Luxury Tax law

Residence Searching in Uruguay: A sprawling former common retailer for $ 975,000

March 24, 2021

This five bedroom house was built as a general store in the late 19th century and is located on the border with Pueblo Eden, a rural village in the Maldonado department of southern Uruguay, about 25 miles from the popular spa town of Punta del Este.

The 6,800-square-foot house was bought by current owner Margarita Arsenault, a Canadian living abroad, and her husband Michael Arsenault in 2009 and restored over several years. “It was in ruins,” said Ms. Arsenault. The couple renewed the structure’s original stone walls and added doors and floors that they bought while traveling to Brazil and the Uruguayan area.

“They have preserved their historical character by using materials that were salvaged from old estancias,” said Bettina Waldraff from Team Haverkate at Engel & Volkers, one of several agencies listing the property. “Your mission was to restore the building to its former glory.”

Twelve-foot wooden double doors open to a large room, whose fieldstone walls and beamed ceilings complement a large stone fireplace. Elaborate antique floor tiles around the room surround pale tiles with radiant heating underneath.

The kitchen-cum-living room has a vaulted wooden ceiling, stone walls and custom-made wooden cupboards as well as standard appliances and two ovens. “The sellers enjoyed this as a private home, but it could easily house an inn, gallery or restaurant,” said Ms. Waldraff.

The five bedrooms – each with its own bathroom – and the living room surround a courtyard with a custom-made parrot, the traditional Uruguayan grill for meat and bread, and various seating areas. A spiral staircase leads from the courtyard to a roof terrace with a view of the pastoral Maldonado landscape.

The house sits on over two acres of land with a stream, a eucalyptus grove, lemon and peach trees, and lemongrass and verbena bushes.

Pueblo Eden, a 0.25 square mile village of fewer than 100 people about 40 minutes north of Uruguay’s Atlantic coast, has become a trendy destination for wine lovers. Viña Eden, a Brazilian winery, has gained worldwide acclaim, and tourists also travel to La Posta del Vaimaca to purchase rustic Uruguayan staples like roast lamb and potatoes.

“Pueblo Eden was unknown a few years ago,” said Charles Wright, owner of La Cite Real Estate / World’s Leading Real Estate Company in Punta del Este. “Now it’s going to be like Napa Valley. I was surprised at the changes and a lot of people are settling there. “

While the city has a monthly organic food market and a “tiny” supermarket, residents travel to Punta del Este for groceries, banking, or personal services, Ms. Waldraff said. Punta del Este International Airport is 37 km south. Montevideo, Uruguay’s capital and financial hub, is about 80 miles to the west.

Uruguay’s borders have been closed to everyone except citizens and permanent residents since March 17 last year, which has paralyzed property sales. “The market is stagnating,” said Germán Gomez Picasso, partner / director of Reporte Inmobiliaro, a Buenos Aires-based office that covers real estate in Uruguay, in Spanish. “In 2020 it got worse and worse because of the pandemic.”

Enrique Argüello, managing director of luxury real estate agent Curiocity Villas in Punta del Este, said: “Border closings have resulted in a 90 percent drop in sales in Punta del Este and the region this year. Many overseas customers are waiting to travel so they can buy. “

In the meantime, changes in immigration policies are helping to fuel pent-up demand. To attract investors, the Uruguayan government lowered the property investment threshold for obtaining tax residence in Uruguay from about $ 1.7 million to about $ 400,000 last July. The minimum stay for maintaining residence has been reduced from six months to 60 days.

The coastal Maldonado region is “the area most searched by foreigners” searching for property in Uruguay, Wright said. “And they don’t want apartments.”

Coupled with the pandemic of buyers looking for more space, the rush for residence has sparked interest in homes that are less available than apartments. “There are currently thousands of homes for sale in Punta del Este ranging from $ 300,000 to $ 400,000. More are under construction,” said Martina van Bevern, co-owner of van Bevern Properties in Punta Ballena. “They have to offer a special feature, a special building or a special view to have value.”

