international (but in a smaller scale), there is the possibility to “buy fractional”, ie. to buy a part or portion of the entire property. It is a figure that has considerable popularity in a market like the one we have today.

The approach is aimed at the holiday home as an investment. Second home buyers seek homes that require them to give a small down payment, with low building expenses, and few financial risks … but that allows them to benefit 100% from their investment. It differs from multiowners, which means only a right to use the property x weeks per year. (I’ll make a post detailing this type of fractional purchase).

3 – Almost half of the exhibition was dedicated to the international market, with potential countries such as Spain and Portugal for the English market, as well as new destinations to invest, such as Cyprus, Greece, Africa, Egypt, Brazil, Swazi and Turkey (the ones that had great reception in the English market were mainly: Cyprus, Turkey and Egypt).

4 – In particular, Egypt was the guest country, with many product developers offering the best destinations in the Red Sea. Egypt is considered one of the leading emerging markets in the property sector because it is generating great interest from international markets to invest there.

Many of the reasons to invest in Egypt are: good sustained economic growth, cheap labor and land, and a booming real estate market. A great thing is that the RE market is interesting to both, domestic and foreign customers.

Among the advantages of buying in Egypt is the exemption of tax rates:

* The purchase and ownership of a property is exempt from taxes, both inheritance and capital gains.
* The administrative charges, if any, are very low in general.
* There is an estimated return on investment between 5 to 11% depending on the type of property.
* The areas of the Red Sea are the most popular for tourists and the demand for vacation homes is located in Hurghada, Sharm el Shiekh, and Gouda.

* Theoretically, when buying a home it is not necessary that it be registered in the deeds of the property, although the possibility exists if a buyer decides to register his property paying a fee for it.

5 – There were about 130 seminars of about 45 minute each, in addition to the exhibition, with the idea to reflect this continuous change because new markets are opening at the same time, and new creative ways to face sales and marketing are emerging ….. It is said that the money exists, but will exist only for companies that are prepared to give in exchange good business prospects ….. It is also interesting the idea that investments in “passive properties”, for example student apartments or hotel rooms, should be part of investors’ portfolios as investment alternatives.