dominican republic real estate

Dominican Republic Real Estate:

Is Buying Property In The Dominican Republic Still A Good Idea ?


We have written a large number of articles over the years but one thing we have espoused constantly during the past 17 years has been our faith in the emerging markets – And The Dominican Republic in Particular.  And with such looming potential problems elsewhere, such as negative interest rates, possible bank bail-ins and currency devaluations, we still have a tendency to believe that real estate, gold and other similar hard assets will be the preferred store of wealth in the coming years.  However, just like anything else, one wants to buy such assets at a fair price.  In this regard, the Dominican Republic still offers some the best real estate bargains in the entire Caribbean (see price per square foot or square meter comparisons below).  But the real question to ask is, aside from buying real estate an an investment, would you want to live there?  Is the market or country you are buying in still growing?

In the case of the Dominican Republic specifically, GDP growth for 2015 came in at a positive 7 percent.  According the World Bank's March 2015 report, GDP growth in the Dominican Republic has averaged around 5.5 percent annually between 1991 and 2013.  In addition, according to the World Bank's report titled Doing Business 2015, the Dominican Republic along with Jamaica and Trinidad and Tobago featured among the countries that implemented the most reforms in Latin America making it easier for local entrepreneurs to do business.  The World Bank also says that The Dominican Republic has weathered the global economic crisis well and in 2010 experienced one of the highest growth rates in the region.  National debt per capita is US$3,500 in the Dominican Republic.  In the United States national debt per capita has been calculated out to about US$60,000.  National debt in the Dominican Republic related to GDP is calculated at about 40 percent.  National debt in the United States is now over 100 percent of GDP and the debt to GDP figures for many EU member countries mimics the US.  The latest inflation numbers (as of August 2015) for the Dominican Republic report less than one percent as (actual was half percent).  In short, while the Dominican Republic continues to face challenges with job growth for it's citizens and a desire to see even more people move up from the working poor to the middle class (they have made tremendous strides in this regard over the last 15 years) the balance sheet is certainly more sound than it is in other markets, and especially so called wealthy developed markets.

Since most of our clients have a number of similar questions that they constantly ask, we are providing a list here of the most common ones.

Can foreigners own real estate in the Dominican Republic?

Yes, there is no restriction.  One need not become either a resident or citizen in order to purchase real estate, although many of our clients do so if spending more than 90 days at a time inside the country, or if deciding to live full time of course. However, a client need only present a copy of a current and valid passport as the identity document used for any sales contracts and eventual titles obtained from the title office.  Again, there are no restrictions for foreigners to own property and unlike Mexico for example, no restriction for ocean front real estate either.  Recent legislation passed in the country has also strengthened the legal rights of foreigners in the legal system as it pertains to property ownership and investments inside the country.  In addition, you may use a real estate purchase as proof of local economic solvency as it pertains the residency application process as well, should you wish to consider becoming a resident or even a citizen later on (Ascot Advisory can provide assistance with both the residency and naturalization process also).

Is there private title insurance available in the Dominican Republic?

Yes, there are two companies we know of that do offer local title insurance.  While obtaining title insurance may offer peace of mind for many buyers and while we can assist with this process, regardless of whether or not you decide for pay for private title insurance or not, in the least you should ALWAYS conduct a title search by a trusted representative.  Searching a title principally involves checking BOTH title offices where the title will be registered (the local office in the province or district where the property is located and the main title registry office also in the capital, Santo Domingo).  This is very important because it could be possible that a lien or encumbrance is registered in one office and not the other. Also, it is equally important to check to see of the seller owes any back due property taxes (there are annual real estate taxes in the Dominican Republic despite some incorrect information floating around, but it is very inexpensive by North American or European standards).  The reason for this that the tax office does not repossess property for back due taxes as a standard practice.  Instead they will keep a tabulation of the outstanding annual taxes that might be due, plus the 50-percent late penalty, and refuse to transfer title to the new buyer until all such taxes have been paid.  Obviously it would be better to know about any issues like this before you hand over any monies to the seller.  Obviously these kind of matters are what we assist with in terms of the due diligence process for clients.

What are some key features of the purchasing process I may not be aware of as a foreigner?

One aspect of the property purchase process that may be different for someone coming from another country is the fact that a notarized sales contract constitutes an immediate legal right of sale and possession.  The meaning of this is, the moment both the buyer and seller sign the sales contract, exchange payment and have the contract notarized, the buyer has the immediate legal right to take possession of the property.  Immediately following this, the process of registration of a new title into the buyers name begins, but in terms of legalities the initial notarized sales contract has legal weight under the law for ownership purposes.  Again, the title transfer in some respects can be considered somewhat of a formality that can take anywhere from 45 to 90 days, depending upon the expediency of the government title registration office involved.

Are there any taxes or fees to be paid as part of the title process?

Yes, and typically it is the buyer that would pay the costs for such fees or taxes, unless of course you are purchasing new construction in which case the builder or developer usually will cover the cost of the title included or factored into the sales price.  There are a number of government fees and taxes related to this process, some are fixed fees where as others relate to or are a direct percentage of the transaction amount.  Obviously once the sales contract is signed and notarized, the property is yours (as the buyer) so with this logic in mind, the title transfer process normally something the buyer would want to do for his or her benefit and it is the buyers attorney that would take charge of this.  The only down side to new construction involves the waiting for your title.  Meaning, usually many builders or developers will wait until ALL units are sold before they go through the expense of titles for each individual unit.  So, it could be the case that you take possession of your new apartment (condominium ownership) but it could also be the case that the builder has not yet sold all the units.  So, it is not that unusual for someone to purchase a new unit and not obtain title until perhaps 18 months after they have already been living in the unit.  Obviously if you purchase an older property whereby the seller does have title, then it is the case of your attorney filing for the new title in your name immediately. 

