Residential Projects in the Dominican Republic, a growing market
More and more foreigners are settling in the country with the aim of connecting with nature, improving their quality of life, and enjoying a lower tax burden. Many of them are high net-worth individuals, who are seeking to establish their residence outside of Spain in locations with lower tax rates, since it is possible to buy homes near the Dominican coast for less than $200,000, obtaining a return of up to 7% through the rent.
Is there a lot of movement in the Dominican real estate market?
The market has grown a lot in recent years. The demand for the purchase of real estate projects within the Dominican Republic has potentially grown. Growth in sales has been accompanied by a similar increase in the prices of these residences.
We are talking about a growth of over 20%, a percentage that rises to over 40% if we talk about the price of land. The increase in prices is directly related to the COVID-19 pandemic, a global event that has triggered in the market the need to escape from the big cities and find a new place to work remotely.
This search, of the market, for new spaces in which to live more comfortably and that are adapted to new lifestyles, has led to a growing demand for Prime Invest projects in the Dominican market.
The developments that are currently being developed in the Dominican Republic are not oversized and there is a lot of demand: the housing needs of the country are very large and are not yet satisfied while, on the other hand, the tourist demand continues to grow.
Which type of developers have been most recently interested in new construction?
They are basically local promoters because the current size of the projects is not attractive to a foreign investor. There is foreign investment in areas such as Bávaro, Punta Cana or Las Terrenas, where there are much larger developments of 300 to 400 apartments. In these real estate projects, the foreign investor develops and sells.
Who is the usual tourist in the Dominican Republic?
The Dominican Republic is a country that receives a large flow of tourists and that will continue to grow because it is very close to the United States. The largest group of tourists are Americans, then Canadians and Latin Americans, such as Brazilians, Colombians and Venezuelans. European tourism is not far behind, above all, a lot of Italian and Spanish tourists, as well as French, Scandinavian and German, but the latter to a lesser extent.
And are they the same ones who later purchase properties?
Tourists who visit the Dominican Republic for the first time usually come to the hotels because they want to play golf or enjoy the paradisiacal beaches of the Caribbean. It is after their second or third visit to the country that they decide to purchase a vacation property; an investment with which to make a profit and even earn additional income.
In most developments, homes are rented for short periods, for vocational purposes. It is very difficult to find properties for seasons of one year because the owners want to continue enjoying their homes when their schedules allow it.
Of what prices are we talking about?
The prices of these real estate developments depend on the services they include. Some projects range from common areas with swimming pools, spas, and sports areas to simpler projects. The price will depend entirely on the benefits that the buyer is looking for, construction density and quality specifications.
Why is there so much interest in the Dominican Republic?
The Dominican Republic has always been a growing destination, it has the advantage of being close to the US and Canada, having a good climate and having very kind and friendly people. Dominicans are open, cheerful, and very helpful.
It is also a very stable country, with a low crime rate, which is important for a tourist. There are very beautiful areas, and the beaches are wonderful, the water is warm all year round and its gastronomy is little known but quite rich. The entertainment offered is quite wide, ranging from exotic nightlife to family fun activities, water sports, and nature sightseeing.
And for real estate investors, what can the Dominican Republic offer them?
For investors, the Dominican Republic is currently the best destination in Latin America. All countries in the region have experienced in recent years changes of government of left-wing tendencies that make capital uneasy. Peru, Chile and Venezuela have been in this situation for years, and now Mexico, Argentina and Colombia have joined them. There are not many options left where you can go to a country to invest without the risk of drastic changes in the government that would imply, in some way, not fulfilling the objectives of the business plan.
The political parties that are in power in the Dominican Republic and the possible alternatives have very similar programs. There will not be a political change, even if the party in government changes. Therefore, political stability generates confidence and encourages real estate investment within the country.
The Dominican Republic, even though it is not the largest country in Latin America, is the eighth-largest economy in the region and that is tremendously important. The average growth rate of the country has been the highest in the region, close to 5% sustained.
