Better days are ahead for Ecuador’s real estate and construction industry, experts say. In Cuenca, real estate agents say the turn-around is already underway.
Ecuador’s Housing and Urban Development Minister Adrián Sandoya confirmed Tuesday that the administration of President Lenin Moreno is calling for a full repeal of the Ley de Plusvalía, or capital gains law, and will not submit a replacement to the National Assembly.
Ecuadorians voted overwhelmingly to repeal the law in the February 4 national referendum. The law was enacted in December 2016, during the administration of former president Rafael Correa for the purpose of controlling land speculation. Correa claimed that some real estate investors were driving up the price of real estate, making home ownership impossible for many Ecuadorians.
The construction and real estate industry complained bitterly about the law, claiming it would prolong a deep four-year slump and deny employment to tens-of-thousands of building trades workers.
The news that the law would simply be repealed and not replaced was celebrated by builders and real estate agents. “We were worried that they [the government] would introduce a replacement bill that would keep some of the high capital gains taxes,” says Jaime Rumbea of the Ecuador Real Estate Developers Association. “There were people proposing that. I am glad that President Moreno listened to the people and decided on a straight repeal.”
Two days after the referendum, Minister of Justice Rosana Alvarado said that the government was preparing a new law to replace the Ley de Plusvalía, saying that some of its objectives were valid. Sandoya said, however, that a replacement law was discussed but no further action was taken. The final decision was Moreno’s, she said, and he opted for a full repeal.
Sandoya said that land speculation can be controlled through regulatory means and that a new law in not needed.
Real estate agents in Cuenca agree that the full repeal of the law, which applied a graduated scale of capital gains taxes beginning at 75 percent, would revitalize real estate sales and construction starts.
“This is great news and I applaud the president for not introducing new legislation,” says Jorge Jaramillo, an independent real estate agent in Cuenca. “Builders I have talked to since the referendum are planning to restart projects that have been dormant and to begin new ones. More sales are also coming since many buyers were delaying purchases because of the high tax.”
According to owner of Cuenca Rentals and Sales, Graciela Quinde, sales are already increasing following the election. “I am seeing a lot more activity among buyers and sellers and the number of closings is picking up dramatically,” she says.
Quinde, who rents and sells primarily to foreigners, says that rentals have remained strong in recent years despite the down-turn in real estate sales. “People are still coming to Cuenca in big numbers, and not just people from the U.S. and Canada,” she says. “I’m renting to more people from Europe and China. Cuenca is becoming a truly international destination.”
She added: “With the changes in the law, I think some of the foreign renters will become buyers.”