Even though Brazil’s hopes of being crowned the FIFA 2014 World Cup champions are dashed after a staggering defeat by Germany in the semi-finals this week, the Latin American powerhouse still boasts numerous other winning qualities.
So, as the world’s greatest football tournament draws to a close, leading developers Ritz Property pays homage to this year’s World Cup host nation and presents 14 reasons to consider Brazil as the home of your next property investment.
1) Tourism is on the increase – and not just because of the World Cup
3.7 million visitors, including 600,000 international tourists, are expected to have descended on Brazil’s 12 host cities over the course of the 2014 tournament, but the nation’s healthy tourism sector doesn’t begin and end there. The World Bank, recording data on international inbound tourists, showed that the Brazilian tourism market has been on a steady increase over the last three decades, with significant growth in the last few years. 2009 saw 4,802,000 tourists visiting Brazil rising to 5,677,000 by 2012, a noticeable increase of 18%.
The positive effects of travel and tourism on the Brazilian economy in 2014 are also echoed by the World Travel and Tourism Council (WTTC); in the WTTC’s Travel & Tourism Economic Impact 2014 – Brazil report, the total contribution of Travel & Tourism to Brazil was BRL443.7 billion, some 9.2% of GDP in 2013. This is forecast to rise by 5.2% in 2014 and by 4.1% per annum to BRL696.6 billion by 2024.
2) Improved aviation accessibility easing travel concerns
The North East city of Natal, Brazil’s popular ‘City of the Sun’, has welcomed the development and opening of a brand new international airport, taking the old airport capacity of 2.6 million passengers annually to 6.2 million passengers in addition to cargo.
Flights taking off from the new Greater Natal International Airport, the first private airport in Brazil located in the northern growth zone of the city, are signalling a new era for the city with both the Mayor of Natal and the Governor of the State of Rio Grande do Norte, in which Natal lies, actively in discussions with airlines from southern Europe, the Middle East and USA regards expanding direct routes to the city.
3) Employment levels are on the up
The World Cup gave an obvious boost to Brazil’s construction industry, with the building of new stadia, renovations to existing venues and improvements made to the country’s infrastructure. One million jobs have been said to be generated by the World Cup overall, according to a report issued by economic research institution Fipe on behalf of Brazil’s tourism ministry, yet this increase also forms part of a wider, longer term uplift in the Brazilian job market.
The IBGE (Instituto Brasileiro de Geografia e Estatística) has reported that whilst the average unemployment rate in Brazil from 2001 to 2014 was 8.65%, this figure has fallen from 5% in March 2014 to an encouraging 4.9% as of April.
4) A country of natural wonders
From breathtakingly unspoiled beaches of white sands and azure waters in the North East, to the magnificent Iguaçu Falls and the mighty Amazon jungle, representing over half of the world’s remaining rainforest with unparalleled biodiversity, Brazil is a treasure-trove of natural wonders which draws visitors year-in year-out.
Brazil is also famous for the samba rhythms that beat at its heart and the accompanying carnival, bright with colours and eye-popping attire, alive with excitement and energy, the largest taking place each year in Rio de Janeiro in February / March.
5) An unbeatable climate
The climate of this expansive South American country varies, rather widely, from region to region but is characterised overall by a tropical climate of often high temperatures and long days of sunshine. Perfect for attracting tourists year round.
Over 60% of Brazil’s population live in locations tempered by sea winds, altitude or polar fronts, making coastal regions popular for visitors and locals alike, and in turn investment.
6) Economic buoyancy
The economic report released by Fipe and commissioned by Brazil’s tourism ministry, claimed that the 2014 World Cup will add 30 billion reals or $13.4 billion to the country’s economy, with Vicente Neto, Head of Embratur, Brazil’s official tourism promotion agency, stating, “It is an extraordinary human legacy”.
In a wider sense, Brazil’s economy is reaping the rewards of a successful tourism industry, in the long term as well as immediately. The WTTC Travel & Tourism Economic Impact Report for Brazil is anticipating a rise of 3% in the direct contribution of Travel and Tourism to Brazil’s economy in 2014, and predicting an even greater average annual increase of 3.9% in the coming decade to 2024.
