Natal, Brazil, the state capital of Rio Grande do Norte, was named for its official founding on Dec. 25, 1599. Natal means "Nativity" or "Christmas" in Portuguese. More than four centuries after Natal was founded, investors and tourists alike are still discovering the hidden gem that lies along the northeast coast of Brazil. The outlook for Natal and surrounding areas seems as bright as its weather.
“Our research has pointed to [Natal] as potentially one of the top performing markets for direct property investment in 2008,” Deanne DuKhan, portfolio strategist for Experience International, said in an e-mail interview.
Prospects for Natal’s property market are undoubtedly tied to growth in tourism, infrastructure and overseas private investment and all three trends are expected to continue their ascent in the coming years.
The region has already attracted a “lot of key investment from the European markets,” with “high levels of interest from...the [U.S.] and Middle East,” Rusell Messenger, director of Beach Property Investment Ltda., said in an e-mail interview. Messenger’s company handles real estate transactions in Brazil and has offices based in Natal.
Furthermore, “the market [in Natal has been] driven by both domestic and foreign demand, a combination [that] is likely to ensure a constant stream of income from capital inflows,” DuKhan said.
The Brazilian government’s initiative to improve the country’s economy has probably helped encourage foreign investors to pour capital into a country that has previously been regarded as economically unstable. The government has recently implemented a program of reform that, among other things, has focused support on the tourism industry for Natal and surrounding areas, DuKhan said.
Significant developments in the city’s infrastructure include the new and highly publicized bridge that now stretches across Rio Potengi, Natal's principal river.
"[The bridge] has made access to the North coast much easier...and is expected to generate significant growth in the area,” Messenger said.
Even greater excitement surrounds the construction of a major international airport on the city’s northern flank, which is expected to be “the largest [airport] in Latin America, and one of the seven largest in the world,” DuKhan said.
“Once operational, it is realistic to expect a dramatic rise in tourist numbers to the region, which is likely to continue growing in tandem with increased air carrier routes and competition,” she said.
The airport is scheduled for completion in 2010 and has been budgeted to cost $560 million, according to a Dow Jones NewsWire release last month. Construction of runways has already commenced, but the possibility of incorporating the new airport into a free-trade zone may postpone its full completion, Messenger said.
“In [the event of free-trade zone approval], it is expected the airport will partially open and be able to accept air traffic [at] the end of 2010 with full and final completion by the end of 2011 or 2012,” Messenger said. The results of free-trade zone considerations and full funding reports for the airport will be announced in mid 2008.
“It is our expectation, however, that once the final approval is given for the entire airport project to proceed…including the proposals for creating a free-trade zone, that we will see a significant leap in land and property prices in the [northern areas] of Natal,” Messenger said.
In terms of the city’s geographic appeal, “Natal offers the same natural attractions and climate as the Caribbean, without hurricane risk or political instability,” DuKhan said. Natal also has excellent year-round weather as the capital of the “sunshine state” Rio Grande do Norte, according to Messenger. The city supports a population of almost one million people.
Housing prices in Natal are affordable and undervalued as a result of Brazil’s economic stagnation and currency volatility in the late 1990s, DuKhan said.
However, property values are likely to rise as the perception of risk surrounding overall Brazil real estate is lowered. Thus, investors who are interested in Natal property may wish to act quickly.
“As Brazil’s sovereign rating is likely to be upgraded this year [or] next, the window of opportunity for purchasing at entry-level prices is limited [because] asset valuations will almost certainly be reassessed when this occurs,” DuKhan said.
The Natal property market already appears to be experiencing a boom in housing prices with year-on-year growth of around 20 percent expected to continue, Messenger said.
The famous beach at Ponta Negra is a tourism draw for Natal, Brazil
Numerous resort and condominium developments are in the planning stages for the Natal area, offering real estate investors a wealth of new opportunities for investment. However, the waiting period for obtaining project approval seems to be extended as the local government struggles to keep up with requests for an increasing number of developments, Messenger said.
“Units purchased should be of international standard quality in design and amenities, as near to waterfront as possible, and within reasonable distance to the airport,” DuKhan said.
She also warned that investors should “transact through reputable agents, and retain the services of an independent lawyer, as the incidence of unscrupulous real estate practices is high in South America.”
Investors and soccer fans alike will probably hear more about Natal during the next few years as the city has been placed under consideration as a possible 2014 World Cup venue, Messenger said. The Brazilian government has announced plans to build new stadiums in Natal and three other cities in Brazil and to upgrade 14 others to international status.
“[While] the World Cup venues will not be announced until next year, there is wide expectation that Natal will be one of them,” Messenger said.
Soccer star David Beckham recently visited Natal as part of the Brazil World Cup promotion and to speculate the area as a possible location for a David Beckham School of Football, Messenger said. Thus far, Beckham has established schools in London and Los Angeles.
For more information on investing in Brazil real estate, please see our previous article, Brazil Property Investment: More Than Just the Amazon.