Are There Any Annual Property Taxes in The Dominican Republic?

That all depends upon the value of the home you purchase.  If you purchase a residential property and it is worth RD$4 Million Pesos or less (about US$85,000 under current exchange rates) then you pay ZERO annual real estate taxes.  If the home is worth more than that amount, you pay 1% (one percent) of the value over and above RD$4 Million Pesos (over and above US$85,000) annually.

Where is the best place to purchase real estate and what can I expect to pay?

The decision as to where you might want to purchase a home, farm or apartment of course comes down to you, in terms of lifestyle choices.  The Dominican Republic offers miles of typical idyllic Caribbean beaches, but also the highest mountain range in the Caribbean as well.  In fact, there is a section of the country that has been called the Alps of the Caribbean, complete with cooler climate, pine trees and ferns similar to what can be found in the US New England states (but fear not, Dominicans do not yoddle, unless of course they have downed a few too many Presidente beers).  Apart from that, there are the metropolitan areas of Santo Domingo (the capital city with a population of about 3.8 Million people) and the second largest city, Santiago (with a population of about 1 Million).  Many clients are in fact quite surprised in terms of what is available in these metropolitan areas, and you will find a large number of modern stores, supermarkets, shopping malls, movie theaters (new films in English, albeit with Spanish Language subtitles) and a whole lot more.  Some major chain stores and brands in these cities that many Americans and Europeans might be familiar with include Carrefours, Benneton, Radio Shack, Price-Smart (Price Cosco), Ethan Allan furniture, TGI Fridays, Outback Steakhouse, Tony Romas, Hard Rock Cafe, Applebee's, Zara, Mango and a very long list of other stores as well.  In fact, while many of these chains are closing stores in their respective home markets, they are opening new stores in the Dominican Republic (must be a reason). 

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 and 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. The Global Property Guide (a real estate guide from the UK) says that prime beach front property in the Dominican Republic sells at an average of US$2,000 a square meter, compared with US$10,400 in Barbados.  There is nothing wrong with Barbados, but it is worth 5 times the cost of similar, beautiful beach front property in the Dominican Republic?  We think not.  Of course all these numbers are averages and can be quite subjective.  From our own research, looking at condominium costs for brand new construction within the more affluent areas of Santo Domingo, we have seen costs ranging from about US$1,000 per square meter up to US$1,300 per square meter.  So obviously some of the numbers must be looked at with the understanding that there certainly may be a margin of error.  However, even assuming that margin to be 10 or even 20 percent, some of the difference are still staggering.

One very interesting phenomena we have noticed and discussed with out clients previously concerns single bedroom condominium units in the Dominican Republic.  While recent US university graduates are being forced to live home with mom and dad longer than what was the historical mean over the past 20 to 30 years, there is a trend of young professional Dominican singles buying their first condominium apartment in cities such as Santo Domingo and Santiago.  In short, while the previous norm in the Dominican Republic was for college aged children to live at home until they were married (partly for economic reasons, partly for cultural norms), we are seeing more and more builders dedicating a portion of new buildings in upper middle class areas to one bedroom units.  Since there is no plethora of aged baby boomer's in the Dominican Republic and most Dominicans would be appalled at the idea of placing aging parents into a nursing home, the only other demographic would be the young and single (or young and newly married) who now have the economic means to make such a purchase.  In fact, this has become an attractive tie in for many of our clients that have decided to send college aged children to university in the Dominican Republic.  How so?  Well, mom and dad can buy a very nice one or two bedroom unit for say about US$130,000 and their offspring has a place to live rent free while they go to school.  Then, once they graduate mom and dad has a unit they can rent out, probably sell for a profit or keep as a smaller home for their own retirement.  Now I know what you are thinking, it all sounds nice but what about the annual property taxes.  Well, there are annual real estate taxes in the Dominican Republic albeit for properties priced above US$90,000 (or actually the equivalent in Dominican Pesos under current exchange rates).  As such, the annual yearly real estate taxes for the US$130,000 condo is: wait for it, wait for it – US$400 per year.

In terms of what is fueling the local real estate market in the Dominican Republic (which should not be confused with the tourist market or properties marked to foreigners in beach front vacation areas) it is a case of increased affluence and not easy debt.  In terms of banking and mortgages, the local banks in the Dominican Republic have not lost their minds as have mortgage originators in the so-called developed world.  Mortgages are available from the banks in the DR, albeit with anywhere from 20 to 30 percent as a down payment and adjustable interest rates ranging from about 9 percent on the low end up to maybe 15 percent or so.  However, even with those kind of borrowing requirements, there is an active local real estate sector in the country which should tell you something.

So, in brief, the question is: Are there any safe haven stores of wealth remaining in the world?  Are there any kinds of assets or investments to consider for some of your longer term funds that hopefully would be more insulated from the events and markets in other countries?  The answer to both is YES, and considering a real estate purchase in the Dominican Republic can be used as a conduit for the faster track to citizenship investor program, and also considering buying lower cost real estate situated in a growing market usually yields positive results, we tend to think it is one investment idea worth considering.             


John Schroder is the author of this article and his firm, Ascot Advisory Services, has been assisting clients for 17 years in The Dominican Republic with residency applications, citizenship applications, banking and investment accounts, and other legal services (real estate contracts and title transfer, company formation services).  Ascot Advisory Services is not a real estate broker, but we do assist clients with title search, sales contract preparation and review, plus legal representation at closings.  In addition, we assist clients with the title transfer process as well.

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