While prices for homes on the coast of the island nation range from $1,350 to $1,850 per sqm, some villas and luxury properties with more land are listed for as much as $3,700 per sqm. Apartments for sale in the central districts of the country's cities reach up to $2,078 per sqm on average, according to the Global Property Guide.
Over the past decade, dramatic improvements in land regulations and the legal framework for the sector has improved the business climate for consultants and potential property owners alike. Globally, the Dominican Republic ranks 105th in terms of ease of registering property to do business, and comes in third among Caribbean countries, falling just two places behind Jamaica and one place behind Guyana. This promising environment led to the sector attracting $158 million of FDI from January-September 2012, reflecting marginal year-on-year growth.
A SECOND HOME
Since 2000, new developments such as the coast of Punta Cana and Casa de Campo's golf and resort complex have led to an increased amount of investors exploring real estate in the Dominican Republic. In response, international real estate companies have moved into the country to aid foreign buyers who are seeking to purchase second homes or launch local business operations.
One such company is Stewart Title Dominicana, a Costa Rica-based agency that saw ample opportunity in the country with the demand for second homes from a number of local and international buyers. Now, the company is engaged in a variety of activities, including the management and release of funds for construction, title guarantees for real estate property, escrow funds, document custody, closing service, and tax payments, and has become a leader in the real estate sector. The company specializes in luxury property and high-end clientele, as “middle-income buyers have not been very active. Transactions are usually valued at between $50,000 and $150,000, or over $1 million," Lissette Balbuena, General Manager of Stewart Title Dominicana, explained to TBY.
With activity from potential US customers continuing at a slow pace, market players are seeking to extend their services to nations experiencing faster growth and deepen ties with those recovering from the crisis. Current investors come from France, Switzerland, Germany, and Italy, with Dominicans and South Americans more recently showing interest in the market. However, countries such as Canada, Russia, and Venezuela pose interesting possibilities for the local real estate sector, as growing economies with a strong upper class seek to invest in second homes or property investments. In its search for partnerships with rapidly expanding economies, “the Dominican Republic should also start moving much more toward Asia," Balbuena concluded.
Nevertheless, residential and commercial units in resort areas such as Punta Cana, Puerto Bahia, and Casa de Campo are still witnessing huge demand. To combat the effects of the crisis, many developers chose to invest in hotels or retail areas in addition to residential buildings. “We finished the construction of luxury apartments and 3,000 sqm of commercial area, including about 50 hotel rooms in 2010," Juan Bancalari, President of Puerto Bahia, told TBY, adding, “so far, we have sold 90% of the 185 housing units we built for approximately $100 million." Although many projects have been delayed since then, this type of “real estate tourism" is accelerating in 2013 and, according to Bancalari, holds the potential to become a very profitable industry over the next few years.
A HELPING HAND
Government support to build housing for the lower-income side of the spectrum has also prompted business opportunities for many. In doing so, the authorities have mitigated the level of poverty in the country.
In early December 2012, the government announced plans to allocate $1 billion of the country's pension funds toward the construction of affordable housing. Work will be carried out in accordance with the Real Estate and Development Trust Law, which aims to narrow the gap between the wealthy and disadvantaged segments of the population. Currently, the government has the capacity to build 15,000 homes per year, but the Medina administration seeks to boost that number to 40,000, aiming to establish 400,000 new units by 2023. Government officials noted that the measure will also create approximately 500,000 jobs in the next four years, increase longer-term housing offers, lower costs, and present a variety of investment opportunities. In addition, the government approved a decree to process around 3.4 million properties in both urban and rural areas that have been reformed, titling the land under the names of their owners and thereby mitigating poverty in a number of communities. Since taking office, President Medina has committed to issuing 35,000 titles to landowners who have benefitted from agrarian reform, as well as another 400,000 to people qualifying under other programs.
Private initiatives in the sector aimed at reducing property are also appearing nationwide. The MICASA project, led by commercial developer Promotora García Armenteros, is well underway, with Ps60 million invested in its first stage, which was completed at the end of 2012. The first phase of the project offers 300 units ranging from Ps1.34 million to Ps1.7 million. With the goals of optimizing space, using earthquake-resistant materials, and offering maximum functionality, the design for the project took over eight months to complete. Owing to the recent approval from the Ministry of Public Works and Communications, investors and purchasers are able to benefit from the various incentives and benefits outlined in the Mortgage Market Development & Trust Law.