Punta del Este real estate update

Photo from El Pais newspaper

So Punta del Este is not completely immune to the effects of the global crisis. Figures published in El Pais, from the Reporte Inmobiliario real-estate investment conference held last week, show that applications for new construction submitted in the first half of 2009 fell 55% in projected square meters, to a total of 112,000 m2. The total permits issued in 2008 covered 400,000 m2 of construction of houses and apartments.

According to the article in Monday's El Pais, this is attributed first to a wait-and-see stance with regards to a major change in the zoning laws currently under debate by the municipal government --that would allow construction of greater height along certain avenues-- and secondly to the world financial crisis. Third, not mentioned by the paper, would be uncertainty regarding the results of the Uruguay presidential elections in Oct. and Nov.

The article reports that the second half is expected to show higher applications for construction permits. With an average lead time of 18 months to completion of the fastest projects, to 4 years on the slower ones, the market could still rebound with little noticeable effect in terms of product supply in the coming couple of years. That's if we see higher permit issuance over the next 12 months. Market players consider 2008 to have been an exceptional year for the real-estate market, and although they see a recovery for the second half of 2009, they expect the overall activity to return to the more subdued levels seen in 2006.

With regards to prices, no reductions are being reported but the article does note a shift in queries towards the US$200,000 price bracket, from the US$500,000 standard seen over the last year. That should not surprise us, considering that a vast majority of the product has been geared to the US$500k and up market, with very few projects addressing the mid and lower budgets. The few examples of mid-range condos on the market right now, such as Torre Francia and Torre 360 are benefitting from the absence of competition for new build in that price range.

New construction launched this year mostly seems to continue to target relatively fat ticket, such as the Tiburon Terrazas complex currently being launched at a base price of US$800k for the cheapest units. So it will still be a year or two before we see a fuller offer of mid-range condos, both smaller in size and lower in quality specs.

But, according to developer sources, a new mid-range project is about to be launched in the vicinity of the Golf Club, geared to, you guessed it, golf lovers. The gated complex will be located on a 5,000 m2 site within one block from the Golf Club, and will have its own driving range among other amenities. Units the not-too-originally named Altos del Golf property will be 2 and 3 bedrooms, with the 2-bedrooms units at around 120 m2 and a price per m2 of around US$1,800, our sources tell us. Knowing how the real-estate market usually goes, in two years we will have dozens of similarly positioned developments :-)

Lastly, the El Pais article mentions the current breakdown by national origin of the buyers in the first half, which are, Argentines 75% (46% of the total from Buenos Aires, 19% Cordoba, 6% Rosario, 4% others) followed by 15% Uruguayans, 7% Brazilians and 3% others.