Uruguay Coastal Properties

According to Telemondo, 2008 was the best year for tourism since 1996. The 2009 visitors season is off with a bang as well! We have bookings for next year and inquiries about rentals are up quite a bit compared with last year.

We feel we’ve played a small part by making Piriapolis far more visible in the international market. Our sister publication, Coastal Uruguay, the virtual Coastal Chamber of Commerce, had a larger hand in the success. Of the goals targeted, none is more important than exposing the Coast of Uruguay to European and North American audiences, with the express purpose expanding the visitor’s season beyond the two months (at best) it’s historically limited to. I’m happy to report progress is excellent.

I’ve talked with several travelers from North America and Europe that visited Piriapolis because of these publications. Another thing I appreciate about these people is most of them choose to visit in wonderful times like November, March and April, months South Americans do not come. We’ve also had rugged individuals as renters in May, June and September.

As the tourist season expands, we feel with complete and absolute certainty, cultural, creative as well as investment opportunities in real estate will grow exponentially. This trend has played out many times, many places on earth with the same results!

Stay Tuned!

Steve Bowman

For those of you who love lists of international real estate hot spots, here’s yet another that may be interesting. And no, Uruguay is no where on the horizon. Is this a good thing, or a bad thing?

Propertyshowrooms.com produced a list of the supposedly most outstanding property hot-spots across the world, in terms of projected investment returns. By combining the key results of several surveys in the public domain published by companies like Price Waterhouse Coopers, Knight Frank, and Forbes, the company has produced what it feels is an authoritative Top Ten places to invest.

“It’s very much a buyer’s market out there, with emerging markets taking the industry by storm,” says Danny Bance, Managing Partner of Propertyshowrooms.com. He continues: “What’s for sure is that it’s a very exciting time for property investors and individual home buyers alike. Places like Morocco and Brazil have certainly surprised the market with the quality of their product and rapidly improving infrastructure. Both factors are great for short and long-term investment.”

Counting down the list, Romania weighs in at number ten, followed by Estonia, Panama, Egypt and Malaysia. Morocco has a strong placing at number five, with its current high GDP growth and low cost of living compared to European countries.

Number four is Turkey, with ongoing EU membership talks continuing to boost the property market. It’s true to say that a recent legal debate in Turkey has made the purchase of property by foreigners something of a grey area, as the ruling elite decide on the size of land that foreigners are allowed to purchase. This is expected to be resolved soon.

A surprise entry at number three is Canada, which is attracting investors due to political and economic stability. The USA is at number two, with Florida’s pummeled market a favorite with foreigners, particularly given current weakness of the American dollar.

And the number one investment hot spot? The answer is: Brazil.

“Brazil is a country which has seriously found its feet in the property market and is beginning to outshine many other more established sectors,” says Danny Bance. “Obviously there are several factors involved in placing Brazil at number one, including good transport links and the availability of 100% freehold properties.” He continues: “Brazil is tipped to be among the world’s top five largest economies by 2050, according to global investment banking firm Goldman Sachs. Plus the recent discovery of off-shore oil reserves, and the cultural boost of being awarded the 2014 football World Cup, has seriously put Brazil on the map. In addition, it has the highest GDP in South America. It really is our number one investment hot-spot.”

So there you have it. No bubble here, except in perhaps land prices.

Stay Tuned!

Steve Bowman

Here’s a good story about, erahh…..justice in the deep south.

A judge in La Paloma, Rocha ruled to transfer a vast beach property of the Mar del Plata area in Rocha, valued at more than USD 4 million, to Luis Sosa for UYP 17,000 (USD 750) using the adverse possession (squatter’s rights) rule. In Uruguay, adverse possession implies that if for 30 years an individual has behaved as the owner of the land, paying corresponding taxes and making improvements, the land becomes this persons property. (The land still has property tax debts totaling USD 100,000. Huh? Go figure.)

The municipality of Rocha requested that the judge reverse her ruling on the transfer. However, Martínez believes the municipality was late in presenting the lawsuit. The judge, Amalis Martinez said, “I don’t give anything to anyone. He has rights in accordance with the evidence and the demands of the law,” Martínez told El Este newspaper.

The 200 hectare property is near La Pedrera on route 10, between El Palenque and San Antonio. It has five kilometers of coastline and can be divided into dozens of high value seaside farms.

Yep. Yes sir’ee. Inflation is indeed rearing its ugly head.

Here in Uruguay, the government claims the official rate of inflation is 8.5%. Yeah, sure. The tooth fairy gave them that number. Based on my by gosh and by golly assessment, in January 2008 prices were, on average, at least 15% above December 2007. Food prices up 20%, and other items like medications were up 35%. Building materials skyrocketed 30% from between Spring of 2007 and now. (By the way, inflation is an issue on a planetary level right now; it’s not just Uruguay.) However, this region is legendary for its insane inflation levels, 300%….. the sky has been the limit.

So what does that mean if you’re a prospective real estate investor? In moderation, inflation is very good for hard assets like real estate. When it goes to extremes, like what is happening in Argentina right now (23% so they say, ah huh), it always turns out ugly. The economic crisis of 2001 - 2002 in Uruguay and Argentina is one way the drama could unfold. For those of you that don’t know, the bottom fell out here. It was one nasty mother!

