Real Estate

It is almost April 2016 and it is now official, negative interest rates are coming to a country near you.  And do not think for one minute this phenomena applies only to Japan or the European Union.  The US Federal Reserve has recently told it's member banks to stress test the implementation of negative interest for the US banking system.  In layman's terms, they are telling the banks in the US to get their IT people and computer programmers working on the mechanics of implementing this.  And if they are going to the trouble of saying it, then it means they are seriously planning on doing  it.  But what does this all mean to the average person or investor attempting to say ahead of the game?  Namely, to seek out other stores of wealth other than cash, which hopefully will not only retain value but have a chance to appreciate as well.  Along these lines, such options include gold, silver, art work and real estate.  But of all these, while obviously not exactly highly portable as the other options mentioned, real estate still offers some advantages.  First off, assuming we are discussing a single home or condominium apartment, the most immediate and obvious benefit is a roof over your head or other wise said, a place to live.  Secondly, real estate can be rented out thus providing a monthly rental income.  Thirdly, while all the above items also have room for appreciation, a place to live is a human necessity.  I know many gold bugs would disagree, but not everyone needs gold or art work to live, but everyone needs housing.  As such, there could be arguably be an easier or larger market for property in the future if liquidating was something you wanted to do, at least in terms of selling an asset that was a necessity.  But then we are left with the question: where to buy or invest?

Along these lines, we have been talking about Dominican Republic real estate in general and the capital city of Santo Domingo for some time now.  However, we are not real estate brokers, so our angle is not the marketing of properties.  Rather, it is an idea that many of our clients have taken advantage of over the years and real estate can certainly be used as a tie in for the residency and citizenship application process (investor residency, not to be confused with ordinary residency, does allow for the person to apply for citizen after 6 months).  And in fact many of our clients have doubled their money by investing in Dominican Republic real estate over the years.  But with that said, you are probably thinking that if real estate has doubled, then it probably no longer is a bargain, but you would be wrong.

If you compare real estate prices for Panama, St. Martin, Aruba, The Bahamas and a number of other Caribbean locations, you will find that the Dominican Republic still offers some of the lowest priced properties by comparison.  In order to make some sound real estate cost comparisons, we have turned to the statistical information website Numbeo.com in order to compare apples to apples as they say.  As such, we have taken a look at what is costs to buy a condominium apartment in the center of the city or urban areas in the following jurisdictions, which are usually going to be the most costly per square meter.  To start off, Numbeo.com tells us the cost to buy real estate in Barbados is almost US$8,000 per square meter and US$9,000 per square meter in the Turks And Caicos Islands.  In Belize, the cost is US$5,100 per square meter.  In Panama, the cost is US$2,000 per square meter, and in Puerto Rico the cost is US$1,700 per square meter.  In the US Virgin Islands the cost is US$4,300 per square meter and in Bermuda the cost jumps to a mind boggling US$10,300 per square meter.  In the Cayman Islands the number is US$2,800 and in Trinidad & Tobago they are reporting US$1,900.  Last but not least is the Dominican Republic whereby Numbeo.com is reporting US$1,400 per square meter, which represents the lowest cost of all the others mentioned above.

Why a city such as Santo Domingo and not a beach location?  We have many clients that have made purchases of beach front or beach resort area properties and there is nothing wrong with that.  And of course when you think of the Caribbean or even the Dominican Republic, that is exactly what comes to mind.  But, keep in mind that resort area or beach front properties are going to be more expensive on average than a similar sized property in an area like Santo Domingo.  In addition, while a number of furniture stores and other kinds of shopping has sprouted up in these areas, generally speaking there is going to be more options in an urban non tourist area for shopping, theaters, bilingual or English schools and other kinds of amenities.  Plus let us also keep in mind that cost of living for food and restaurants tend to me more costly in a tourist or beach area as well.  As such, living in Santo Domingo will give you more of these kinds of options, more services, more stores, more schools to choose from and more cultural things to do as well (Santo Domingo does have a national theater with ballet, symphony orchestras and plays).  So, as a cost issue and lifestyle idea, why not buy a property in Santo Domingo and spend one weekend per month at a luxury beach resort or in the mountains?  Santo Domingo is about 1 ½ hours to many of the popular beach resort areas and about the same distance from the mountain regions as well (which have been called the Alps of The Caribbean for it's ferns, pine trees and waterfalls).  So, what does a property in Santo Domingo cost and what is the best kind of property to buy?

In terms of what kind of property, for those people that are retired or who travel quite a bit for business, usually a condominium apartment makes more sense.  Such properties often offer off the street secure parking, 24 hour security, and in some cases with newer building a swimming pool for tenants.  There is still quite a bit of new construction going on in Santo Domingo even right now in 2016 and as such there is no shortage of newly constructed properties to choose from.  All depending upon what part of Santo Domingo, apartment size and amenities, the costs are going to range anywhere from US$80,000 up to US$250,000 with the average coming in at around US$150,000 for a 2 or 3 bedroom 1,400 square foot unit in the more upscale areas in the city center.  Recent comparisons for cost of living indicate that Santo Domingo is half the cost of Miami, and with direct international flights to Europe (assuming you need to travel for business) it is a convenient place to live.

Many of our clients have told us they have about US$250,000 to US$300,000 liquid and want to know if it feasible for them to live in Santo Domingo.  So using such an example, let us suggest that this kind of person does decide to purchase a higher end 2 or 3 bedroom luxury condo for US$150,000.  Assuming they place the remaining US$150,000 in local peso denominated government bonds at about 9 percent interest, they have a full paid for home and sufficient monthly  investment income to pay for living expenses such as electricity, telephone, cable television (500 channels with about 15 stations from the US in English) and supermarket shopping.  A full time maid will cost you about US$400 per month, so it is not out of the question to afford help that cleans and cooks.  And of course if you have an additional monthly pension, social security or other kinds of additional income, then even better.  In summary, you have many options in the world in terms of where to live, retire and invest.  So why not choose a place that offers one of the least costly cost of living options coupled with a quality of life comparable to a number of other major metropolitan areas?

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