Brand new beach villas for under £20,000

published 11 February 2008

Following another week of dreary British weather, most of us would rather open our front door to white, sandy beaches, blue skies and welcoming temperatures.

If the home you're stepping out of cost you next to nothing and is making you money, then so much the better. But all those things in one place would be the Holy Grail of overseas property investment surely it can't exist?

According to the papers, it does and it can be found in Brazil. The Business has named the country one of its property hotspots for 2008, "expected to experience huge growth in the coming decades". The Sunday Times is also tipping the area as the hotter, cheaper alternative to Spain.

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Northeast Brazil certainly has plenty of attractions. It boasts year-round hot temperatures and you can enjoy the weather on beautiful white beaches that are largely empty as currently the Brazilian tourist industry is still focused on Rio de Janeiro and Brazil's south coast.

And beyond the scenery, the bottom line is attractive, too. Properties in northeast Brazil are extraordinarily cheap. Just £12,860 will buy you a two-bedroom house three minutes from the beach in Paraiba. Admittedly, it couldn't be described as luxury. But even the new-build flats in developments such as Reef Club, with golf courses, spas and (in the case of the Lagoa do Coelho complex) on-site plastic surgeons, are astoundingly cheap. One-bed flats at Lagoa do Coelho start from £53,000.

And the tourists won't stay away for long. An international airport is being built in Natal completion is due in 2009 so the local tourism industry should boom in coming years, providing plenty of renters for your home. As a whole, Brazil's tourist industry grew by 134% between 2002 and 2005 and its hotels are struggling to keep up. There is a nationwide shortage of good-quality hotel accommodation, meaning that demand for short-term holiday rentals is soaring.

Sounds great so what's the downside? Well, as you might expect, investing this early on in any emerging market certainly isn't without risks. For one thing, no one can be sure that the area really will take off with tourists but the scenery, climate and cost of living suggest it will. "It's still early days, but it can be compared with buying in southern Spain 25 years ago," says Anthony Fernandes in The Sunday Express.

Another thing to bear in mind is that the area is very popular with a less desirable breed of ex-patriot criminals. Brazil does not have an extradition treaty with the UK and as such many British criminals use the country as a hide-out Ronnie Biggs being the most famous. The quiet seclusion of the northeast coast has created the ideal location for a criminal community. As a result, it pays to be extra vigilant when conducting property deals in the area. Just because Brazil doesn't extradite doesn't mean it's tolerant of criminal activity and you wouldn't be the first nave foreigner to find yourself on the wrong side of the law.

But property developers are aware of this problem, as are the British property investors who have already bought there. As such, there are plenty of people prepared to guide you through the buying process. And with English not widely spoken in the region, the fee is well worth it. The Sunday Times recommends Daniel Daly, who describes himself as a professional baby-sitter' and charges a set fee of £1,400.

All in all, the beauty and possibilities offered in this corner of Brazil outweigh the negatives for the more adventurous investor. A careful buyer, in the right location, can pick up a bargain and should enjoy decent capital gains and rental income for years ahead.

How to buy property in Brazil

To buy a property, you need a CPF, or tax identification number, which you can get this from the Brazilian embassy.
Buyers pay 3% of the property's value in tax and another 2%-3% to the public notary on registration of the sale.
Tourists can spend up to 180 days a year in Brazil. To stay longer, you will need a permanent visa.
When buying off-plan, always check that the development has a building licence and view the site before buying.

Lagoa de Coelho: comes with plastic surgeons

Reef club: Brazil has a beautiful coastline

Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings accounts and credit cards to pensions, property and pet insurance.

Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.

Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping, among many other titles both online and offline.