Construction in Punta del Este, Uruguay is at its lowest point in 12 years.
In the medium term, a recovery of the activity is not expected. Compared to Puerto Madero, the new construction price gap expanded to 70%.
Despite having a large number of real estate projects available, especially in Punta del Este, the construction is stalled in the area and is, in fact, at the lowest level for at least 12 years. At the beginning of 2018 it was thought that the recovery of the activity would happen in the short to medium term and although there are some positive signs, nothing suggests that there will repeat of the boom times of the past any time soon.
According to data processed by the Bank of Social Welfare (BPS) at the beginning of this year, there were 2,541 construction workers registered with the social security corresponding to local work with a fiscal domicile in Maldonado. It’s the lowest level since at least November 2005. The largest number of workers were verified between September and October of 2011 with almost 10,000 workers formalized before the BPS with many others working informally.
Construction activity in the region began to weaken in 2012 after the boom that had started in 2005. One of the main reasons was the withdrawal of Argentine investors in the real estate market of Punta del Este as a result of the exchange rate shocks implemented by the Government of Cristina Fernandez that prevented the exit of capitals from that country. Another element that affected the market was the signing of the agreement to exchange tax information between Uruguay and Brazil, Argentina which slowed the amount of money laundering that Uruguay had become notorious for. The first reason was eliminated by Argentine’s new President Mauricio Macri when he assumed the government in December 2015 lifting currency flows; The other actions against tax evasion continue in force but has stalled the real estate market in Uruguay.
There is still a hope that a more positive construction cycle might re-establish itself in the future based on genuine demand rather than money laundering as in the past. Currently, there are some 17 new projects presented last year that are still in a first phase but are far from their culmination due lack of funds and poor demand.
One of the few developments that is advancing is the Fendi Chateau complex by Argentine developer Sergio Grosskopf, at Mansa Beach. “But not all of those 17 projects are in the same condition.”
There is currently an investor preference in favor of Argentina. In the last decade, the prices of the new works in Puerto Madero and Punta del Este evolved in a quite parallel way. The prices for the premium areas of Buenos Aires rose above 20% margin against Punta del Este, but now the gap exceeds 70%. However, values have also increased in other middle-class Buenos Aires neighborhoods. In Caballito, for example, there are developments with a price of USD 4000 per m2.
This could lead to some real estate investors opting for superior products in Punta del Este are offered at USD 3800 m2 in the future if these trends continue. There always a chance for Punta del Este future market as the Argentine economy continues to grow if the price rise in dollars is maintained.
Despite this, the favorable circumstances that attracted real estate investors to Punta del Este in the past have now changed and will no longer be the same as before.
The activity of the construction industry fell 6% in 2017, according to data from national accounts reported by the Central Bank in March. The last leading index of April’s construction activity projected a “stagnation” of that sector at least for 2018. The latest data yielded below-expected performance in the unemployment rate, as well as a fall in the reduction of cement destined for the local market. This was a deterioration in the expectations of industry entrepreneurs. In an interview with the country, the financial advisor of the Association of Private Promoters of the construction, Alfredo Kaplan, projected a poor performance for the construction of housing in 2018.
Source: La Cronista