Uruguay
Last Updated:
May 31, 2008
There was a 13% rise in the average price of apartments in Montevideo in 2007, according to Reporte Inmobiliario. Gross rental yields across Uruguay range from 6% to 9%, according to the same source. Particularly in Montevideo, the capital of Uruguay, and Punta del Este, high-end property prices are now well above their 2001 predevaluation level.
The principal reason is that Uruguay’s economy has grown strongly over the past 4 years, with 6.5% GDP growth in 2007, 7% in 2006, 6.6% in 2005, and 11.8% in 2004.
In Montevideo’s Old Town, property prices are not very high. True to its name, it is quiet with very few new buildings. Old Town is filled with French-style properties. Aside from fully refurbished properties than can go as high as US$1,076 per square metre (sq. m.), prices range from US$538-860 per sq. m., according to Reynolds Propiedades figures at www.uruguay-real-estate.com.
While Uruguay mirrored Argentina’s economic situation before, during, and after the 2001 crisis, Uruguay did better. The Uruguayan Peso did not devalue as much, and property prices recovered sooner than in Argentina.
Foreigners can buy freely in Uruguay.
The principal reason is that Uruguay’s economy has grown strongly over the past 4 years, with 6.5% GDP growth in 2007, 7% in 2006, 6.6% in 2005, and 11.8% in 2004.
In Montevideo’s Old Town, property prices are not very high. True to its name, it is quiet with very few new buildings. Old Town is filled with French-style properties. Aside from fully refurbished properties than can go as high as US$1,076 per square metre (sq. m.), prices range from US$538-860 per sq. m., according to Reynolds Propiedades figures at www.uruguay-real-estate.com.
While Uruguay mirrored Argentina’s economic situation before, during, and after the 2001 crisis, Uruguay did better. The Uruguayan Peso did not devalue as much, and property prices recovered sooner than in Argentina.
Foreigners can buy freely in Uruguay.
Analysis of Uruguay Residential Property Market »
RENTAL YIELDS
Last Updated: Nov 06, 2008
Uruguay offers security, peace, beautiful beaches – and rather good gross rental yields. Since late 2005 the value of apartments and houses in Montevideo has doubled. Residential property prices increased this past year, but not as much as during the previous 3 years.
Montevideo apartments are no longer the ‘screaming buy’ they were in 2005. In view of the price appreciation to date, we’re moving the country rating down from 5-star to 4-star.
But property here is still good value, and we still recommend buying in Montevideo.
Rents on mid-sized prime area Montevideo houses (250 and 350 square metres) have gone up particularly strongly, so gross rental yields on these categories are a healthy 9%. Montevideo apartment yields range from 6.7% to 8.6%.
The country remains beloved of Argentinians and Americans, a haven for the well-to-do, a tranquil corner in a turbulent world. The Uruguayan Peso has mildly appreciated against the US$ since late 2005; it now stands at USD=19.2 Pesos, versus USD=23.1 Pesos then.
Montevideo apartments are no longer the ‘screaming buy’ they were in 2005. In view of the price appreciation to date, we’re moving the country rating down from 5-star to 4-star.
But property here is still good value, and we still recommend buying in Montevideo.
Rents on mid-sized prime area Montevideo houses (250 and 350 square metres) have gone up particularly strongly, so gross rental yields on these categories are a healthy 9%. Montevideo apartment yields range from 6.7% to 8.6%.
The country remains beloved of Argentinians and Americans, a haven for the well-to-do, a tranquil corner in a turbulent world. The Uruguayan Peso has mildly appreciated against the US$ since late 2005; it now stands at USD=19.2 Pesos, versus USD=23.1 Pesos then.
TAXES AND COSTS
Last Updated: Apr 20, 2010
Effective Tax Rate on Rental Income |
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| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 10.3% | 10.2% | 10.2% |
| Click here to see a worked example | |||
Source: |
Disclaimer | ||
Rental Income: Net rental income from leasing property is taxed at 12%.
Individuals who obtain income derived from renting properties shall pay a monthly payment in advance of the abovementioned tax. The amount of withholding tax arises to 10.5% of the total amount of income received each month. In case the only income obtained by individuals is derived from renting properties, advance payments can be considered as definitive tax payments.
