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Revitalized real estate and construction markets expected as government confirms repeal of 2016 law

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.

Builders and real estate agents say business in Cuenca is picking up.

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The news that the law would simply be repealed and not replaced was celebrated by builders and real estate agents.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.”

Cuenca real estate agents report more closings in recent weeks.

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.”

One thought on “Revitalized real estate and construction markets expected as government confirms repeal of 2016 law

  1. And when none of these predictions come to pass?

    Because they won’t. The article is just repeating the misinformation that has been used to defeat a common sense law. The tax didn’t “start” at 75%. That was the highest rate and only applied to a portion of excess profits on a sale. The tax also didn’t apply to every sale of every property, only the second sale of the same property within 5 years. It didn’t apply to new builds either, so the idea that this will somehow bolster construction is nonsense.

    The statement that buyers were holding off purchasing because of the tax is nonsense. Nobody put off buying a property because of this law because the tax doesn’t apply to purchases. It only applied to profits on sales greater than 40% within a 5 year period. People looking to buy a house are not looking to sell it within 5 years and they sure as heck aren’t getting a 40% profit over the original sale price.

    This won’t bolster jobs. Unemployment is already at 5%. That’s full employment in any economy. There is always one person in 20 either in between jobs, going to school, injured or simply not looking for a job. There are construction projects going on everywhere. There aren’t any workers left to do them, unless they plan on importing Venezuelans and Colombians to do it. This also won’t bolster sales because the tax wasn’t adding to the price. What this will do is give the idle money class a new place to park their money, drive up prices, and flip properties ad nauseum. I guess that’s “good” for real estate agents, but it doesn’t benefit consumers in any way.

    The only people who stand to benefit from this change are the speculators who trade on insider information, knowing years in advance where a new highway is going to run so that they can buy up farmland cheap from poor campesinos who don’t know the road is coming and then flip it for 10 times the original price once the new infrastructure goes in. There’s a whole class of people in Guayaquil, including the mayor, who got rich doing just that. Adding the question to the referendum was Moreno’s gift to the monied class so that they would refrain from criticizing him relentlessly like they did leading up to the election. Of course, now the referendum is over and he has nothing left to offer them, which is why they’ve already started attacking him like they were doing 12 months ago.

    But this is the age we live in. Moreno gave the right-wing El Telegrafo and Ecuador TV, so now there’s no press outlet to contrast all the misinformation they tried to force feed the public during the Correa administration. It’s sad that CHL has become nothing more than one more sounding board in the echo chamber.

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