Uruguay’s housing market remains fundamentally strong, buoyed by robust demand and improving economic conditions.

Table of Contents

• Housing Market Snapshot
• Demand Highlights
• Rental Market
• Mortgage Market
• Historic Perspective
• Socio-Economic Context

Housing Market Snapshot

In the second quarter of 2024, the average price of newly built houses in Uruguay rose strongly by 13.33% (7.98% inflation-adjusted) to UYU 85,000 (US$2,038) per square meter (sqm) from a year earlier, according to the National Institute of Statistics (INE). On a quarterly basis, nationwide house prices increased 6.25% (4.79% inflation-adjusted) during the latest quarter.

However, house price growth is more muted in the country’s capital city. In Montevideo, the average price of newly built houses was up slightly by 1.2% y-o-y to UYU 112,750 (US$2,704) per sqm in Q2 2024. When adjusted for inflation, real house prices actually dropped 4.09% over the same period.

Quarter-on-quarter, new house prices in the capital city increased by 2.97% in Q2 2024 (1.53% inflation-adjusted).

Uruguay's median house price annual change

Demand remains robust. During 2023, there were 50,556 real estate purchase transactions in Uruguay, down slightly by 0.4% from a year earlier but remains the second highest level recorded in recent years, based on figures from INE.

In the first seven months of 2024, the total number of real estate purchase transactions increased by 3.9% to 27,173 units as compared to the same period last year.

Demand from foreign buyers is also gradually increasing. The real estate market in Uruguay, and particularly in its beach resorts, relies heavily on foreign buyers, around 75% of whom have traditionally been Argentines, followed by Brazilians (with about 20% share) while the remaining 5% were buyers from other countries. Some European retirees are also drawn to Montevideo, especially writers and artists.

This can be mainly attributed to the improving economic conditions this year and the weakening Uruguay peso, which makes local real estate properties more affordable to foreign investors. The Uruguay peso (UYU) has depreciated by about 7.2% against the US dollar in the past year, from an average monthly exchange rate of UYU 38.45 = USD 1 in August 2023 to UYU 41.45 = USD 1 in August 2024.

Real estate transactions in Uruguay are typically quoted in dollars because of a history of fluctuations in the value of the Uruguayan peso. 

In addition, the country also offers decent rental yields to potential property investors. The average gross rental yield in Montevideo – the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs – stood at  5.37% in Q2 2024, according to a recent research conducted by the Global Property Guide.

After slowing last year, Uruguay’s economy is expected to bounce back quickly, with a projected real GDP growth rate of 3.4% this year and another 3% next year, according to IMF figures.

Demand Highlights

Property demand is improving again

During 2023, the total number of real estate purchase transactions fell slightly by 0.4% y-o-y to 50,556 units, following strong growth of 15% in 2022 and 24.8% in 2021, based on figures from INE. 

Despite the slight decline, last year’s figures were actually the second-highest number of transactions recorded in recent years. In fact, three years prior, transactions dropped by 4.4% in 2020, 11.9% in 2019 and 5.9% in 2018.

Demand is showing improvements this year. In the first seven months of 2024, real estate purchase transactions increased by 3.9% to 27,173 units as compared to the same period last year.

Montevideo accounted for the biggest share of about 33.9% of all property transactions from January to July 2024, followed by Maldonado (17.1%), Canelones (13.7%), Rocha (5.1%), Colonia (4.9%), Cerro Largo (2.6%), and San José (2.5%).

Based on an article published by El Observador, the total value of purchase and sale of real estate in Uruguay reached at least US$1 billion in the first half of 2024, at par with the figures registered in the same period last year. Said figures were calculated based on the collection of the Property Transfer Tax (ITP), which is equivalent to 2% to the buyer and another 2% to the seller of the property’s value. 

Punta del Este: from an idyllic vacation spot to a year-round retreat 

The fashionable beach resort of Punta del Este is currently transforming from an idyllic vacation spot to a year-round destination for the rich. Sometimes called the “Monaco of South America”, it became a pandemic refuge for thousands of wealthy investors in recent years, according to an article published by Bloomberg.