Capital Gains: Capital gains realized by individuals are taxed at 12%. Taxable capital gains are the difference between the sales price and acquisition costs.
Inheritance: There are no inheritance or gift taxes in Uruguay.
Residents: Resident individuals pay tax on their Uruguayan-sourced income. Labor or earned income is taxed at progressive rates, from 0% up to 25%, while income from capital and capital gains are taxed at 12%.
Individuals who obtain income derived from renting properties shall pay a monthly payment in advance of the abovementioned tax. The amount of withholding tax arises to 10.5% of the total amount of income received each month. In case the only income obtained by individuals is derived from renting properties, advance payments can be considered as definitive tax payments.
Capital Gains: Capital gains realized by individuals are taxed at 12%. Taxable capital gains are the difference between the sales price and acquisition costs.
Inheritance: There are no inheritance or gift taxes in Uruguay.
Residents: Resident individuals pay tax on their Uruguayan-sourced income. Labor or earned income is taxed at progressive rates, from 0% up to 25%, while income from capital and capital gains are taxed at 12%.
BUYING GUIDE
Last Updated: Mar 21, 2007
The total roundtrip transaction cost, i.e. the cost of buying and selling a property, is 14% This includes the real estate agent's fee of 6%, which is paid equally by both buyer and seller.
Property registration takes about 66 days, and involves eight separate procedures.
Property registration takes about 66 days, and involves eight separate procedures.
LANDLORD AND TENANT
Last Updated: Jun 05, 2006
Uruguay's landlord and tenant law is pro-landlord.Rents: Rents can be freely agreed between landlord and tenant, except for properties constructed before June 2, 1968.
In the free sector rent increases may be freely mutually agreed between landlord and tenant.
For rent-controlled properties, rent increases are indexed to the Unidad reajustable de alquileres URA or (Re-adjustable Unit for rent), published by the government.
Tenant Security: The duration of a rental contract can be freely agreed. The court system works adequately to enforce evictions and lease agreements, but is quite slow.
ECONOMIC GROWTH
Last Updated: May 31, 2008
One of Latin America’s most fortunate
Uruguay’s economy has bounced back from the 2002 recession, and it is still a relatively prosperous country, with GDP per capita at US$6,477 (2007). It does not share its neighbors’ problems of unemployment, inequality, poverty and slums.With a population of 3.5 million, it is known for its progress in education, its advanced welfare system and its liberal laws on social issues such as divorce. It has an excellent climate, good communications, fine ports, high agricultural and cattle productivity, and an experienced service industry.
Uruguay was among the first Latin America countries to establish a welfare state system and has maintained this, together with one of the region’s lowest poverty rates, through relatively high taxes on industry. Good access to health care contributes to a high average life expectancy.
However, there is a downside. Large swathes of Uruguay’s economy are in the hands of the state, including telecoms, most of the electricity industry, oil imports and several banks. Though economic performance is reasonable, the country could do much better, and it suffers from relatively high emigration.
Uruguay’s colonial towns, sandy beaches and year-round mild climate have created an increasingly important tourist industry. However, Uruguay's dependence on livestock and related exports make it vulnerable to fluctuations in international commodity prices. Recessions in Brazil and Argentina - its main export markets and source of tourists - propelled Uruguay into economic crisis in 2002.Disbursements from the International Monetary Fund (IMF) and a restructuring of foreign debt have helped to foster a fragile recovery.
In November 2004 Tabaré Vázquez from the leftist Broad Front coalition won the presidential elections. Vázquez immediately approved at US$100 million emergency plan to help the poor, and opened investigations into the disappearances under military rule in the 1970s and 1980s. He also restored ties with Cuba.
This is a significant shift from the centrist presidency of Jorge Battle (1999-2004), who had pushed some significant reforms.
Yet Vázquez’s finance secretary Danilo Astori is a moderate, who has pursued tight fiscal policies, and also spearheaded the reform of the taxation system, including the introduction of a 12% tax on rental income. It seems likely that Astori will be the Broad Front’s candidate in the 2009 presidential election.
Uruguay is part of Mercosur (Mercado Común del Sur), the commercial and political agreement with Argentina, Brazil, and Paraguay, which provides a potential market of 200 million people. But it may be more of a handicap than a benefit, as it condemns the country to paying high import duties on imported machinery.