With some buyers now keen to live in the area year round, updated homes with features like heating (which are less common) are in most demand. Mr. Wright said, “We have a large inventory of homes in need of renovation suitable for four seasons. “

He estimated that a house with a yard, pool, and BBQ in the upscale vacation village of Jose Ignacio would cost an average of $ 800,000. A similar house in Punta del Este would cost an average of $ 450,000. Beachfront properties could cost almost double that.

Foreign tastes of real estate vary, Argüello said, with Americans preferring beachfront villas and British buyers looking for several acres of land near the coast. The starting price for a home in Jose Ignacio is around $ 1 million, he said. Near Jose Ignacio, off-beach homes start at around $ 750,000. Despite a steep market slowdown, prices remained stable at the upper end.

Mr Argüello noted that some buyers from Argentina – which shares part of its eastern border with Uruguay – have been forced to sell their vacation rentals because currency devaluations at home have made it difficult to keep up with spending. “That created an opportunity for discounts, but it’s not on the high end.”

Michael Oliphant, owner of Focus Properties in Punta del Este, agreed that “everyone is waiting for the Argentines to return and prices will go up if they do”. In the meantime, most of the market activity has been local: “People from Montevideo who have a good grasp of the macroeconomic situation are opportunistic and buy real estate here that they can pass on to foreigners when the borders open.”

The Maldonado region has long been a glamorous place for the richest Argentines and Brazilians. While the area still attracts the superrich, “it is now a place to live – still exclusive but low-key and unremarkable,” said Argüello, adding that Uruguayans “are not the primary investors here”.

Recently, Maldonado has attracted more Europeans with a smaller cohort of Canadians and Americans, Ms. van Bevern said. “We are Germans and 90 percent of our customers are foreigners,” she said. “Everyone thinks of property as their ticket to come and live in Uruguay.”

As of March 22, the country had reported 81,537 Covid-19 cases and 792 deaths, according to the New York Times’ coronavirus world map.

Ms. Waldraff, the listing agent for this property, said her company is “seeing an increase in daily inquiries from overseas buyers that we have never seen in the 10 years we’ve been here. Uruguay is felt to be safe. We have a good health system. The government takes care of its people. There is a secure banking system. “

“Anyone from outside Uruguay can buy a property, and the process is crystal clear,” said Carrau, noting that the government has long attracted foreign investors with guidelines that make buying easier. “Uruguayans and foreign buyers have equal rights. All you need is a valid passport. “

Most overseas buyers pay cash rather than get funding, he said. Funds can come straight from a US bank account, “although foreign investors typically open a local bank account that can be in any currency.”

John Leaman, executive partner in the real estate division of Guyer & Regales law firm in Montevideo, said the buyer’s attorney pays 10 percent of the purchase price once both parties have signed a preliminary sale agreement called Boleto de Reserva in an escrow account. Once a title search is completed, usually by a notary, the title is transferred to the buyer. The process can take up to 60 days.

Because of the border closings, the government has allowed buyers to authorize real estate agents or other local agents who can make a purchase on their behalf.

Spanish; Uruguayan Peso (1 Peso = $ 0.02)

Real estate commissions and notary fees in Uruguay are set by law at up to 3 percent, said Carrau, “but can be negotiated with the specialist.” Buyers and sellers pay their respective representatives a broker’s commission and VAT of 22 percent on the commission.

Buyers will pay notary fees related to certificates, postage stamps, registration fees, and other public registration costs. These can range from $ 300 to $ 800, Argüello said. Buyers also pay a real estate transfer tax of 2 percent of the “cadastral” or estimated value of the property. “Fiscal value is typically less than 50 percent of market value,” he said.

Ms. Arsenault, the saleswoman, said the total annual tax on this home is about $ 1,000.

Bettina Waldraff, Team Haverkate / Engel & Volkers 011-598-94-299-200, realestate-in-uruguay.com

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