Post-pandemic, Punta del Este has evolved into a prime destination for beachfront real estate investment.

“Several factors make Punta del Este, Uruguay, a prime destination for beachfront real estate. Firstly, its unparalleled natural beauty and temperate climate make it an ideal location for those seeking a seaside retreat,” said a recent article published by B Magazine. “Secondly, Punta del Este’s modern infrastructure, upscale amenities, and cosmopolitan atmosphere set it apart from other beachfront destinations.”

This is supported by other real estate analysts. “Regarding the real estate market in general, Punta del Este has been a hub for both local and international investors. Its reputation as a luxury resort city, combined with Uruguay's stable economic policies, has made it a desirable location,” noted a 2024 article published by The Latin Investor.

Accordingly, Punta del Este and its neighboring provincial capital Maldonado together are home to around 170,000 people, with about 15,000 new residents settling in the area since the onset of the Covid-19 pandemic. In fact, just outside Punta de Este, the resort of La Barra, a former fishing village, is also becoming a popular second-home market for international buyers. 

“We’ve experienced continuous growth through immigration for 20 years, which accelerated in the two years since the pandemic,” said provincial governor Enrique Antia. “That shows there is a bigger population of young people.” 

A five-acre mixed-use real estate project named Atlántico situated at the northwest edge of the city broke ground in 2021. Its developer Altius Group said that the first phase of the project, comprising of a shopping center, an 18-floor apartment block, and a 14-story office tower, is scheduled to be completed by end-2024. The whole project has an estimated cost of US$130 million. 

Another US$42 million 25-story World Trade Center-branded office tower on the city’s historic peninsula district is also currently being built. The building is expected to house at least 1,200 people when it opens by early 2025.

Punta del Este’s luxury property market is dominated by foreign buyers, particularly from Argentina and Brazil, as well as from the United States. 

Luxury homes in Punta del Este typically cost from US$2 million to US$6 million. Beachfront luxury homes command even higher prices, ranging from US$7 million to as high as US$20 million. 

Some of the most expensive residences in Punta del Este can be found in the “Mouette” building and Trump Tower apartments, with prices ranging from US$7,000 per sqm to US$10,000 per sqm. The cheapest new apartments in the area range from US$2,500 to below US$7,000. 

More modest homes are available farther from the beach, starting at around US$200,000 for a small two-bedroom house, said Sandra Sofio, Engel & Völkers Punta del Este. 

House price variations in Montevideo 

The neighborhood of Carrasco has the most expensive housing in Montevideo, with an average price of US$4,260 per sqm in early-2024, according to a Mercado Libre report published by El Observador.

Carrasco is considered Montevideo’s most exclusive suburb. Many are attracted to Punta Carretas for its magnificent Rambla (seaside avenue), Villa Biarritz for its strategic location, and Punta Gorda for its beautifully restored historic spots.

It was followed by Punta Carretas and Punta Gorda, with the average sales price also breaching the US$4,000 per sqm mark.

Other posh neighborhoods in the capital city included Pocitos, Malvín, and Parque Rodó, with an average house price of around US$3,500 per sqm.

La Blanqueada and Cordón registered average house prices ranging from US$2,950 to US$3,250 per sqm. El Centro and Tres Cruces have an average price of around US$2,800 per sqm.

In the coastal area and surrounding areas, including Parque Battle and Villa Dolores, house prices remain above US$3,000 per sqm.

The neighborhoods with the cheapest housing in early 2024 included Las Acacias (US$750) and Peñarol/Lavalleja (US$875).

Rental Market

Rental yields are moderately good; rents continue rising 

The average gross rental yield in Montevideo – the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs – is moderately good at 5.37% in Q2 2024, slightly down from 5.53% in Q3 2023, according to a research conducted by the Global Property Guide. Though these yields are gross, i.e., before costs and taxes, and so realistically net rental returns would normally be a couple of percentage points lower.

Gross rental yields are an important consideration even for those who do not intend to become landlords because a high rental yield indicates that the property market is reasonably priced.