7) Stable currency
This month Brazil celebrates 20 years of the introduction of the real. This inflation busting currency marked a true watershed moment in Brazil’s economic history and played an important role in poverty reduction according to many.
Whilst hyperinflation is no longer an issue, President Dilma Rouseff and her Party are working towards the Central Bank’s inflation target of 4.5% (current levels are 6%) and investors can invest with confidence in a far more stable economy.
8) The doors are open to foreign direct investment
Some countries are easier than others for foreign investors to enter but Brazil has for some years recognised the importance of foreign direct investment (FDI) to the economic future of the nation. The latest data from the ECLAC report reveals that FDI into Latin America reached $185 billion in 2013 continuing the upward trend seen in the last 3 years.
Brazil retained its number one position accounting for over one third, $64 billion, of all regional FDI. Indeed the UKTI has pledged, as part of British Chancellor’s next Budget, a further £2 million a year to increase its presence in Latin America to mirror the successful expansion strategy it has pursued in China. And at a regional level, Carlos Eduardo Nunes Alves, the Mayor of Natal, at a private meeting with Ritz Property only last month, stated that FDI is “extremely important” and that the city “has vast potential to grow and treasures investments from partner companies in Natal”.
9) A rising middle class
Indeed the progressive attitudes of the Brazilian nation filter down from the very top to ordinary people. The middle classes have seen vast expansion with data from Savills revealing growth of 40 million people from 2005 to 2011, with Cetelem BGN and Ipsos Social Research Institute showing that 34% of the population were classified middle class in 2004, a figure that had leapt to 54% by 2011.
This goes hand in hand with a poverty reduction programme that has resulted in a rise of 9% in average Brazilian incomes in the decade to 2012. These figures not only provide added reassurance for a growing economy but also indicate a growing consumer market with greater demands for housing, spelling good news for property investors.
10) An emerging property market with real potential
Increased individual wealth, access to mortgage finance and declining interest rates have been massive triggers in the boom of Brazil’s property market in recent years. Whilst there may be some concerns that the top of the market may have been reached in certain super-prime districts of Rio de Janeiro or Sao Paulo, Brazil is a vast country covering some 8,500,000 km2 and opportunities still abound elsewhere.
Nationally the market is stable with Brazil’s composite FIPEZAP house price index rising by 12.7% during 2013 from a year earlier and by 3.5% in Q4 2013 from the previous quarter according to the Global Property Guide. Regionally the North East city of Natal and its 800,000 and growing population is tipped as a property investment hot spot due to the high demand for quality accommodation, affordable entry points (from R$411,488 / £111,000 for a 2 bedroom western style apartment at Ritz Property’s Costa Azuldevelopment) and capital appreciation levels forecast to be strong.
11) A healthy rental market
There is no doubt that the presence of the World Cup has had a positive impact on the rental markets of the 12 host cities. Local real estate agents in Rio de Janeiro for example are reported to have rented out luxury residences for hundreds of thousands of dollars with the average rental cost in the city rising by 144% in the last 5 years driven by this year’s sporting event and the 2016 Olympic Games.
Savills recently claimed that Brazil’s property market, unlike many other emerging economies growing at a fast pace, does not look overheated, meaning that there is still room for growth and, in turn, investment opportunity. The buy-to-let market is on the up, with figures for Rio de Janeiro recognising an increase of 5.1% in residential yields and 8.5% in commercial yields (according to Savills’ ‘12 Cities Real Estate Costs of Living and Working Around the World’ report).
12) Impressive hotel occupancy rates provide opportunity
Looking to another accommodation sector, high occupancy rates for key hotels during the World Cup were to be expected, but Vicente Neto from Embratur revealed that the ‘World Cup effect’ was greater than anticipated for the 12 host cities. Hotel occupancy rates were 45% higher than expected, a rate in line with travel website Trivago.co.uk which revealed that searches for Brazilian hotels during the tournament were up an incredible 387%.