Several laws promote foreign investment, they encourage rentiers and pensioners to reside in the country, granting them considerable tax benefits. In addition, there is a double taxation treaty signed between Spain and the Dominican Republic, so that all capital transfers, whether they are pensions, dividends, or whatever is received in the Dominican Republic, being a resident is exempt from taxation. This is driving many Spaniards be considering already becoming residents spending 193 days a year.
In addition, there are other tax incentives, such as for new tourist promotions or when selling a property, which in Spain would be the municipal capital gains.
Which is the current housing offer now in the Dominican Republic?
Many developments are taking place in the country, depending on the location of interest. For example, there are developments to buy a small apartment, outside the coastal area, for as little as $85,000. Now, closer to the sea, the price of a house can go up to $200,000, a figure that can triple for high-standing properties.
And how is the Spanish buyer in the Dominican market?
Spaniards see the Dominican Republic as a place for occasional vacations: they go for a week to disconnect from routine or to enjoy their honeymoon as a couple, but they do not consider buying a property in the country.
However, many reside in the Dominican Republic for work reasons, either for permanent work or simply for occasional business trips. This segment of Spaniards generally go hand in hand with a Spanish company and purchase a home with an average cost that could be between $80,000 and $100,000.
Finally, we find the Spaniards who are enjoying their retirement and looking for rest or a change of scenery for the season. We have detected two strata within this segment: a group for whom tax efficiency is very important and another group with a slightly lower level but seeking to improve their quality of life and enjoy their retirement.
Are Dominican banks providing mortgages to foreigners?
It depends, there are Dominican banks that offer certain percentages of financing to foreigners who want to buy a home in the Dominican Republic, however, the financing model is based on 80% -20%, that is to say, the bank will not provide 100% of the value of the property.
The country has banking terms and conditions in which the mortgage limit is based on approximately 65% of the value of the property. Percentages that reduce the risk when financing foreigners.
Can a property be made profitable?
As we have commented, the characteristics of the houses acquired influence the price and the subsequent demand. The profitability will depend on the price at which one buys the house and the area in which it is located.
In areas with high tourist demand, you will be able to adequately make your investment profitable. It is estimated that you can expect a return of between 6 and 7% through the rental. Everything will depend on the level of demand that exists in that area.
Recommendations for those who want to settle in the Dominican Republic…
If among your plans is looking for a place to start a new life, a more friendly country, with dreamlike natural landscapes and welcoming people, the Dominican Republic is your country.
Before everything, you will have to evaluate the different areas that are part of this incredible paradise. The location is one of the main factors to take into account, everything will depend on the lifestyle you want to have: near the beach, in the city or close to nature.
Once you have decided in which area you would like to start this new adventure, you should start looking for real estate projects. Research who is behind each promotion and seek advice from someone who lives in the country or who knows it well. With the support of someone with knowledge of the Dominican real estate market, it will be easier for you to inform yourself and choose your new home.
In addition, good advice will be essential if you are looking for profitability, this is one of the main objectives of an investor: that his investment generates value when he does not occupy the property.
At Prime Invest we know the Dominican real estate market closely, especially in the Punta Cana area where we have one of our largest real estate developments: The Seed Punta Cana.
What is The Seed?
The Seed is one of our largest projects in the Dominican Republic. Our residential complex of 490 homes with one, two and three bedrooms, is of careful design, and concerned with the natural environment where the complex is located.
A design with minimalist and modernist lines that integrate its green areas and landscaping throughout its architecture, comes to life alongside nature.
The Seed is designed to enjoy the Caribbean, an ideal complex to invest in or vacation in, with the best amenities if you are looking for an all-in-one resort.
To whom is this resort aimed?
The project is mainly focused on families, because the amenities are designed for all members of the family, from the youngest with tides of children's entertainment to the oldest: sports areas, a complete spa, bar and even coworking areas where teleworking is facilitated.
In this resort, we offer comfort, tranquility, and security, which is very important. Without forgetting a very important aspect for investors and for these people who are looking for a new residence: all transactions are made in dollars. It is also very important that this project has the solidity and backing of Prime Invest, a leading company in the marketing of second homes on the Costa del Sol.