Beautiful Beaches, a Property Boom, and the Soya Dollar

Wednesday, April 06, 2011

It’s South America’s most upscale beach town, but you can find affordable homes in Punta del Este

Dear Reader,

The green-gold meadows shone in the bright sunlight. The sky looked fresh-scrubbed blue. A farmer parked an old 1950s truck in the shade of a spreading tree, beside a white picket fence. Cows clustered around a red barn, watched by a sleepy dog. It’s American pastoral at its best. Until a very tropical palm tree intrudes onto the scene…

That’s because I wasn’t in the rural heartland of the U.S. I wasn’t in Ireland (although, aside from the palm trees and strong sunshine, it felt just like home). Instead, I was traveling through Uruguay, a small but appealing country in South America. And this country’s appeal is drawing more and more tourists and property buyers.

Unlike the U.S. and Ireland, Uruguay is on a roll. Both her economy and her real estate market are growing strongly. And much of that growth is down to agriculture. Uruguay’s economy grew 8.5% last year, easily surpassing economic powerhouses like Brazil and the US.

Tourist numbers are up, too. In January this year, tourist numbers increased 40% compared to January 2010. Most of those tourists…almost 75%...were Argentines. And it’s a new breed of Argentines—along with locals—that is fuelling the real estate markets in hot spots such as Colonia, Punta del Este and Rocha…thanks to the buying power of the so-called “soya dollar”.

“Soya dollar” is a local term used to describe a newfound wealth in Uruguay and Argentina. It’s a wealth created by the high prices commanded on world markets by soya, grains, etc., caused by increased demand and a weakened dollar. And since Uruguay’s properties are priced in dollars, this new wealth finds its way easily into the Uruguayan property market.

My scouting trip started in Punta del Este. This little seaside town is a fun mix…of locals and tourists… modest brick homes and gleaming glass high rises…small town friendliness and celebrity glamour. For six weeks a year, it’s South America’s most desirable resort, filled with royalty, the seriously wealthy, and stars from the worlds of fashion, music and cinema. They throw a great party when they’re in town…packing bars, restaurants, nightclubs and beaches. For the other 46 weeks of the year, Punta reverts to its laid-back, sleepy self.

You can see the influence of the glitterati clearly as you leave Punta and head to La Barra. New luxury developments are replacing the older, shabbier homes close to La Barra’s beautiful golden beaches. The main shopping street is a crazy jumble of over-priced “antiques” stores, designer clothes in stylish boutiques, tiny local grocery stores, and upscale restaurants.

There’s even an entire shop given over to Buddhas. Wood, clay, gilded, plain, slim, fat…you can have whatever type of Buddha you want. Not exactly what you’d expect to find in a tiny beach town in Uruguay…

Outside of La Barra, chacra developments take over. These offer large lots, sometimes up to five acres in size (most I saw were much smaller than that…from ¼-acre up to 2 acres), set in a tranquil landscape of grassland, artificial lakes, and stands of trees. Most offer minimal on-site amenities—a clubhouse and swimming pool, perhaps tennis courts. Pricing ranged from $40-$135 per square meter ($162,000 to over $500,000 per acre).

Argentines made up most of the buyers (in some developments, all the buyers), with the odd European and Uruguayan. Those that built their own homes (most didn’t, leaving developments strangely empty) built on a grand scale. Ditch all thoughts of cozy second homes with a spare bedroom for guests. Some of these homes could house a football team…

I checked out those chacra developments…and then I scrutinized just about every new condo development on offer, in and around Punta del Este. Everywhere we went, we heard the same story: nothing left for sale, or the odd one or two units left.

This market—which remained strong through the recession—shows no sign of weakening.

Traditionally, most property buyers (up to 80%) in the Punta del Este area came from Buenos Aires. They wanted a second home…and a safe haven for their property investments. But booming agricultural exports from Uruguay (meat, grains, seeds/oilseeds, dairy products) and the country’s strong economy swung the balance. Today, almost 50% of buyers in Punta are Uruguayan.

And the profile of Punta’s buyers has changed too. Now, they aren’t all city slickers from Buenos Aires. Instead, they’re farmers from the interior provinces of Argentina and Uruguay…flush with “soya dollars” and looking to invest in high-end real estate.

Property prices in Punta del Este now average $3000 per square meter. The boom seems to have focused on prime ocean- and beach-view condos in the heart of Punta, on the boardwalk. (One such condo fetched $7.3 million in 2009.) Surprisingly, you can find good-value houses in Punta…back from the boardwalk, away from the high-season crowds, but still close enough to enjoy the beautiful beaches, fine dining, and entertainment on offer. These properties have appreciated steadily over the years, but not quite as spectacularly as the boardwalk condos.

One house, with 115 square meters (1237 square feet) of interior space, is on the market for $265,000. The home has three beds and three baths, air conditioning, an outside patio and barbeque area, and swimming pool. It’s furnished and in excellent condition. It’s 600 meters from the ocean.

Another larger home has 330 square meters (3550 square feet) of living space, with 3-beds and 3-baths. This property is listed at $330,000 ($1000 a square meter). Again, it comes furnished, and is 600 meters to the ocean. Underneath the living quarters, it has a four-car garage.

A little further away from Punta del Este, close to Laguna del Sauce, a 152 square meter (1635 square foot) house with a thatched roof is for sale at $185,000. The fenced grounds of a third of an acre include a swimming pool. This property has just sold (it was a good deal). Another property in the same area is for sale, for $240,000. It’s larger, 200 square meters (2152 square feet), with three beds and three beds…furnished…and only 100 meters from the beach. (Laguna del Sauce is a lake that covers 50 square kilometers; it’s a popular spot for fishing, windsurfing and water sports.)

If you’re not a soya dollar millionaire, you can still buy your own second home in Punta del Este…without breaking the bank. If you’d like to know more about these (or other properties in Punta) contact Alberto Prandi here.

Margaret Summerfield