Riding the Wave of Opportunity

Saturday, December 04, 2010

Punta del Este has beautiful beaches, and a booming real estate market

Dear Reader,

I'm in Uruguay this week, scouting for new real estate opportunities. I'm happy that I'm back here. Uruguay is one of my favorite countries in the region. The rural landscape, the temperate climate and the relaxed locals all remind me of my home country, Ireland. Both countries are small, too, dwarfed by larger neighbors. But while the news emerging from Ireland in recent weeks has focused on our growing debt burden, a bailout from the IMF, and protests from a public unhappy with our government's handling of the crisis, the mood in Uruguay is very different.

For starters, Uruguay's economy (unlike Ireland's) is growing. In the first six months of 2010, it expanded by 9.8%. Forecasts predict an annual growth for the whole year of 7%-7.5%. The Uruguayan president credits that impressive growth partly to the strength of Uruguay's main trading partner, Brazil. JP Morgan believes that this strong economic growth should help Uruguay move closer to investment grade. An upgrade earlier this year by Fitch moved the country to BB, two levels below investment grade.

Tourism figures look good here for 2010, too. Uruguay is one of the few countries to buck the global downturn in traveler numbers. Uruguay expects 200 cruise calls during the 2010/2011 season (November 2010-April 2011), with 300,000 passengers. They should generate $30 million in revenue. That's not a lot compared to the $1.3 billion in revenue generated by the country's tourism industry annually, but Tourism Minister Hector Lescano believes that cruise passengers help promote Uruguay. Moreover, 10%-12% of these passengers return to Uruguay, some as investors.

I'm currently in Punta del Este, Uruguay's premier resort town, and the playground for South America's rich and famous. The town just celebrated its first food festival. It's getting ready for the start of high season, too, when the town's population can reach 500,000, compared to just over 7,200 year-round residents.

I first scouted in Punta three years ago. I can't believe the pace of change in some parts of the city. New buildings line some sections of the coast, with impressive ocean and beach views, and high-end amenities. The market here remains strong.

Many of the "pre-launch" opportunities I checked out only had a handful of units left. One small block of condos released days earlier had already sold thirteen units. That's particularly impressive when you consider that there's little developer financing here, and bank financing is difficult to get for non-residents. Argentines make up a large chunk of the market in Punta del Este, looking to park their money in a more stable country than their own. 

Land prices in and around Punta soared this year. In six months, the price of land rose to $347 a square meter, an increase of 17.8% in only six months. Boom times indeed...

One of the hot investment buttons here is farmland. In the first half of 2010, farmland investment increased in Uruguay...with more transactions (up 9.3%), more acres sold (up 25.8%), and more money changing hands (up 37.5%) than the same time last year.

Farmland investing is easy in Uruguay. The CONEAT index shows the soil type and productivity of every piece of land in Uruguay, and gives it a rating. That rating correlates with the price of the land...so you can tell how much you should be paying per hectare. With no tariffs, low taxes, and easy access to markets, it's possible for a small player to have a profitable stake here.

Margaret Summerfield

Editor's Note: Members of Real Estate Trend Alert, the VIP real estate investors' club, have been hearing about coastal land banking in Uruguay...and farmland opportunities...over the last eighteen months. Members even heard about beachfront land here for $4000 per acre. This video tells you all you need to know about this exclusive club...and how you can try it out, with no strings.

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uruguay

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