Hot Property Market to Watch

International Living Postcards--Saturday Edition

Saturday, Feb. 24, 2007

The colonial part of this country's capital city is undergoing a rejuvenation, led by foreign investors and second-home hunters. The coastal areas offer excellent opportunities to own oceanfront and oceanview properties. The infrastructure is First-World. There is a growing banking center.

No, this isn't Panama, but rather Uruguay, a little country with a growing real estate market that has my attention right now.

Uruguay is, in many ways (including culturally), a mini Argentina. Montevideo is much smaller than Buenos Aires, which means it's more manageable. Punte del Este is the country's main beach destination, attracting sun-seekers from around the world, but especially from elsewhere in South America.

Uruguay trails the market in Argentina by about three years. While property prices in Buenos Aires have been on the up for the past four years (following the 2001 bottom thanks to the peso devaluation), values in Montevideo started in the same direction around early 2006.

Now that Argentina has recovered and Buenos Aires real estate prices are pushing beyond $3,000 per square meter in some areas, investors are looking to Uruguay as an alternative.

This country, specifically its capital city, offers the would-be second-home buyer or retiree the chance to enjoy himself while, at the same time, positioning himself for profit, both in terms of the capital appreciation I think will continue in this market and from rental yields in Montevideo.

The colonial area of Montevideo has seen investors (mostly foreign) come in and start renovating old colonial buildings into houses and apartments. Most are small projects by individual investors, but the area is starting to turn from a rundown neighborhood to a burgeoning center for nightlife and artist galleries. The government has plans to extend the pedestrian streets and reduce traffic to help with parking and pollution. We're early on in the gentrification cycle, though, so prices are still reasonable--in fact, they're cheap on a global scale.

Until the financial crisis in Argentina in 2001, Punta del Este was the beach destination for porteños. These Argentines have begun to return, as their situations have improved, but, increasingly, this market is being made by foreigners coming from farther afield and appreciating both the beaches and the prices. The high season in Punta del Este is short, typically from the end of December through the end of February, but finding a place to stay in the high season is nearly impossible. In other words, for these eight or nine weeks, you're virtually assured your rental will be occupied 100%. Even this rental income can be enough to net at least 5% return on a rental property.

So far, new developments in the coastal areas are few except for condo buildings. (But one developer I am working with is putting a project together of small villas rather than condos.) Your options are resale properties or land. Prices for condos can be as low as $50,000 (not on the water) and you can pay well over $1 million for a house on several hectares with a few hundred meters of oceanfront.

Uruguay is one of my key picks for this year…but look soon to find the best deals.

Lief Simon
For International Living

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P.S. With international airports in Montevideo and Punta del Este along with paved highways up and down the coast, getting in and around Uruguay is convenient. Cost of living in Uruguay compares to Argentina, although luxury goods are more expensive.