The fashionable beach resort of Punta del Este has dominated Uruguay’s property market for more than a decade, but the nation’s capital is finally having its turn.
Montevideo – home to about a third of Uruguay’s 3.5m population – is fast transforming. The once overlooked sister to majestic Buenos Aires on the other side of the River Plate now rivals some of Latin America’s most vibrant capitals.
Yet for many decades the city was a far cry from its peak in 1930 when it was the inaugural host of Fifa’s World Cup and a leading beef exporter. The dictatorship from 1973 to 1985, followed by a financial crisis in the early 2000s, left the former Spanish garrison town neglected and property prices depressed.
The subsequent turnround has been spurred by growing global demand for staples like rice, soy and meat, which has revived and revitalised the capital’s fortunes. New gallery spaces, beachfront cafés, boutique hotels and residential condos are ushering in a construction boom and quickening Montevideo’s tranquil pace.
The current economic malaise in neighbouring Argentina is also boosting real estate investment in Montevideo, as locals and multinationals opt to set up shop in the safer haven of the Uruguayan market. Since the Argentine government imposed tighter currency controls limiting dollar purchases at the end of 2011, the city’s age-old connection with Argentina has strengthened. “Uruguay has served as a sheltered harbour for Argentines for years. Today it’s more like a life jacket,” says Carlos Arocena, owner of real estate agency Bado & Perazzo Inmobiliaria, part of Sotheby’s International Realty.
The average selling price for one- and two-bedroom flats in the city rose 14 per cent and 7 per cent respectively in the 12 months to January 2014, according to property valuation firm Valora. This year, Montevideo beat Buenos Aires to come top in Mercer’s annual Quality of Living Worldwide City Rankings for South America.
The reasons for this renewed appeal are both recent and longstanding. The crumbling Old City, or Ciudad Vieja, adjacent to the port, has been spruced up – a project largely piloted by Spanish investors. The area now bustles with activity; antique market stalls and elegant wine bars jostle for space amid the banks, auction houses and colonial churches. New free-trade zones have helped lure more than 350 international companies to the city since 2008, including Citigroup and PwC. “Montevideo now competes with the likes of Miami as a safe haven for foreign capital in the region. Newcomers are also bringing their families over, a testament to the city’s lifestyle,” says Martín Dovat, director of Zonamerica, an office community that is home to more than 300 companies.
However, it is Montevideo’s riverfront promenade, known as the Rambla – today complete with outdoor gyms, cycle lanes and bordered by sandy beaches, shady plazas and distinctly European beaux-arts architecture – that sets it apart from the continent’s other traffic-clogged megacities.
Traditionally one of the most popular residential areas along the Rambla is Carrasco, a 25-minute drive east of the historic city centre. At the turn of the 20th century, this leafy coastal suburb was a summer destination for the aristocracy, seduced by a 5km stretch of sand and Uruguay’s first high-end hotel-casino, opened in 1921.
With wide avenues and strict planning laws, most properties around the now renovated hotel-casino – Hotel Sofitel Carrasco – in the old part of Carrasco, known as Carrasco Viejo, are two-storey detached houses. Unlike apartment sales, house prices in this area fell last year by as much as 17 per cent for four-bedroom properties, compared with an average of 14.5 per cent for larger homes in other coastal neighbourhoods.
The profile of potential buyers in Carrasco, and in Montevideo in general, is changing. Homeowners used to have big families and security wasn’t an issue. In 2011, 24 per cent of homes in Montevideo were occupied by one person, compared with 17 per cent in 1996. Full-time surveillance is seen as a requirement, but costly. Armed robberies rose by 2.3 per cent across the capital from 2011 to 2012, according to the ministry of internal affairs. Therefore, apartment living is fast becoming a practical solution because of shared maintenance costs.
Although crime rates are low for the region as a whole, Montevideo’s economic prosperity has inevitably made some areas, particularly wealthier suburbs of the city, more vulnerable to crime. In response, modern, low-rise, five- and six-storey new -build blocks have sprung up northeast of Carrasco Viejo in Carrasco Este, an area exempt from rigid planning laws and surrounded by woodland and lakes. The location – 10 minutes from the international airport and the Zonamerica office development – is popular with company directors and retirees. A three-bedroom, 450 sq metre, serviced apartment, with a rooftop terrace and a communal pool, is priced at $1.05m through agent Caldeyro Victorica.
The older part of Carrasco, meanwhile, is adapting to compete for potential buyers. “Traditional mansions are being converted into offices, or revamped into separate maisonettes,” says Rodolfo Victorica, director of Caldeyro Victorica.
Like Punta del Este, the rental market in Montevideo thrives in the South American summer, but demand from new businesses and foreign residents continues to spur year-round leases. The number of rental contracts signed across the capital increased by 5 per cent between 2012 and 2013.
How long this wave of outsiders will stay remains to be seen, but they will leave behind a bolder, brighter coastal capital, where residents continue to indulge in life’s simple pleasures.
Lucinda Elliott is a researcher on the FT’s LatAm Confidential
● Montevideo has a mild subtropical climate: average daytime summer temperatures often exceed 26C
● Foreigners face no restrictions when buying property
● Net rental income from leasing property is taxed at 12 per cent
What you can buy for . . .
$500,000 A four-bedroom apartment overlooking Lake Carrasco
$1m A 400 sq metre apartment in Pocitos, 15 minutes from the Old City
$3m A detached house in Carrasco Viejo, near the British school