People who love the Dominican Republic like to refer to the country as the “best-kept secret” in the Caribbean but the beans are beginning to spill: The Dominican Republic is fast becoming a tourist destination for island paradise lovers from all over the world.
According to a recent article in Dominican Today, the republic’s English language news source, tourist arrival to the country for the first four months of 2008 grew by 5.6% when compared to the year before. The number of tourists rose by about 84 thousand bringing the total for the period to 1.6 million. The tourist influx is expected to continue increasing at a steady pace for the foreseeable future.
With republic’s white beaches, idyllic climate, warm crystal blue waters brimming with exotic sea life, and striking mountain ranges, it is really not surprising that the tourist industry is growing and prime real estate in the country is attracting international investment from commercial and private buyers.
A Country Snapshot
The Dominican Republic covers an area of 18,815 square miles, the size of New Hampshire and Vermont combined. With a population of 9 million, it is the second largest country in the Caribbean. It takes up the eastern two-thirds of the Island of Hispaniola which is located to east of Cuba and Jamaica and west of Puerto Rico in the Greater Antilles archipelago. It shares the island with its neighbor Haiti.
According to The National Geographic, the republic’s economy is mostly based on tourism, sugar processing ferronickel, gold mining, and textile industries. Its agricultural sector grows sugarcane, coffee, cotton, and cacao. Exports from the country mainly consist of sugar, coffee, silver, and gold. World Travel and Tourism Council forecasts that the Dominican tourist industry will contribute 16% to the Gross Domestic Product (GDP) of the country in 2008. Currently, one out of seven people in the country are employed in tourism related jobs. Thirty five percent of total export earnings for 2008 are expected to come from international visitor related transactions.
Santo Domingo, the country’s biggest city located on the southern coast, is the oldest capital in the Americas. With a population of four million, it comes complete with standard urban amenities including an assortment of restaurants, modern and upscale shopping centers, broadband internet connection and English language cable channels. According to John Schroder who is the owner of Ascot Advisory Services, a company that specializes in offshore incorporations, banking, investments, and residency services in the Dominican Republic, “[it] also offers a national theater with ballet, plays, and symphony orchestra events.”
Santiago de los Caballeros, the second largest city is located in the in the fertile Cibao Valley of the Central Region. With a population of one million, it has similar amenities to that of the capital.
In addition to a stunning array of beautiful beaches that are a fixture of a Caribbean paradise destination, the Dominican Republic also offers impressive mountain ranges with tropical mountain climate for those who prefer something other than the beach resort scene with cooler temperatures. The country encompasses Pico Duarte, also known as the “Dominican Alps”, the highest point of the Caribbean standing tall at a little over 10,000 feet.
According to Mr. Schroder, who has lived on the island for 12 years, the country has something for everyone. “[It has] quite diverse topography. One doesn’t feel as if they are on some very small island,” he said. “There is an area known as Jarabacoa…[with] topography similar to New England, with pine trees and ferns….Monte Cristi, has a topography very similar to Aruba, with cactus and sand, and then of course one has the typical Caribbean beaches as well,” he added.
It seems, for some, it is not just the natural beauty of the country that makes it special. When asked what was unique about the Dominican Republic, Dean Brown, a Real Estate Advisor for Century 21 Juan Perdomo, answered, “The people! Dominicans are very friendly, hospitable, and fun-loving people.”
Investing in the Dominican Republic: Pros and Cons
The Dominican Republic has a lot of positive things going for it. After decades of instability and turmoil, it has turned itself around and has begun to attract the attention of global financiers.
As for the advantages of investing in the Caribbean nation, Ascot Advisory’s Mr. Schroder argued that, in terms of GDP, the Dominican Republic has one of the most stable economies among its peers. Its telephone and internet infrastructure in metropolitan and tourist areas is well developed and reliable. The fact that it has a substantial local agricultural and manufacturing industry results in much less costly imports than some alternative Caribbean island destinations. In simple economics, this translates into a lower cost of living than that of, for example, the island of Aruba which imports almost all of what its residents need. In addition, the country is a stable democracy with a foreign investment friendly outlook.
However, the country is not without its disadvantages. According to Global Property Guide, the fact that it borders Haiti, it’s chronically unstable neighbor, can be off putting to potential investors. It’s large population of 9 million is also a double edge sword. On one hand, it is appealing to those who are not interested in being confined to tiny island with limited options of entertainment and activities. On the other hand, it also means it makes it impossible for the island to bill itself as the perfect, untouched fantasy island paradise to appeal to those investors who crave privacy and exclusivity.
While it experienced an economic boom over the past decade, its annual per capita GDP is only US$ 3,074 creating a massive income gap between the wealthy and the poor as the rich from all over the world begin to set up shop on its shores.
The above disadvantages don’t seem to have stopped investors, however. What was once a foreign direct investment trickle has now transformed into a steady stream and the social and economic outlook of the country continue to look stable for the foreseeable future.
The Dominican Republic Real Estate Market
Referred to as ‘the diamond in the rough’ of international property investment, the Dominican Republic real estate market has shown impressive growth over the past few years.
According to a February article in Global Property Guide, this recent interest and investment flow has put the island nation in the spotlight of the luxury real estate market.
Such projects include Cap Caña, a resort development that transformed over 30,000 acres of the southeast coast with several high end hotels and golf courses, and thousands of luxury homes in what ended up being the largest private community in the country.
Mr. Schroder also pointed out that the government has enacted laws that protect the rights of international property owners and investors in recent years. Foreigners can now purchase real estate without having to worry as much about the safety of their investments. To top it off, unlike some other Caribbean countries, an investor doesn’t have to be a citizen or a resident to purchase property in the Dominican Republic. This simplifies and reduces the hassle factor of the complex bureaucracy that is usually associated with cross-border transactions.
Although there are no restrictions on foreigners purchasing property, international buyers may find it challenging to acquire the finances needed to fund their mortgages. According a May, 2008 article in Property Wire, a global real estate news service, the mortgages offered by local lending companies can be prohibitively expensive. However, already companies looking to fill that service gap are cropping up.
The biggest thing the Dominican Republic property market has going for it is affordability. Global Property Guide’s investment analysis confirms this in its March 2008 survey of Caribbean real estate prices. Bermuda, Grand Bahama, and Barbados came in first at $7,861, second at $7,020 and third at $6,728 respectively with the most expensive prices per square meter while the Dominican Republic came in at $1,324 as the most affordable market among the twenty Caribbean countries assessed.
“Real Estate in the Dominican Republic is much more affordable and better value than other Caribbean islands. [You can get] beach front condos for $140,000,” Century 21’s Dean Brown reiterated the republic’s price advantage.
“[The country] still offers some for the most affordable real estate in the entire Caribbean and this is especially true for middle class buyers…many other jurisdictions have become so pricey that only the wealthy can afford them,” said Schroder, the overarching message being buy now while the good prices are around because they won’t last forever.