In Q2 2024:

• In Pocitos, gross rental yields for apartments ranged from 4.26% to 6.03%.
• In Cordón, apartments offer returns ranging from 5.1% to 5.97%.
• In Centro, rental yields ranged from 4.83% to 5.67%.
• In Malvin, rental yields are higher, ranging from 5.41% to 8.04%.
• In Punta Carretas, apartments offer rental returns from 4.16% to 5.76%.
• In Tres Cruces, gross rental yields for apartments are lower than the city average, ranging from 2.85% to 4.75%.
• In La Blanqueada, rental yields ranged from 5.78% to 6.2%.
• In Pocitos Nuevo, rental yields ranged from 4.46% to 6.07%.

Round-trip transaction costs are high in Uruguay (i.e., the total costs of buying and selling a property).  See our residential transaction costs analysis for Uruguay.

Residential rents continue to increase. In July 2024, rents rose by 4.91% to a monthly average of UYU 19,690 (US$472) as compared to a year earlier, according to INE.

As of July 2024, there are 86,686 current rental contracts in Uruguay, up by 1.79% from the previous year. Of these, about 77% were in the city of Montevideo, 11.6% in Canelones, 2% in San José, 1.6% in Maldonado, 1.3% in Paysandú, and 1.2% in Colonia. 

Mortgage Market

Low interest rates buoy housing loan growth 

Banco Central del Uruguay (BCU) maintained its benchmark policy rate for three straight meeting at 8.50% in August 2024, as inflationary pressures continue to ease. The move followed seven consecutive rate cuts since April 2023, with a cumulative decline of 300 basis points.

“As inflationary pressures cooled off, the Banco Central del Uruguay (BCU) started its easing cycle in April 2023. The Monetary Policy Committee of the BCU gradually lowered the monetary policy rate from 11.5 percent at the start of 2023 to 8.5 percent in April 2024 as headline inflation reverted within the target range and inflation expectations gradually declined,” said the IMF. “At the end of 2023, the authorities reaffirmed that the BCU inflation target is the center of the target band (4.5 percent).”

In line with the central bank’s policy decisions, the BCU housing lending rate for indexed units (UI) remained more or less steady. In August 2024, the housing lending rate stood at 4.7%, from 4.6% a year earlier and 4.8% two years ago.

The Indexed Unit, or Unidad Indexada (UI) in Uruguay, created in 2002, is like Chile’s Unidad de Formento, which is adjusted with the CPI, and replaced the previous Unidad Reajustable (UR) which was adjusted according to a wage index. The index is calculated by INE and is subject to daily changes to reflect changes in the CPI. The indexing to the price level does not incur inflation risk since the real value of payments remains constant.

Uruguay’s mortgage market is highly concentrated and is dominated by Banco Hipotecario del Uruguay (BHU) which accounts for about 80% of all housing mortgage credits.

In August 2024, housing loans in local currency rose strongly by 26.6% to 364 million UI from a year earlier, mainly buoyed by low interest rates, according to figures from BCU. For the first eight months of 2024, UYU-denominated housing loans soared by 21.2% y-o-y to an accumulated 2,159 billion UI.

Historic Perspective

The story of Uruguay’s housing boom and bust

Montevideo saw a spectacular housing boom from 1995 to 2005, with prices of newly built houses surging by 198.6%, according to the INE. 

House prices continued to rise in the following years, registering an annual average growth of 11.9% from 2006 to 2015 (an average of 2.5% annual growth when adjusted for inflation).

The housing market started to slow by end-2015 due to Uruguay’s economic slowdown and Argentina’s economic crisis. Uruguay’s economy grew by a meager 0.4% in 2015, 1.7% in 2016, 1.6% in 2017, 0.5% in 2018, and 0.4% in 2019 - a sharp deceleration from annual average growth of 5.4% from 2004 to 2014. 

House prices have been almost unchanged from 2016 to 2018 when adjusted for inflation. Then in 2019, nominal house prices in Uruguay increased by 2.04% but actually declined by 6.2% in inflation-adjusted terms. In Montevideo, house prices rose by 5.56% but fell by 2.83% in real terms.

