Why Dominican Republic is a top investment opportunity in real estate’s portfolios

Nov 25, 2023
Why the Dominican Republic is a top investment opportunity in real estate’s portfolios

Discover the top investment opportunity in real estate portfolios with the Dominican Republic. Benefit from a growing housing deficit, a thriving tourism industry, and government support for the construction sector. Take advantage of a booming tourism industry, a rising demand for rental properties, and favourable government policies.

The Dominican Republic offers an extraordinary investment portfolio for real estate investors due to a combination of favourable factors, including a growing housing deficit, a vibrant tourism industry, and government support for the construction sector.

 

Development Hotspots in the Dominican Republic

Santo Domingo, Punta Cana (La Altagracia province), Las Terrenas (Samaná), Juan Dolio (San Pedro de Macorís) and Jarabacoa (La Vega) are the most demanded locations for the development of tourism projects. One of the main reasons Santo Domingo is the top hot spot for Airbnb investors is because it is a capital with millions of Dominicans living abroad and investing back to their home city. The circulation of Dominicans back and forward makes Santo Domingo the ideal Airbnb hotspot.

In this segment, it is worth mentioning the Pedernales Tourism Development Project, a 10-year project with an estimated investment of US$2,245 million and with the objective of developing 12,000 rooms once completed. The hotel chains Hilton, Marriott, Sunwing, AmResorts, Iberostar Group and Karisma Hotels & Resort have committed to begin construction in 2022.

Another large-scale example is the tourism projects starting development in Miches, with more than US$1,000 million in investments, some 2,900 hotel rooms and 2,000 real estate rooms. It is expected that investment in tourism development in the Dominican Republic, with the consequent constructive impact, will continue to be strong in the medium and long term.
 

Tourism growing with a positive impact on housing construction in the DR

The Dominican ease of Life, friendliness, and climate mixed with the best beaches are attracting more and more tourists. The Dominican Republic is a popular tourist destination, with over 5 million visitors arriving in 2022. This influx of tourists has created a strong demand for rental properties, particularly in tourist hotspots such as Santo Domingo, Punta Cana, Las Terrenas, and Juan Dolio. Real estate investors can capitalize on this demand by investing in short-term rental properties or vacation homes.

In fact, the country has recently reached its record high, with 5,334. 290 tourists registered in the first nine months of 2022, exceeding expectations of recovery after the effects of the COVID-19 pandemic and the Russia-Ukraine war on international tourism. Projects for rentals with Airbnb and similar accommodation platforms have grown notably in customer interest, as has the sale of apartments and villas in tourist areas.


 

Residential Housing Demand Booming because of Housing Deficit


The Dominican Republic faces a significant housing deficit, with an estimated 767,348 dwellings needed to meet the demand of its growing population. This deficit is particularly acute in urban areas, where there is a high concentration of people and limited land availability. The government has recognized the need to address this issue and has made it a priority to increase housing supply. This presents a significant opportunity for real estate investors who can develop and provide affordable housing to the Dominican people.

The housing deficit (the gap between families’ access to housing and the actual supply) in the Dominican Republic is a historical challenge that remains to be mitigated at both the public and private levels. It is constituted by two indicators: quantitative deficit: the difference between households or family niches demanding housing and the amount of available housing; qualitative deficit: housing that needs to be improved in terms of structure and services to be decent housing (e.g., access to drinking water).

The housing market will remain stable in the next decades


The population growth rate is directly linked to growing needs; and therefore to the demand for construction sector services. The most direct demands resulting from population growth are schools, hospitals, housing, urban and rural infrastructure, etc.

The Dominican population will continue to grow in the coming decades, but at a slower rate, and structural aging will have an increasing incidence. Aging, buying power and demand for residences go hand in hand, so this can have a rather positive effect on the housing market.

A demographic characteristic of the country is the high internal rural-urban mobility, due to the concentration of economic opportunities in certain regions. In this process, some intermediate municipalities have multiplied their urban area up to three times in the last twenty years, while in many communities in rural areas, or with lower density, the population has decreased or aged.


 

Urbanization Accelerates Booming Development Market in DR


The greatest acceleration of urbanization is being experienced in the most populated cities: Puerto Plata, Santiago, La Vega, Santo Domingo. In fact, Santo Domingo is building over 50% of all real estate projects in the complete Dominican Republic. The accelerated urbanization of the main cities has increased the demand for land use for housing purposes, with the consequent competition to other uses, such as agricultural land. The relationship between the real GDP growth rate and the construction sector is evident, given the transversal and strategic nature of construction in the economy.

The positive growth of the Dominican Republic in recent years translates into the momentum of the entire construction sector

The incidence of tourism, being one of the country’s strategic sectors, is especially relevant in the construction sector; it influences the building of tourist apartments, housing complexes, aparthotels, hotels, motels, cabins, etc.


 

Credit Supply in Dominican Republic

Another factor that greatly affects the demand for buildings is access to financing, in this case for the purchase of housing. The Superintendency of Banks indicates that, in 2021, a total of 72,647 credit operations were registered in this sector, 4,182 loans more than in 2020.

The multiple banking credit portfolio for the acquisition and remodeling of housing (mortgage financing portfolio) totaled DOP 167,415 million (MUSD 3,067), an amount 12.1% higher than in the previous period. In particular, the portfolio for the acquisition of a second or vacation home accounted for 4.6% of the total portfolio: PDO 7,822 million (US$ 143 million).