Uruguay's Residential Property Market Analysis 2024
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.