But not any longer.
This Uruguayan town of fewer than 30,000, usually called simply Colonia, is in the midst of an improbable real estate boom fueled by speculation, increased demand and the beauty of its natural and manmade surroundings.
According to Fernando Llorach of the Dinamica real estate agency in Colonia, home price increases over the past two years are unprecedented — not only in Colonia, but in booming Uruguay as a whole, with the average value of new-build apartments doubling.
Some of the increase can be attributed to the appreciation of the Uruguayan peso against the U.S. dollar. Currently the dollar is at 19.15 pesos; in 2009, the dollar bought 24.35 pesos. Property is usually bought and sold in dollars in Uruguay, except at real estate auctions. Construction, in contrast, is budgeted and invoiced in pesos.
But nervous, cash-rich buyers from Buenos Aires, just an hour across the Plata River by hydrofoil, also have driven up prices, attracted by Uruguay’s lack of foreign exchange controls or forced currency conversions.
And the cost of building land has soared. A little more than two years ago, Mr. Llorach said, prime building plots were for sale at $100 per square meter, or about $9.30 per square foot. “Hardly anyone here could have guessed then just how quickly things were about to change,” he said, noting that rampant speculation had pushed prices six times as high now.
The town’s Rambla Costanera, a pretty riverside promenade where the tops of Buenos Aires’s highest buildings can be seen on the horizon on a clear day, has been the focus of the boom. New luxury apartments with river views command an average of $3,000 per square meter, about the same as prices in high-end residential districts in Uruguay’s capital of Montevideo, 180 kilometers, or 110 miles, away, according to Ignacio Albanell Meikle, a Montevideo real estate agent.
But Mr. Albanell Meikle said Colonia’s prices were still significantly less than the $4,500 per square meter often seen for top-end properties in Punta del Este, Uruguay’s popular vacation resort.
Argentines are the most common buyers, but a growing number of North Americans and Europeans — who until recently had bought almost exclusively in Montevideo and Uruguay’s established beach resorts — have been buying. “There’s a lot of interest from overseas buyers who are looking for a second, and sometimes even a third, home,” Mr. Llorach said.
The attractions include Colonia’s pretty streets and relative absence of crime, plus Uruguay’s generally attractive tax structure and a perception that the country is a secure place to invest. It has no history of expropriations, and foreign residents are not taxed on overseas assets.
The New York Time
By NICK FOSTER
Published: March 24, 2011