Interestingly, while hotel searches by UK travellers related to the football were up by 344%, they were still up an impressive 19% this year in general terms. This increased interest in hotel stays in Brazil offers opportunities for those looking to capitalise on this lucrative asset class by buying into a hotel project such as the new Mercure Natal or soon to be refurbished Piramide Hotel both located in prime Natal sites and available from Ritz Property.
13) Growth in demand for branded hotels
Having a brand name associated with a hotel always offers added reassurance for guests and investor’s alike but in Brazil, this is even more apparent.Lauro Ferroni, VP of research for Jones Lang LaSalle Hotels, explains that this is because they are simply fewer,
“In the U.S., there is one brand-affiliated hotel room for every 100 residents. In Brazil, the ratio offers a stark difference, with one branded hotel room for every 2,800 residents. This highlights just how much room there is for the establishment of branded hotel supply in Brazil.”
Natal’s hotel market is already bigger than other cities within the North East such as Recife or Fortaleza with some 27,000 at present and more in the pipeline, such as the Mercure Natal from Ritz Property. Indeed the imminent presence of one of the world’s largest hotel chains in Natal is also most welcome by the Mayor of Natal, Carlos Eduardo Nunes Alves.
14) The future is bright as Rio de Janeiro to host 2016 Summer Olympics
One of the key features of the FIFA World Cup, as expressed exclusively to Ritz Property by both the Mayor of Natal and the Governor of Rio Grande do Norte, Rosalba Ciarlini, is legacy. Ensuring that Brazil capitalises on its achievements for this sporting tournament for future benefit is a priority.
Looking ahead, the future is bright for Brazil as Rio de Janeiro, currently the only city to be designated as a World Heritage Site owing to its ‘Cultural Landscape’, has been chosen as host of the 2016 Summer Olympic Games.
Like with the World Cup, spending on facilities and infrastructure is set to be impressive with an estimated R$1 billion expected to be spent in the city owing to the Games, alongside around R$30 billion injected into the Brazilian economy overall (according to FIPE).
Northern Trust: Outsourcing Accelerates Through Pandemic as Investment Managers Seek to Improve Margins, Enhance Business Resilience, and Future-Proof Operations
White Paper Sees Increase in Managers Outsourcing Middle and Front Office Functions to Achieve Optimal Business Structures
According to a white paper published today by Northern Trust (Nasdaq: NTRS), investment managers of all sizes and strategies have been prompted to undertake a comprehensive review of their operating models as a result of the Covid-19 pandemic which has accelerated existing trends that are compounding cost pressures. This has led increasing numbers of managers to outsource in-house dealing and other functions, such as foreign exchange and transition management, hitherto seen as core.
While cost savings remain a core driver, and indeed are one outcome of outsourcing, costs are no longer the only focus. Far from being solely a defensive reaction to increased pressure on margins, the white paper (‘From Niche to Norm’) describes outsourcing as part of the target operating model, or moving toward the ‘Optimal State’ for many investment managers, and explains how the focus “has expanded to the variety of other potential benefits offered – enhanced capabilities, improved governance and operational resilience.”
Gary Paulin, global head of Integrated Trading Solutions at Northern Trust Capital Markets said: “The pandemic has challenged a range of operational assumptions. Working from home has, for example, questioned the need for a portfolio manager to be in close proximity with the dealing desk. Previously considered essential, the pandemic has effectively forced firms to ‘outsource‘ their trading desks to remote working setups and the effectiveness of this process has disproved the requirement for proximity, in turn, easing the path to third-party outsourcing. Many investment managers are actively considering outsourcing to a hyper-scale, expert provider as a potential, cost efficient solution – one that maintains service quality and, hopefully, improves it whilst adding resiliency.”
Northern Trust’s white paper compares outsourced trading to software-as-a-service stating: “instead of carrying the cost and complexity of running an in-house solution, firms move to an outsourced one, free up capital to invest in strategic growth and move costs from a fixed to a variable basis in line with the direction of travel for revenues.”
