Brazil is classified as a developing country, a description that more often than not means poor, with inadequate infrastructure and sometimes corruption. It can however also signify an untapped country rich with natural resources – a definition which fits Brazil perfectly. Property and land prices, though rising, are still undervalued and have a lot of potential.

Aside from the tropical climate, spectacular and varied scenery, the culture of enjoyment and the year-round sunshine (giving an annual potential occupancy rate of around 30 weeks), there are a number of practical reasons to buy property here. Brazil is considered a low risk in terms of war, terrorism and natural disasters, and the economy is relatively stable.

Property can be purchased on a 100% freehold basis, and both property rights and title are secure whilst taxes remain low (property taxes stand at around 0.2% to 2% of the assessed value). For those wishing to buy land or property for use as a second home or for retirement, the cost of living here stands at around 20% of that of the UK, and the currency exchange rate is favorable. Retirees are entitled to instant residency from the age of 50, otherwise multiple-entry visas are available.

Investors in rental properties can expect returns of approximately 6-7% per annum, based on an average of 60% occupancy, and property prices are increasing by over 15% a year. Finally, the selling process is easy, with transfer of title a simple process.

Prices in Brazil have been relatively unstable over the past few years, and Brazil experienced a decrease in property prices after the devaluation of its currency in 1999. In the four years leading up to 2005, property which had been sold at R$150,000 (£38,000/$65,000) went down to less than R$100,000 (£25,000/$42,000). Prices are therefore cheap, with a more stable economy forming a stronger base for values to climb back to their previous levels. Prices for a detached villa start at around £12,000, although a significant premium will be added to property close to Rio. Prices are also higher in the popular regions of North-East Brazil.

Another factor behind these predictions is the recent success of the tourism sector. The modernization of main airports and construction of high-standard hotels and resorts (many of them operated by international groups) have boosted tourism in the northeast, and the government is committed to fostering the tourism market. Daily flights are available from a large number of European cities, and a week’s holiday from the UK including flights and accommodation can currently be found for as little as £299. Capital appreciation in Ceará in the North, where the number of foreign tourists has increased by 26% since 2000, reached 20% in 2004, a figure matched in a number of towns in Brazil.

Two-thirds of Brazil’s population live on the coast, so this strip is well-developed with hotel properties, villas and apartments close to the beach and with good access to towns, resorts and all the facilities you would expect from a beach culture. There are also less-developed areas along the coast, though security can be an issue in these regions.

In urban areas, the best option is probably to invest in a serviced apartment in a reputable and secure area. For those planning to invest inland, building a home has proven popular. Many investors have also found that building a “pousada”, or guest house, in a small village in one of the “chapadas” (valleys) makes for a profitable investment as well as a relaxed lifestyle.

As the largest and most famous cities in Brazil, Rio de Janeiro and Sao Paolo are the safest opportunities for investment, although prices are likely to be high in the desirable areas and percentage returns will diminish proportionately.

The two cities have a relationship similar to New York and Los Angeles – Sao Paolo is the centre of government and finance in the country, and is therefore likely to be popular with those looking for commercial and office properties, whilst Rio, the “cidade maravilhosa” (beautiful city), has a reputation for Carnival and the arts. Sandwiched between mountains and the sea, Rio has 45 miles of white-sand seafront, including the famous Copacabana and Ipanema beaches, and is therefore likely to be popular with those wanting to take advantage of high tourist numbers and the city’s reputation as one of the great romantic destinations.

Whilst these cities are undoubtedly popular destinations, higher returns and greater potential growth are more likely in the north of Brazil. The area is attracting interest from investors as it is relatively underdeveloped and has a wealth of natural beauty. With rainforest sweeping down to some of the finest beaches in the world, the north combines a fresh, unexplored feel with properties designed to a luxury standard. Tourism arrivals are predicted to increase by 80% before the end of 2006 now that Joao Pessoa airport has become international.

Confidence in this area is sufficiently high for some agents to offer guaranteed returns of up to 6% on some waterfront properties. Supportive infrastructure is under development. In Rio Grande do Norte the Mayor’s office is planning an investment of about R$400 million in hotel construction in the next four years. The state is reported to have the cleanest air and the purest water in the whole of South America, and in a recent survey the city of Natal was found to have the lowest crime rate and one of the highest quality of life rankings in the country.

Aside from Rio Grande do Norte, other states which are proving popular in the north include Ceará, a major tourist hub which has already reported significant returns on property; Pernambuco; Alagoas; Sergipe; Paraíba; and Piauí. An ambitious investment project has significantly improved infrastructure in these areas, road improvements between the cities being one of the measures taken. Bahia is also tipped for increased growth, although the tourist industry is already somewhat more developed here than in the above-mentioned areas.