Why are people investing in Rio de Janeiro?

08 March

Rio de Janeiro is back on the top thanks to the resumption of the oil industry, marked by recent auctions of government-owned underground areas of land known as ‘pre-salt blocks’. The industry’s privatisation was one of the campaign platforms of the new Brazilian government, which took office on January 1st, 2019 and encouraged players in this sector to return to the country.

Paulo Guedes, Brazil’s Minister of the Economy, is keen to attract further foreign direct investment with the economy already showing signs of recovery. The Ibovespa index, of the Stock Exchange of São Paulo, has accumulated a high of 10.64% this year.

What does this mean?

The sale of these pre-salt oil fields will have a direct impact on the economy of Rio de Janeiro since the oil province accounts for about 50% of the 2.8 million barrels produced per day in the country. With new construction of oil platforms, ships and many other requirements, Rio’s economy is going to see a timely boost.

The 6 rounds already performed attracted the industry’s global giants such as Exxon Mobil, Chevron, BP, CNOOC, among others, generating foreign direct investment forecasts of around 27 billion dollars.

How will this affect the property market?

For the real estate sector, with new investment in the oil sector’s infrastructure and the resulting relocation of thousands of skilled workers, there is going to be a significant increase in the demand for high-end properties.

Consolidated global destination

On the hospitality front, the market was shaken up by the announcement made by the LVMH Group, which acquired the Belmond Group and the iconic Copacabana Palace. The Accor Group, on the other hand, invested R$ 50 million in Largo do Boticário, a colonial architecture set in the city, and R$ 250 million in the first South American Fairmont hotel, in Copacabana. Investments that clearly show that Rio has gained more weight than ever, as one of the top global destinations.

Another market movement occurs in the port area, in the celebrated Porto Maravilha, which received large investments in urban planning and transportation.  New commercial towers, such as Aqwa, signed by the famous Norman Foster, responsible for works such as those of the Reichstag, the Parliament in Berlin, and the Gherkin, in London, which have already received about 4 thousand employees of large companies, and the Start Ups Factory, which will house 130 start-up companies with revenues of R$ 50 million annually.

Two kilometres away, alongside the new Museu de Arte do Rio (Rio Art Museum) and the Museu do Amanhã (Museum of Tomorrow), the Porto Carioca Market inspired by European moulds, such as Lisbon's Time Out in Portugal, full of gastronomic attractions, will open in the second half of 2019, which will certainly change the local panorama. These are trends that point to the average increase in the value of properties in Rio, which has the advantage of still being one of the few destinations where short-term accommodation in the style of Airbnb is not regulated, making the city a kind of oasis for this type of high-yield investments.

Despite rising slowly and consistently, after the 2015 crisis, prices are still 25% below pre-crisis levels. Current prices, converted at the exchange rate between the real and the major currencies, offer excellent opportunities for international investors. The neighbourhoods of Leblon and Ipanema little suffered from the crisis and maintained their status as the leading market jewels, followed by Copacabana (seafront), Jardim Botânico and Gávea.

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