Guy Gibson, global head of Institutional Brokerage at Northern Trust Capital Markets said: “The opportunity to deploy capital to build new fund structures, develop new offerings, focus on distribution and enhance in-house research has been taken up by several of our clients to the benefit of their investment approach, and to the benefit of their investors. Additionally, in the last two months alone, many firms have recognized that outsourcing to a well-capitalized, global platform has enabled them to take advantage of cost-contained growth opportunities in new markets.”
A further development, which has echoes of the journey the technology industry has already undertaken, is the move towards ‘whole office’ solutions, which represent the next potential wave in outsourcing.
According to Paulin; “recently we have observed a growing number of managers wanting to outsource to a single, hyper-scale professional service provider who can do everything, everywhere. This aligns with Northern Trust’s strategy to deliver platform solutions for the whole office, serving our clients’ needs across the entire investment lifecycle.”
Integrated Trading Solutions is Northern Trust’s outsourced trading capability that combines worldwide locations and trading expertise in equities and fixed income and derivatives with access to global markets, high-quality liquidity and an integrated middle and back office service as well as other services, such as FX. It helps asset owners and asset managers to meaningfully lower costs, reduce risk, manage regulatory compliance and enhance transparency and operational efficiency.
How are investors traversing the UK’s transition out of lockdown?
By Giles Coghlan, Chief Currency Analyst, HYCM
Just when we thought we had overcome the initial health challenges posed by COVID-19, the UK Government has once again introduced lockdown measures in certain regions to curb a rise in new cases. This is happening at a time when the government is trying to bring about the country’s post-pandemic recovery and prevent a prolonged economic downturn.
This is the reality of the “new normal” – a constant battle to both contain the spread of the virus but also avoid extended economic stagnation.
Of course, no matter how many policies are introduced to spur on investment, traders and investors are likely to act with caution for the foreseeable future. There are simply too many unknowns to content with at the moment.
To try and measure investor sentiment towards different asset classes at present, HYCM recently commissioned research to uncover which assets investors are planning to invest in over the coming 12 months. After surveying over 900 UK-based investors, our figures show just how COVID-19 has affected different investor portfolios. I have analysed the key findings below.
At present, it seems that by far the most common asset class for investors is cash savings, with 78% of investors identifying as having some form of savings in a bank account. Other popular assets were stocks and shares (48%) and property (38%). While not surprising, when viewed in the context of investor’s future plans for investment, it becomes evident that security, above all else, is what investors are currently seeking.
A third of those surveyed (32%) said that they intended to put more of their wealth into their savings account, the most common strategy by far among those surveyed. This was followed by stocks and shares (21%), property (17%), and fixed interest securities (17%).
When asked about what impact COVID-19 has had on their portfolios throughout 2020, 43% stated that their portfolio had decreased in value as a consequence of the pandemic. This has evidently had an effect on investors’ mindsets, with 73% stating that they were not planning on making any major investment decisions for the rest of the year.
Looking at the road ahead
So, it seems that many investors are adopting a wait-and-see approach; hoping that the promise of a V-shaped recovery comes to fruition. The issue, however, is that this exact type of hesitancy when it comes to investing may well slow the pace of economic recovery. Financial markets need stimulus in order to help facilitate a post-pandemic economic resurgence, but if said financial stimulation only arrives once the recovery has already begun, the economy risks extended stagnation.
It seems, then, that there are two possible set outcomes on the path ahead. The first is a steady decline in COVID-19 cases, then an economic downturn as the markets correct themselves, followed by a return to relative economic stability. The second potential outcome is a second spike of COVID-19 cases which incurs a second nationwide lockdown – delaying an economic revival for the foreseeable future. At present, the former of these two scenarios is seemingly playing out with economic growth and GDP steadily increasing; but recent COVID-19 case upticks show that it’s still too soon to be certain of either scenario.