How the story will actually play out in a hyper inflation scenario is impossible to know, but as I said, the ending is never pretty. If you feel this is just a temporary blip, or it won’t get too far out of hand, invest! If you believe hyper inflation is in play, I’d leave my checkbook at home when you come to visit our beautiful coast.

Stay Tuned!

Steve Bowman

The Holy Grail of many international real estate investors is the good deal on a beachfront home. Fortune magazine, had an article about the deals that are now available in the US due to the real estate crisis.

This article talks about the price implosion in Florida’s panhandle, among other battered locations. After a 25% - 30% swoon, you can now get a beachfront condo for less than $500,000. Big deal!

I know it’s a long way down here, but for that kind of money, you can get a small but nice place in La Bara. By the way, the panhandle ain’t up to La Bara standards; not by a long shot. For $200,000 a nice beach house can be had in the greater Piriapolis area.

Does it mean real estate here is a bargain? That’s impossible to say. However, if your primary motive is a second home, not wild speculation, our pristine coastline deserves a look.

Stay Tuned!

Steve Bowman

Well there’s nothing like being wrong to right the ship.

In a post a couple of weeks ago, I talked about the search engine terms we place very well with. A prospective client checked it out and found the assessment is correct. However, he let me know that we missed the boat on a Luxury Homes Uruguay search, a prized term with Google’s pay per click program.

(If you’re wondering why this matters, finding a property with ease through an internet search is a key leg in an international marketing program.)

We’ve check this out and here’s what we discovered. For some mysterious reason, we started showing up of the first page with a Luxury Homes Uruguay search, which is good. We’ll continue to watch and see if the favorable ranking continues.

The short coming we haven’t be able to rectify is the the Luxury Real Estate Uruguay problem.

Stay Tuned!

Steve Bowman

Two people contacted me last week that are coming to Uruguay to buy modest pieces of real estate. In both cases, people from the US are planning on using Equity Lines of Credit based on the prime rate to finance the purchases. They also plan and renting the units.

This could be a terrible idea if one is on a budget. Here’s why.

Say you’re buying a 2 bedroom property for $125,000; with closing costs (9%) the total tab will be about $136,250. With 50,000 down, the financed amount is 86,250. Existing Equity Lines today frequently have rates at prime, 5.25%. The monthly interest cost is $377/month or 4,524 annually. There are too many Performa possibilities to be specific, but lets just say it will be a challenge to cover the interest costs with rental income. That’s before taxes, utilities, common area (if any), management fees and furniture costs are considered.

Just six months ago prime was 8.25% and the monthly tab would have been $593, about 216 more per month. The negative monthly cash flow in the example would easily top $300/month. If your reaction is big deal, great! Your finances are probably pretty sound; it’s not a lot of money. However, if feeding a property perhaps $4,000/year is worrisome, be careful!

I firmly believe this is the onset of an inflationary cycle. Interest rates will go up and they could shoot past 8.25% like a bullet. For those of you too young to remember, the last time we had a cataclysmic inflation burst, prime went to 20%. Even if rates only reach 12%, the monthly interest rate expense in the example bulges to $863. Negative annual cash flow from the interest alone becomes $10,356 year.

If you share my feeling about the risk, look into a second mortgage with a fixed rate.

Plan on prosperity and prepare for disaster. Use credit wisely. Be Safe.

Stay Tuned!

Steve Bowman

I’ve talked about the effect of the crashing dollar for some time now. In some cases, at least in theory, real estate prices should be flat or decreasing in relation to strong currencies. (Property prices are in US dollars.)

What’s happening with the US dollar is a full-fledged economic catastrophe in the making. As always, there are totally unexpected twists and turns with any economic crisis. Here’s an example:

We have an exclusive listing for an Ocean View Estate here in Piriapolis. The owner of the property is European and strong currencies (Euro and Swiss Francs) were used to build this mansion. The owner’s response for the dollar debacle was to raise the price of the property to partially compensate for the Buck’s decline. The price for the estate was increased last week from $2,260,000 to $2,460,000 - about 9%.

This is not a lot of money in this price range, but it is interesting. By the way, other owners of properties that were financed by strong currencies have also moved the price peg a bit higher.

The question is, will these price increases stick?

Stay Tuned!

Steve Bowman

We’ve had a few inquiries about advertising unique properties on our site: estates, mansions…..luxury property.

If you have questions about how effective this may be, do a search for: luxury property uruguay, luxury real estate uruguay, mansions uruguay, estates, etc you’ll find we come on the first page, sometimes more than once.

All of this depends a bit on the day with Google. They have a problem giving up the luxury category for both real estate and property at the same time. Other search engines do not.

The same favorable results with another unique type of property will be equally effective because this is a blog. With an established site such as this, put up some posts about the property type and the search engines are attracted by the terminology magnets.

My interview with the International Herald Tribune’s - Raising the Roof, is now on line.

Here’s the link: Property Investment

The interview will also be in the print addition that comes out of Paris.

Stay Tuned!

Steve Bowman