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Home Sweet Home?

Posted on April 7, 2007
Filed Under Montevideo, Real Estate, Expat Tips | 9 Comments

So you are interested in buying real estate in Uruguay? You have been hearing that it is a bargain and you are wondering whether you will miss out on this great opportunity. Well, there are a few things you should think about first. But before I start flailing my arms like the robot in Lost in Space, I should warn you that what follows is based on my own observations and may not mesh with what you’ll hear elsewhere. So take it for what it’s worth.

First, if you are thinking of buying property in Uruguay as an investment, keep in mind that the fees associated with “flipping” a property, i.e. buying and then selling it, can be as high as 15% of the property price. Also when selling the property after a few years, the new tax on home equity appreciation can easily add another 5-10%, since it does not differentiate between price increase due to inflation versus real property appreciation. Another important point to consider is that mortgages are costlier and much harder to obtain in Uruguay. Because of this the pool of buyers and therefore the liquidity of the housing market is much smaller than you might wish. Strict and inflexible inheritance laws may further discourage foreigners buying. This means that a property in a less prestigious or less desirable area could stay on the market for years before it sells. So here goes, advice number one: if you want to invest in Uruguayan real estate, buy in popular areas and prepare for the possibility of staying in for a long time.

Don’t forget that houses that are not continuously occupied are often the target of break-ins. Advice number two: if you want to buy a second home in Uruguay and use it only part of the year, consider an apartment (or condo, as they say in the US). Otherwise, contract a house manager that will visit your property periodically.

If you are planning to live full time in Uruguay, you’ll need to decide on the type of property and location. Here are a few possibilities and my personal comments.

Rural property – Not for the uninitiated. Yes it can appear ridiculously cheap and even “romantic”, but you’ll need to take into consideration that it may be very expensive to obtain: a phone, internet, or reliable electrical power. Household help may be difficult or impossible to get. If the property will be unoccupied for part of the year, you’ll need a casero. Basic supplies, such as gasoline may be inconveniently far, fancier items hard to get. Competent health care may be hours away. So it is not for the casual dreamer. Advice number three: unless you are an experienced farmer, give it up. Subscribe to the National Geographic Channel instead.

Beach front property in the boonies – Same as above but add: be prepared for a lot of wind most of the year. Be prepared for cold ocean water temperatures year round. Be prepared for a lot of house maintenance. Foundations on beach houses do shift a lot, producing cracks on the brick construction typical throughout Uruguay. Advice number four: buy tools, a lot of books and a pot belly stove.

Property at a small balneario - There are balnearios with a decent infrastructure year round, others that only have it from mid December to mid February. Obtaining basic supplies in the winter may involve driving an hour. For example, most balnearios east of Pedrera, have no gasoline stations. One needs to drive quite a distance into Rocha, the nearest town. The variety of the supplies locally available is very limited. Advice number five: rent first, if you still like it after a whole year, then buy it. You will thank me.

Property at a more popular balneario - Be ready for a circus atmosphere between January and February. The population will increase several times over, especially on weekends. Prices of basic goods will increase in the summer. Advice number six: if you are older and might possibly need medical care, stay near Montevideo or near Maldonado. If you have small children that need to attend school during the off season, ditto.

Property in Ciudad de la Costa - Yes it is inexpensive, but it is so for a reason. Be ready for house break-ins. Advice number seven: get one or two large dogs.

Property in Montevideo - Most foreigners for some reason only consider the coastal barrios. Depending on your budget and lifestyle, it may be wise to consider less expensive areas such as Prado and Centro. Research your home carefully. Advice number eight: take your time and rent if you have to. Don’t count on selling your newly purchased home in the event you don’t like it. It may take a while and the transaction fees will eat a good chunk of change.

Property in the Ciudad Vieja - Yes it is super cheap, but it has few trees and crime is significantly higher. The sight of abandoned buildings and flop houses throughout the barrio and the noise of drunken youths at night make it a no-go for most people. The promise of urban renewal can take decades!