A cautious approach, therefore, will evidently remain the most common investment strategy looking ahead. But investors must remember that, even in the most uncertain times, there are always opportunities for returns on investment. Merely transforming a varied portfolio into cash savings risks a long-term decline in value.
High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.
Hatton Gardens 5 top tips for investing in Diamonds
By Ben Stinson, Head of eCommerce at Diamonds Factory
Investing in diamonds can be extremely rewarding, but only if you know what to look for. For investors who lack experience, finding your diamond in the rough can be quite daunting.
For even the most beginner of diamond investors, the essentials are fairly obvious. For instance, you need to ask yourself will the diamond hold its value over time? What’s the overall condition of the stone and the jewellery? Is there history behind the item in question?
Although common sense plays a big part in investing, people often need insider tips and tricks to go from beginner to expert. Tony French, the in-house Diamond Consultant, at Diamonds Factory shares his professional knowledge on the 5 most important things to look for when investing in diamonds.
1: Using cut, weight and colour to determine value
Firstly, consider the shape, colour, and weight of your diamond, as this can play a pivotal role in guaranteeing growth in the value of your item. Granted, investing trends change with time, but a round cut of your diamond will almost always be the most sought after. The cut of your diamond is incredibly important, as it can influence the sparkle and therefore, the overall value. It’s a similar story for the intensity of some colours, such as Pink, Red, Blue, Green etc. Concerning weight, the heavier (bigger) stones will generally increase in value by a bigger percentage. Collectively these factors also contribute to the supply and demand aspect, which will determine their high price, and will ensure your item is re-sellable.
Looking for significant value? Well, aim to own jewellery or diamonds that come from an important public figure. If you’re lucky enough to own a piece that has significant history, or was owned by a celebrity or person of interest, it’s an absolute must to have concrete evidence of this. Immediately, this proof will increase an item’s overall value, and there’s a good chance the stardom of your item might drum up interest amongst diehard fans, increasing the value even further…
Equally, it’s possible to proactively bring provenance to unique diamonds of yours. For instance, you can offer to loan bespoke, or unusual pieces for film, theatre, or TV performances – then it can be advertised as worn by xyz.
3: Find the source
Establishing your diamond’s source is one of the most important things you can do when investing in diamonds. If you’re starting out, try to purchase diamonds that have NOT been owned by too many people, as the overall value of the diamond will reflect multiple ownership. Alternatively, I’d always recommend buying from suppliers like ourselves or other suppliers and retailers, who buy directly from the people who have had them certified.
Primarily, this will allow you to have a greater degree of transparency, which is crucial when buying such a valuable item. Next, you should immediately see an increase in value of your diamonds, as identifying a source will allow traceability and therefore, market context.
Linked closely with my previous point, is the requirement to ensure that your diamonds are certified by a credible lab, and you have the evidence to prove so (a written document with specific grading details about your diamonds) – this will remove any doubts of impropriety.
It’s essential to remember that not all labs are the same, and many labs are better than others. Both the AGS (American Gem Society) and GIA (Gemological Institute of America) have great reputations and are world renowned. I’d recommend doing your own research into the labs, and when you’ve found the pieces that you’d like to invest in, then make an informed decision based upon your findings. Ultimately, proving certification will make your stones easier to insure, and deep down, you can have peace of mind knowing you have got what you have paid for.
Don’t forget to keep this paperwork in a safe location as well – you’d be surprised how many people we’ve met who have lost, or forget where they’ve placed it.
5: Patience is a virtue…
If the market is strong, it might be tempting to look for an immediate sale once you’ve purchased a high value item. However, I suggest holding onto your diamonds for some time before even thinking about selling. More often than not, an item is more likely to increase in value over a few years than a few days – try and wait a little longer!
Equally, I would encourage having your diamonds, or jewellery professionally valued regularly. If you don’t have the knowledge to make a rough judgement on how much your pieces are worth, a consultant or expert can provide both a valuation, and contextualise that amount in the wider market. From there, you should be empowered with the knowledge to decide whether to keep or sell.
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