Buenos Aires — Real estate investment has been a recurring strategy among Argentinians to safeguard their capital in the face of inflation and the constant devaluation of the peso, as well as to seek stable returns over time.
In this context, historically attractive options for Argentine investors have been Miami and Montevideo. Miami is mainly favored for its location in the United States and its sizable Latin American community, while Montevideo is favored for its proximity, economic stability, and cultural similarity. Both cities offer opportunities. But which is the best option for real estate investment from Argentina?
Fabián Kopel, co-founder of Kopel Sánchez, a real estate developer that has channeled investments of around US$500 million primarily into housing projects in Montevideo, made the case for the Uruguayan capital in a conversation with Bloomberg Línea. Among the favorable points, he highlighted the consistency of public policies in Uruguay, regardless of electoral changes, the strength of the rental market, and the language, among other factors.
“The main factors that make Montevideo much simpler for any Argentine citizen are that they can come to analyze and explore the areas with perhaps US$50 or US$80, which may be the cost of crossing the border, speaking the same language, always having an acquaintance nearby, and not having to rely on people who are 10,000 kilometers away,” he commented.
Regarding the Promoted Housing Law, Kopel emphasized that it has encouraged the construction of around 2,500 housing units per year since 2011. “What the law did very well was to provide incentives for investors to buy and rent out these units, with the idea that rental prices wouldn’t skyrocket, and that’s what’s happening. We have a very healthy rental market because there is still a high demand for people looking for this type of housing,” he stated.
Regarding the average investment, the developer noted that a one-bedroom unit worth around US$130,000 “will yield 25,500 Uruguayan pesos, which is currently about US$650 per month.” This translates to an annual return on investment of 5.5% to 6.5%.
Uruguayan Stability
The stability in Uruguay’s public policies over the last 30 years has created a favorable environment for real estate investment, argues Kopel. He points out that Uruguayan society is democratic and united, which prevents policies from generating deep divisions. In addition to the Promoted Housing Law, he cited the free trade zone policy and the tax policy as examples. The latter has attracted residents like David Vélez, founder of Nubank, and Marcos Galperin, president of MercadoLibre.
The Promoted Housing Law, in particular, has incentivized investors to build more housing units, increasing the supply of rentals and helping to maintain prices at reasonable levels in line with the income of Uruguayans.
This is in stark contrast to the Argentine rental market, which is currently paralyzed due to the country’s macroeconomic situation and affected by a law enacted in 2020.
Demographic Factors
Fabián also highlights that the demand for housing in Montevideo remains constant, even though the growth of the Uruguayan population is stagnant. This is because the Uruguayan capital attracts university students, young professionals, and expatriates, maintaining a strong demand for rentals. Additionally, Montevideo offers an attractive lifestyle with nearby beaches.
According to Kopel, the key lies in people’s preference for moving from old to new homes, regardless of the lack of demographic growth.
The developer also emphasizes that Uruguay has experienced economic strengthening over the past two decades. This has allowed people to become financially independent and live on their own at a younger age, leading to increased demand for housing. With more opportunities available to young people, it’s common for them to seek independent living.
This growing housing demand is reflected in the fact that buildings fill up in less than two months and reach 100% occupancy.
For Kopel, real estate appreciation has become an effective response to population stagnation, providing opportunities for both investors and young people looking to live independently.
Advantages over Miami
While Miami has historically been a popular destination for Argentine investors, Montevideo offers several comparative advantages. Kopel highlights the following:
- Proximity: Montevideo is much closer to Argentina than Miami, making access and investment management easier.
- Language: Uruguay shares the same language as Argentina, simplifying communication and transaction understanding.
- Legal Security: Uruguay prides itself on its strong legal security and political stability, which instills confidence in investors.
- Predictability: Public policies in Uruguay have remained consistent over the years, creating a predictable investment environment.
- Lower Entry Costs: Montevideo offers investment opportunities with lower entry costs compared to Miami.
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