Property in Brazil is on the rise

It's carnival time for the burgeoning beachfront property market in the north-east of the country, says Laura Latham - and Pele might give you a kick-start

We all know about the tropical climate and the locals' penchant for carnival - Brazil, after all, is one of the world's most glamorous, exotic destinations. But recently, the visitors have shown a desire for more than just a week in a hotel - they're eyeing up the property market, too, and the trend has spread so fast that even the country's most famous son, Pele, is getting in on the act.

None of this is accidental. Back in 2003, the Brazilian government decided one way to save the country's weakened economy was to encourage tourism. They set out a plan to attract around nine million visitors each year and began improving coastal resorts and infrastructure in key areas, such as Natal on the north-east coast.

The plan succeeded and the number of tourists rocketed. But what the ministers may not have foreseen was quite how many visitors would be so blown away by the country's fabulous beaches, friendly locals and low-cost, laid-back lifestyle that they'd choose to buy property there.

From the UK, it takes around eight hours longer to fly to north-east Brazil than it does to Spain or Portugal, but British buyers are beginning to flock in, and property that a few years ago was selling for less than £20,000 has more than doubled in value. In fact, the area's become such a magnet for overseas investors that even legendary footballer Pele is getting involved. He recently helped launch King's Flat, a development of 32 luxury, beachfront apartments at popular Ponta Negra beach, on a plot of land he was given after helping to win the 1970 World Cup.

The apartments are all one-bedroom but vary in size, and offer residents direct beach access, sea views and hotel-style services. Always a shrewd player, Pele has made another clever move and kept three apartments for himself. So any new owners could find themselves taking a dip in the on-site pool or basking on the beach with a sporting great - or so the hype goes.

Erlend Vatne of Brazil Dream Homes, which is selling King's Flat properties for between £48,000 and £104,650, says that Natal is definitely the new focus for investment in Brazil, with prices rising by more than 20 per cent in the past year. He says this is a sign of a trend affecting other areas of the country, too. "Prices are rising in all of Brazil but more so in the north-east," he says. "In Natal, the real estate market can be described as booming."

Vatne isn't surprised northern Europeans are attracted to the area, with its year-round sun, low prices and carnival atmosphere, and sees growth in the region also enticing wealthy locals away from their traditional haunts on the south coast. "I've met many people from Sao Paulo that have moved to Natal because it has a better climate, less crime and lower costs of living," he adds.

Another factor, says Paul McMullen of Escapes2, is the new international airport, scheduled for completion in 2009 and expected to offer more direct flights from the UK. Currently, there's the option of charter flights from Britain with tour operator Thomson or services via Spain or Portugal into the nearest airport an hour away. Flights straight into Natal city are predicted to fuel the property market further.

McMullen, who's marketing several beachfront complexes here, is seeing buyers who've been priced out of Europe moving into the area. "We get people desperate for property in Brazil due to the low prices," he says. Currently on Escapes2's books is Portos Dos Carais, with one-bed apartments starting at £28,000, and Lagoa Do Coelho, priced from £50,000. The latter is on the edge of a beautiful, tropical lagoon and is one of a new wave of US-style resorts with a spa and golf course.

Cheaper property is available down the coast towards Recife. Two- and three-bedroom houses through Property Bond International sell for less than £50,000, for example, and Churchill Properties Overseas offers a selection of detached houses and bungalows for less than £40,000.

Because Brazil isn't a short hop, the majority of British buyers are looking for a property to chill out in for a few weeks, along with the opportunity of receiving rental income.

Average buy-to-let returns in Natal are around 5 to 6 per cent of the property's value, and the area attracts year-round tourism, with locals coming through the December-to-February holiday season, and European and US visitors in the summer.

So, bought at the right price, a place here could become a nice little earner. "If you buy an apartment for around £40,000 and hold it for five years, you'll see growth of 10 to 15 per cent plus rental income on top," says McMullen.

But some visitors just don't go home. Businessman John Constantinou, who owns homes in town and on the beach, both bought for less than £30,000, was wowed by the lifestyle as well as the area's natural beauty and decided to stay. "I used to work up to 16 hours a day, so I could have a three-week holiday," he says. "Here, I'm living the holiday."

Despite the area's increasing popularity, Constantinou hopes Natal won't become as overdeveloped as European resorts.

"Marbella, Benidorm and the Algarve have been mentioned as a comparison, but the Brazilians aren't going to let it get as bad as some places in terms of high-rise congestion," he says.

"And heaven forbid we start seeing fish and chip shops here."

Brazil Dream Homes: 00 55 84 3201 2244; www.brazildreamhomes.com.br

Escapes 2: 0161-351 2160; www.escapes2.com

Churchill Properties Overseas: 01983 550 400; www.churchilloverseas.com

Property Bond International: www.propertybond.co.uk

The low-down

* Non-nationals can own property without restrictions but need a tax registration number (a CPF), available via your lawyer or the Brazilian embassy.

* Ownership laws in Brazil are complex and it can be difficult to prove that the vendor has a genuine claim to a property. If you're buying a resale home, rather than in a new development, make sure your lawyer is well versed in Brazilian property law and checks all the deeds.

* For a sale to be legal, the transfer of funds into the country for the purchase must be recorded with Brazil's Central Bank. Your lawyer needs to ensure this is done or your purchase won't be legal.

* In addition to budgeting for a deposit on the property (which is negotiable), you should set aside approximately seven per cent of purchase price to cover legal fees and property purchase tax.