Colonia - This is a lovely area of the country and is quite safe. Great destination for people who want peace and quiet, proximity to BsAs and all the amenities. Advice number nine: Check it out, you may like Colonia and the surrounding areas.

Other towns - There are several towns in the interior that are quite lovely such as Durazno, Tacuarembo, Salto, Melo, but I think they would appeal only to Uruguayan die hards. Real estate prices in the interior are inexpensive. For example a decent house in a good neighborhood in Melo costs around 60,000 dollars. But then again, it may be a culture shock.

Fixer-uppers - A lot of people in North America are handymen and may have extensive experience building or making household modifications. Be forewarned: your experience may not translate well. Virtually all construction are brick, cement and concrete based. Hardly the type of work that can be done by one person. Also, here the labor is cheap. It is the materials that are relatively expensive. And, while you will find hardware stores like MrBricolage, Casa del Niple etc. they are not quite the same as Home Depot and the like. Advice number ten: you will save more by contracting a competent local architect than trying to do it yourself.

Where are prices headed? Will prices go up if too many foreigners discover Uruguay?

Real estate prices have been more or less stable over the last year, even though the new income tax is causing some price adjustments. Since rental income will now be taxed at 12%, many investors are passing this increase on to renters. It looks like some renters are looking to become buyers and this is putting some pressure on prices. Over the next few months this will resolve itself and it will likely reach a new equilibrium. The new home lending programs started by a number of banks may help increase demand for homes and may increase prices somewhat over time. Although interest rates are still too high to be attractive to the general public.

I don’t think foreigners from afar can affect the average Uruguayan real estate market in any significant way. The prices of elite properties in niches like Punta Del Este may be affected, but I think it will be limited. If you take into consideration aspects such as language, climate, distance, cost of travel, real estate transaction fees, I find it unlikely that Europeans and North Americans will come to Uruguay in numbers large enough to influence the market. For similar reasons, Brazilians are unlikely to buy homes in Uruguay in a way that would affect prices, except maybe in Punta del Este. Historically, Uruguayan real estate prices have been driven by the vagaries of the local economy and by Argentinian investors. The Argentinian influence is particularly noticeable in the coastal areas. Argentina has few beaches, none of them good, and the waters are too cold. Given the similarity of cultures and the small distances involved, Uruguay will ALWAYS be their destination of choice. And there are millions of them within a few hour’s drive. If the Argentinian economy continues to recover from the devastation of 2002, Uruguayan real estate prices will go up eventually. But there will be a significant lag, since it takes time to save the kind of money required to buy a property with cash. The process is likely to be gradual, over a period of many years.

Other posts in Expat Tips

• Pros and Cons of Shipping Furniture Abroad
• Should I Bring My Electrical Aplliances to Uruguay?
• Usufruct and Inheritance Issues
• Tipping Custom in Uruguay
• American Income Tax While Living Abroad
• Visa Requirements to Travel to Brazil
• Inheritance Laws in Uruguay
• Uruguayan Spanish Conjugation
• Obtaining the Uruguayan National ID
• Steps To Obtain Permanent Residency in Uruguay

Other posts in Montevideo

• Ten Things I Love About Montevideo
• Furniture Moving and Delivery in Montevideo
• How to Search for Products and Services in Uruguay
• Overview of Crime in Uruguay
• Observations about Dogs in Uruguay
• Where to Buy the Best Uruguayan Empanadas
• Fresh Fruits Available in Uruguay
• Description of the Arrival Process at the Carrasco Airport
• An Overview of the Laundry Services in Uruguay
• An Overview the Main Supermarkets in Uruguay

Other posts in Real Estate

• Pros and Cons of Retiring in Uruguay
• Heating in Uruguay - Things to Consider
• Real Estate Outlook in Punta del Este
• Overview of the Impuesto al Patrimonio (Asset Tax) in Uruguay
• Inheritance Laws in Uruguay
• What Everybody Ought to Know About Renting in Uruguay
• Uruguayan Spanish Real Estate Terminology
• Squatter Rights in Uruguay
• A Description of the Land Buying Process in Uruguay
• Uruguayan Links

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