The beginning of this decade was coincident with an extended recessive cycle, that ended in one of the worst economic and financial crisis occurred in Uruguay.
The extend of the magnitude of the crisis was entirely reflected on local real estate market. The number of transactions fell, prices were reduced to half their values in current dollars and there was a sudden drop in the presentation of Constructing Licenses.
In those years long term credits reduced almost completely and market continued to operate exclusively on cash terms.
Even with the enormous difficulties that existed during those years, the country continued with its international duties, thanks to the important aid received firstly form the United States and after from multilateral credit organisms.
During the first semester of year 2003 uruguayan government manages a successful and voluntary public debt exchange. This, occurred in May of that year, was the breaking point of the long recession that had started in 1999 with a real devaluation of the local currency and the expansion cycle in which local economy is situated. As usually, a strong expansion of properties demand followed, specially in strips A, B and C1, fact that made selling prices duplicate in the segment in just a few moths.
Slowly, all real estate market indicators showed rising tendencies.
The number of Constructing Licences and constructed area rose, and so did selling values, trend that goes on until nowadays.
the end of 2004 a national election meant an unknown event for country's politic history; the Frente Amplio politic party, a socialist politic force, reached the government as never before. This brought up lots of uncertainties that started to clear themselves when before the elections, at the time candidate Dr. Tabaré Vazquez, announced that if he won accountant Danilo Astori would be Chancellor.
Once in the government and having announced the principal macroeconomic trends to be followed in the period, public's doubts were cleared and markets responded really favourably to the socialist taking of the helm for Uruguay's conduction.
A recovery cycle starts in mid 2005 and stands until the present.
Summarizing, the first two years of the decade were clearly recessive, the worst in national history. From the year 2003 on the economy as a whole and hence real estate market held an upward trend.
It's good to specify that economic growth in Uruguay, in contrast to short term past, Uruguay's economic growth is not supported on the entrance of speculative capitals but in important investments in forestry, meat, port and the whole farming and agricultural industry.
Due to the international situation, the whole region goes through an economic expansion phase. During the last few years Latin America's GDP grows above world's average and Uruguay's GDP above Latin America's average.
IMF expects that GDP of South American countries grow around 500.000 million dollars between 2007 and 2009. This is a fantastic scenario for real estate development in the region.
2008 is the fifth year in a row of economic development in Uruguay. It's almost a fact that growth will continue during 2009 and most probably during 2010, with which an never before known (for its extension in time and high rates) expansion cycle is being completed.
As mentioned, once the uncertainties that inevitably rise during electoral processes, specially these one in which most surveys showed a winning socialist force before it did, were cleared, real estate market started consolidating a complete reactivation of the sector.
Mortgage credit is expanding, during 2007 it multiplied times four in comparison with the previous year and in 2008 this volume will double if the trend stays up.
This favourable context starts to show in real estate industry's activity levels. Prices yearly rise among a 10 and 15% in dollars, so do the number of Constructing Licenses approved and activity levels grow in general.
Both housing and offices stocks are, in Montevideo and in the principal cities of the country expect in Punta del Este, rather old and in need of renovation.
Since 2007 a substitution process of the antique stock for a modern one began. We estimate that, if favourable macroeconomic jointure remains, this process could accelerate in the next years.
One of the biggest restrictions observed in real estate actual local market is the high local dollar inflation. The fact that constructing cost is rising over property's revaluation is an important restriction that must be considered.
If dollar's weakness is reverted during the next years, such as many international analysts predict, local real estate industry will probably find a better scenario to develop.