The Covid-19 pandemic worsened housing market conditions. During 2020, nationwide house prices plummeted by a huge 20% (-26.9% inflation-adjusted), as both demand and supply fall sharply. Montevideo proved to be more resilient, with house prices still rising by a modest 2.11% (but fell by 6.64% when adjusted for inflation).

The housing market started to show some improvements in 2021, as economic activity returned to pre-pandemic levels amidst the removal of Covid-related restrictions.

After slowing in 2022, nationwide house prices surged again by 20.59% (14.73% inflation-adjusted) in 2023. Yet Montevideo’s house prices were more or less steady last year (and actually dropped 4.46% inflation-adjusted).

Socio-Economic Contex

Favorable economic outlook, improved public finances 

Uruguay’s economy slowed sharply last year, registering a minuscule real GDP growth rate of 0.4%, following annual expansions of 4.7% in 2022 and 5.6% in 2021, as severe drought adversely affected agricultural harvest.

“In 2023, Uruguay confronted the impact of a once-in-a-century severe drought and external headwinds, but the economy remained resilient, owing to the authorities’ sound macroeconomic policies, the country’s political stability, and strong institutions,” said the International Monetary Fund (IMF) in its July 2024 Uruguay Country Report.

Foreign trade registered a decline in both exports and imports last year. Total exports of goods fell by more than 13% y-o-y to US$11.52 billion in 2023, from a record US$13.36 billion in 2022, according to the country’s trade promotion agency Uruguay XXI. Yet it remains the second-highest export value recorded in the past decade. Beef and cellulose were the leading export products last year, accounting for 18.1% and 17.5% shares respectively, followed by dairy products, beverage concentrate, rice, and soybeans.

Likewise, the import of goods, excluding oil and derivatives, fell by 2% y-o-y to US$10.61 billion last year, in contrast to the strong growth of 22% registered in 2022.

The IMF expects Uruguay’s economy to bounce back quickly, with a projected real GDP growth rate of 3.4% this year and another 3% next year.

“The economy is expected to strongly rebound in 2024, while macroeconomic risks are broadly balanced. The recovery of agricultural exports, increased cellulose production, easing of financial conditions, and robust private consumption, as real wages recover and the price differential with Argentina normalizes, are expected to support a growth rate of 3.4 percent in 2024 and 3 percent in 2025,” said the IMF.

The country registered strong economic growth averaging 5.3% annually from 2004 to 2014, before slowing sharply to just 0.4% in 2015, as commodity prices slumped and Uruguay’s trade partners slowed. The country’s economic growth remained sluggish in the succeeding years, expanding by an average annual growth of only 1.1% from 2016 to 2019. Economic conditions worsened tremendously in 2020 due to the Covid-19 pandemic, with real GDP contracting by a huge 7.4% - the country’s worst performance since 2002.

In March 2024, credit rating agency Moody’s upgraded Uruguay’s credit rating from Baa2 to Baa1, with a stable outlook.

“Key drivers of the upgrade include strong institutions that support the implementation of structural reforms and continued compliance with fiscal and monetary policy frameworks, which in turn point to higher and sustained growth rates,” said Moody’s. “Management practices also support creditworthiness. These credit strengths are balanced by a moderate level of public debt, structural rigidities in public spending, and a relatively high, albeit declining, proportion of public debt in foreign currency,” the credit rating agency added.

Then in June 2024, credit rating agency Fitch Ratings affirmed the country’s long-term foreign-currency and local-currency issuer default rating at ‘BBB’ with a stable outlook, after raising it by one notch last year.

Earlier, in April 2023, Standard and Poor’s also raised Uruguay’s credit rating two notches above the minimum investment grade – the highest rating in the nation’s history. The move reflects recent improvements to the country’s fiscal policy framework, including the recent passage of pension reform, which will help stabilize public finances and limit debt increases.

