By Cathy Brown
On the beach coast of Uruguay, branching out from famed Punta del Este, is a booming real estate market that shows no sign of letting up. If you’re rich or famous, this is the spot to see and be seen in South America.
For those who have never been, it’s next to impossible to try to explain the intangibles of what makes Punta del Este, Uruguay so special. Yes, it has long stretches of beaches, but so do most countries in Latin America. It has great restaurants and nightlife, but nothing in comparison to Buenos Aires or Rio de Janeiro. So why is there a seemingly endless supply of people who don’t think twice about paying millions of dollars in cash to pick up a home or apartment there?
The answer is that to buy in Punta automatically puts you in the game of the elite. It doesn’t mean you have fully been accepted into the glamorous world of yachts, supermodels, restaurants that are so exclusive that even some celebrities can’t find their way in, and million dollar business deals closing over golf or polo. But it at least makes you a contender. For many, you can’t put a dollar amount on that.
Uruguay has long been attractive to foreign investors for many reasons. According to Henry Arguello, who owns the ultra-luxury travel consulting agency Curiocity Travel and sells and rents homes through Curiocity Villas, Uruguay is the place to buy because “It has a long standing tradition of observance for the law and respect for private property, which has never been jeopardized throughout any changes of government. This creates an ideal framework for real estate investment. Uruguay also has strict banking secrecy laws, which means that banks cannot share any of your financial information with any party, including the government of Uruguay or any other government. It is a tax haven for companies and individuals to operate under the radar in terms of privacy, as they only tax income generated inside of Uruguay. It is also been granted the qualification of ‘investment grade’ by Duff and Phelps and IBCA.” Arguello should know. He has over 10 years of experience navigating the world of the Punta elite, and pulls down some of the most impressive real estate deals in all of Punta in terms of numbers and exclusivity.
Bob Bauman noted in International Living that foreigners need only an established address in the country to get a residency permit. Once that is granted, “You keep your status as long as you do not live outside of the country for more than three years.” In other words, you don’t have to live here even part of every year to enjoy the benefits of being a resident.
All of these benefits mean that cash-rich investors from all over the world are clamoring to pump their money into this hot spot. Only a few places in the Americas can compete with Punta del Este in terms of prestige, and the prices of prime beach locations can rival those in the Hamptons, Monaco, and Monte Carlo. And although you might have sticker shock at first when looking into real estate here (average asking prices for premium condo units skyrocketed from $1900 a square meter in 2005 to $4000 a square meter/$370 a square foot in 2010), all projections point to the fact that average price increases of up to 50% are forecasted for the next ten years. Properties are flying off the market, with almost 5 million dollars in real estate sales per day closing in the Department of Maldonado, which is 110% more than in 2010.
A Straightforward Purchase Process in Uruguay
If you have the cash and want to get into the Punta real estate game, it’s much more simple, safe, and straightforward than buying in many other places in Latin America. First, explains Arguello, “Uruguayan citizens and foreigners (residents or non-residents) have equal rights when purchasing property in Uruguay, and there is zero restriction as to what type of property a foreigner can buy. Property can be purchased by individuals, a company or corporation, or by an individual through a fully owned corporation. All property is credited by a proper title deed that is certified by a Public Notary, and all certificates of ownership is part of the Public Property Registry.”
The Notary will be a very important person in the transaction. An expert in real estate law, they will educate you on the importance and consequences of a preliminary contract, the value of your investment, any tax implications, title work, and they will help you to know the essential clauses to have in a deed of sale that will protect your interests. They will make sure that all title work is in order, will draft the purchase document (at which time it is customary that a 10% deposit is expected), will act as the Escrow Agent, and will record the purchase in the Public Registry. So it goes without saying that it is worth it to carefully choose your Public Notary that you will work with. Arguello is a great resource for referrals, and he can help put you in contact with one that would be a good fit for you and your transaction.
Other important details to know are transaction costs that you can expect. For the buyer, costs can vary between 8 and 9% of the property price. Real Estate Agents fees are 3.66%, Notary fees are another 3.66%, Property Transfer taxes will be 2% of the fiscal value of the property (usually much less than the market value), and you can add in another roughly $300 in registrations and certificates.
On the selling end, you can expect 3.66% in Real Estate Agent fees, 2% fiscal value Property Transfer Tax, 12% Income tax for non-residents (difference between the purchase price and sales price, and this number will be 25% if the property was bought as a local corporation).
Prime Areas and the Unlisted Listings
When it comes to looking at properties, you quickly discover that in Punta del Este, many of the best properties never hit the market. That’s why it is so important in this little bubble to work with someone very well-connected, as they can show you properties that will never show up in any listings. Punta is all about who you know and what circles you have entered, so by connecting with someone in the know, you will have much greater chances at picking up prime real estate. More times than not, prices do not reflect construction costs. While construction and design are beautiful in most places, keep in mind that what you are paying for is access to both the ocean and the gorgeous Uruguayan countryside just a few minutes away, and of course the glamour that is Punta.