Sales of vacation homes in the Dominican Republic are on the rise: what is the reason for the upturn?

The real estate sector in the Dominican Republic is one of the sectors with the highest growth and economic momentum. In 2021, it experienced a rebound in property sales, both flat and under construction, especially in tourism and residential projects.

Market diversity, investor confidence and tourism promotion are some of the keys that have turned the Dominican real estate sector into an attractive market.

As of January 2022, the collections of the General Directorate of Internal Taxes (DGII) register an inter-annual increase of 56.9%, some RD$294.0 million more from real estate operations, in relation to the same date in 2021.

The DGII went from collecting RD$516.3 million in 2021 to RD$810.2 million in 2022.

“Regarding the number of real estate operations in January 2022, including both transfers and mortgages, an increase of 41.4% is perceived, representing this 1,853 operations more than the same period of the previous year,” the DGII report states.

Collections exceed those of 2019, prior to the pandemic, which stood at RD$469.2 million.

The former president of the Association of Real Estate Agents and Companies (AEI) and advisor to the board of directors, Claudia Castillo, told Bloomberg Linea that the real estate sector is currently very active and in upward development.

She explained that construction companies tend to build complexes of all types: luxurious or simple, so that the client has variety when choosing.

“Projects for rent with Airbnb have grown notably in customer interest. As well as the sale of apartments and villas in areas such as Punta Cana and Bavaro,” he added.

Castillo, who is also CEO of Top Inmobiliario, noted that tourist housing has rebounded after the pandemic. “Many local and foreign people have incorporated a second home for their use and enjoyment or for investment and good profitability. Developments have tripled and areas that were more inactive in previous years, such as Cap Cana, now have a large portfolio of projects”.

Meanwhile, real estate consultant and specialist in luxury and tourist properties, Hayrold Jimenez, highlighted that the real estate market in the Caribbean country is in an excellent moment. This is evidenced by the large number of projects under construction and the volume of sales.

He commented to Bloomberg Línea that the promotions made by the Dominican Government through the Ministry of Tourism, allow a greater number of foreigners to be interested in the offers that the Dominican real estate market has.

He pointed out that there are two audiences for summer residences, those looking for an ecotourism residence, characterized by having: mountains, trees, pleasant temperatures, rivers, caves, among other qualities and those looking for beach homes: coconut trees, sea, sand and coastal breeze.

He pointed out that the areas of Punta Cana, in the province of La Altagracias; Las Terrenas, in Samaná; Juan Dolio, in San Pedro de Macorís and Jarabacoa, in La Vega, are the most demanded locations due to their mountainous and coastal characteristics.

Financing

The Asociación de Bancos Múltiples de la República Dominicana (ABA), indicated that at the close of 2021, the credit portfolio of multiple banks for the acquisition and remodeling of housing totaled RD$167,415 million (US$3,043.9 million, the rate of the day), a figure that implied a growth of 12.1%, equivalent to RD$18,033 million (US$327.8 million) more than the previous period.

The entity highlighted that the multiple banking credit sector went from RD$149,382 million in December 2020 to RD$167,415 million in December 2021.

The guild stated that a total of 72,647 credit operations were registered, with an increase of 4,182 new credit operations in 2021.
of 4,182 new loans during the last year, according to an analysis of the entity based on data from the Superintendency of Banks.

Meanwhile, the portfolio for the purchase of second homes or vacation homes as of December 2021 stands at RD$7,822 million. Meanwhile, loans for the purchase of low-cost housing from a trust were RD$7,172 million.

Housing in the metropolitan area

The metropolitan area of Santo Domingo is one of the localities with the highest registered construction area in 2021, both commercial and housing.

Data from the Registry of Building Supply (ROE) of the National Statistics Office (ONE), highlights that 16,671 units of works destined for housing were registered, of which 44.9% (7,484) were in the municipality of Santo Domingo de Guzmán, 18.3% (3,056) in Santo Domingo East and 17.2% (2,862) in Santo Domingo West.

According to the ROE, the largest increase in homes offered, was in the price ranges of more than RD$25 million (US$454,545), 107.2%, in relation to 2019, prior to the pandemic.

Investor confidence

The Central Bank’s preliminary report highlights that investors have great confidence in the country, and that a sign of this is that foreign direct investment, reached a total above the historical average and similar to the 2019 level, by registering the sum of US$3,085.3 million in 2021, for a significant increase of 20.8% over 2020. “Higher investments in the tourism, real estate and mining sectors largely explain the total received in the past year.”

How does inflation affect the market?

Construction material costs experienced a rise in the month of January. The Direct Residential Construction Cost Index (ICDV) was 207.36 on average, registering an increase of 3.47 points, compared to 203.89 in the previous month.

The main increases were produced by both the subcontract group, with 3.49 % and the subcontract subgroup of completions, with 9.56 %. The ICDV registered a monthly variation of 1.70 %.

This result is higher compared to the one presented in the same period of the previous year, which was 0.95 %.

The Central Bank (CB) indicated that the housing sector is among the areas with the highest inflation levels, registering 3.45% for the month of January 2022. Between December 2020 and December 2021, the cost per square meter of construction soared by 15%, according to the housing cost index published by the National Statistics Office (ONE).

The cost increases have led to higher prices of materials, such as steel, cement and other essential materials in construction, as well as imported materials due to the increase in maritime freights.

In view of this reality, AEI’s advisor, Claudia Amelia Castillo, assured that developers and real estate companies have had to readjust list prices of projects in process and renegotiate with clients.

“In general terms more than 85% of the clients have remained as they have understood the situation. Despite this, many Dominicans abroad have bought their homes locally and the locals have preferred to reinvest the funds and obtain better income,” he added.

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