Living in Uruguay

"It's a word of mouth thing"

The secret's out: Uruguay is a great place to buy a second home

When it comes to real estate, it really does seem as though Uruguay offers something for everyone: seafront apartments in Punta del Este, urban bolt-holes in Montevideo, and the chance to build your own dream home from scratch in the unspoilt countryside.

A firm favourite of overseas buyers looking to invest in Montevideo is the high-end beach district of Pocitos, which offers good transport connections to the Centre and the Old Town, safety and generally high build quality.

Prices have risen consistently since Uruguay began to recover from Argentina's financial crisis in 2002. Montevideo had traditionally been an expensive place to buy property but the meltdown next door had a knock-on effect, and house prices tumbled. Unemployment rose significantly, real incomes dropped and confidence drained out of the real estate market.

In 2003 new-build units in good locations in Pocitos cost between US$850 and US$1000 per square metre. Similar properties are now around 75% more expensive. And prices are still rising, albeit modestly, in spite of the current global downtown. In the period June – August 2009 properties in Uruguay as a whole were 2.11% more expensive than in the same period a year earlier.

But these figures are for Uruguay as a whole and conceal local variations. According to Pascual Larroque, a real estate agent specialising in finding homes for foreigners relocating to Uruguay, high-end property values in the city's upmarket beach suburbs and in Montevideo's Old Town – which is in the process of regeneration – outperformed many other districts. The increase was around 8% in 2008 before levelling off in 2009.

"In retrospect, the reasons for the sustained price hike are easy to understand," says Mr Larroque. "Uruguayans began to have confidence in their economy. More possibilities for getting home loans came on line. In addition, some of the young people who had left after the meltdown of 2002, mainly to Spain and the United States, came home with their savings and their skills. These were all local factors that produced an upward pressure on real estate prices. On top of this you have the arrival of unprecedented numbers of overseas home buyers," says Mr Larroque.

Rental law in Uruguay is generally seen as being pro-landlord. Rental agreements are concluded for fixed periods and owners routinely include a clause that allows for a 5% annual rent increase. Unsurprisingly, a number of overseas investors are interesting in buying to let, despite a new tax code that came into force in July 2007 that ushered in a 12% levy on rental income (rental values in Montevideo's large uncontrolled sector increased by a similar amount in the months following the introduction of the new tax).

An unfurnished one-bedroom unit in Pocitos away from the water will rent for between US$400 and US$600 a month depending on its condition, and on the basis of a 12-month contract. Furnished units to rent for shorter periods are sometimes difficult to find in the capital's beach suburbs at all times of year. In Punta del Este out of season, meanwhile, the opposite is true: you will have a vast choice.

But in Punta del Este you can expect to pay around US$8000 to rent a well-maintained house with a pool, and within walking distance of the beach, for the month of January – the most costly period.

Owning property is not required to obtain residency. The essential requirements are a clean police record and proof of steady income of (at the time of writing) at least US$500 per month. On applying for residency, you can import your household goods free of import duties – this can be done the day after the application for residency is filed.

According to Juan Federico Fischer, a local real estate attorney who advises companies and individuals investing in Uruguay, buying real estate in the country presents few risks.

"First of all, property is almost always bought and sold in US dollars, so transactions are perfectly transparent. The country has no history of expropriations and corruption is virtually inexistent. It also allows the free flow of foreign currency. As a result some 80% of deposits in Uruguayan banks are in US dollars or euros," says Dr Fischer.

"In addition, Uruguay does not tax global income, only income which is generated in Uruguay, nor is there any inheritance tax. Plus the country has one of the world's strictest banking secrecy laws."

Under three hours drive east from Montevideo over excellent roads – and a short quad bike ride from a pristine ocean beach – lie 100 hectares of grassland and trees that American developer Carl Wescott calls Laguna Tranquila.

The Laguna in question is the Laguna de Rocha, an expanse of fresh water that glimmers nearby in the summer heat, and provides a living for a handful of local fisherman. Tranquila, because the peace and quiet of Mr Wescott's property is palpable from the moment you step out of the car.

But it's a peace and quiet that will soon be disturbed by the sound of earth movers. Mr Wescott says that his pre-sale of 25 building plots was over-subscribed: "Although we are about to start building within a few months, the plan is to disturb the natural environment as little as possible. For instance, we have devised a development plan that will mean we can keep every existing tree on the property. Equally, we expect buyers to opt for house designs that are in keeping with this special place, with lots of stone and natural wood."

Mr Wescott is offering plots of 2500, 5000 or 10,000 square metres. The smallest plots are big enough for pleasant garden and a sense of privacy; the largest can comfortably accommodate stables. Many will have views over the Laguna de Rocha, a protected habitat. At US$25 per square metre, the entry-level price for a 2500m2 plot is US$60,000.

"We think that a critical mass of residents – large enough to call a community – is about two years away," says Mr Wescott. When complete, the development may contain as may as 144 homes since each home site can accommodate up to two houses.

The design of the development includes a hotel with a swimming pool, spa and restaurant – which will ultimately give residents a place to meet and socialise, as well as to grab something to eat and drink, or get some exercise.

Ten minutes drive away, the seaside resort of La Paloma – with a working lighthouse and massive whale skeleton gracing the middle of its main drag – is busy with holidaymakers. But it doesn't feel packed: there is plenty of room to park and no need to wait in line for a table at the town's restaurants. At the Siete Candelas the waitress is happy to be back from a stint working in London. Certainly, neither the air nor the cod could be fresher.

A few miles further along the coast and dramatically sited on a promontory between two magnificent beaches, La Pedrera is newer, trendier and popular with surfers. Like La Paloma, although it is mainly a seasonal resort, essential services are maintained year-round.

What people are attracted to Laguna Tranquila? "Many North Americans and Europeans are curious about living overseas," says Mr Wescott. "But we will also be marketing to Brazilians, Argentines and local buyers. There is a lot of information out there for people who feel like coming to Uruguay for part of the year or permanently. People write blogs and recount their own experience of living in this country. It's a word of mouth thing."

Factfile:

Laguna Tranquila: www.lagunatranquila.com; info@lagunatranquila.com

Juan Federico Fischer: Fischer & Schickendantz; www.fs.com.uy; jfischer@fs.com.uy

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