With an economic freedom score of 69.8, Uruguay is tagged as “moderately free” and the world’s 27^th freest economy in The Heritage Foundation’s  2024 Index of Economic Freedom. Its world ranking was unchanged from the previous year but up by seven notches two years ago. It ranks 4th out of the 32 South and Central American countries and its overall score is significantly above the world and regional averages.

“The relative openness of Uruguay’s economy is supported by a strong commitment to maintaining the rule of law. Uruguay is considered Latin America’s least corrupt country. Its modern entrepreneurial environment encourages the development of a more robust private sector,” said The Heritage Foundation. “Recent reforms have enhanced regulatory efficiency, and the cost of completing licensing requirements has been reduced. Budget deficits and public debt have remained around 3 percent and 60 percent of GDP, respectively, in recent years. Monetary stability has been maintained despite relatively high inflation.”

The government’s budget deficit stood at around 3.1% of the country’s GDP in 2023, slightly up from 3% in 2022 but down from 3.7% in 2021 and 5.1% in 2020. Public debt was equivalent to 67.5% of GDP in 2023, from 67.1% in 2022, 69.1% in 2021, and 74.5% in 2020.

“The deficit and debt outcomes were consistent with the targets of the fiscal rule in 2023. Adherence to the fiscal rule for four consecutive years has helped stabilize the debt-to-GDP ratio under a sequence of negative shocks. The pension system reform, which was approved in May 2023, is expected to stabilize spending over the medium term. The improved fiscal outlook is being reflected in historically low sovereign spreads, including the lowest EMBI (emerging markets bond index) spread in Latin America,” said the IMF.

In August 2024, nationwide inflation rose to 5.57%, up from 5.45% in the previous month and 4.11% a year earlier, according to figures from INE. Despite the recent increase, inflation was actually far lower than its long-term historical averages. Inflation averaged 8.2% from 2010 to 2022, before decelerating to 5.9% in 2023.

Uruguay’s unemployment rate was 8.4% in August 2024, slightly up from 8.3% in the previous month and 8.2% in the same period last year. During 2023, the nationwide jobless rate stood at 8.3%, lower than the annual average of 9% in 2018-2022 but higher than the 7.4% in 2007-2017.

Sources: 

1. Real Estate Activity Indicators (IAI) Buying and Selling Market June - July 2024 (National Institute of Statistics): https://www.gub.uy/
2. Mercado inmobiliario: ¿Cuáles son los precios promedio más ofrecidos y buscados para alquilar y comprar en Montevideo? (Info Negocios): https://infonegocios.biz/
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4. Compraventa de inmuebles por más de US$ 1.000 millones en primer semester (El Observador): https://www.elobservador.com.uy/
5. South America’s Resort for the Rich Seeks Year-Round Vibe (Bloomberg): https://www.bloomberg.com/
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7. Punta del Este in Uruguay: A Prime Destination for Beachfront Real Estate (B Magazine): https://www.benoitproperties.com/
8. USD/UYU - US Dollar Uruguayan Peso (investing.com): https://www.gub.uy/
9. Consumer Price Index (CPI) August 2024 (National Institute of Statistics): https://www.gub.uy/
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11. Uruguay (International Monetary Fund): https://www.imf.org/
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17. Foreign Trade Annual Report – 2023 (Uruguay XXI): https://www.uruguayxxi.gub.uy/
18. Uruguay Upgraded by Moody’s on Measures Aimed at Boosting Growth (Bloomberg): https://www.bloomberg.com/
19. Moody’s improves Uruguay's ratings (Merco Press): https://en.mercopress.com/
20. Uruguay Long-Term Ratings Raised To 'BBB+' On Stronger Fiscal Policy; Outlook Stable (S&P Global Ratings): https://www.gub.uy/
21. Fitch Affirms Uruguay at 'BBB'; Outlook Stable (Fitch Ratings): https://www.fitchratings.com/
22. 2024 Index of Economic Freedom (Heritage): https://www.heritage.org/
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24. After Widening In 2024, Uruguay’s Fiscal Deficit To Slightly Narrow Next Year As New President Takes Over (BMI): https://www.fitchsolutions.com/