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How Investors Can Make The Most Out Of Recent Punta Cana Real Estate Sales
An untapped market for savvy real estate investors is Punta Cana, located in the Dominican Republic. The area is located on the scenic eastern shores of the country and is commonly known as a popular vacation spot for tourists around the world, particularly Americans. Punta Cana is currently the most popular tourist destination in the Caribbean and is projected to remain so for many years to come. As the popularity of the area grows, so does the opportunity to make superior returns through recent Punta Cana real estate sales.
Attractive Fundamental Drivers:
When analyzing fundamental metrics that compromise the real estate market of not only Punta Cana but the Dominican Republic as a whole, they are very attractive. The GDP growth of the country has ticked upwards of 12% in the past ten years, with 6% GDP growth experienced in 2017. Such growth rates in GDP are usually reserved for much more volatile and politically unstable developing countries. The tremendous growth in the GDP of the Dominican Republic is a significant sign that the country’s economy is booming and thus the opportunity for lucrative real estate investments is growing in tandem.
Looking at more specific statistics, there is further evidence to support the notion that areas such as Punta Cana are home to very high yielding real estate investments. The average resale price for properties in Punta Cana has been growing by approximately 10% per year in the past decade. When looking at real estate opportunities in America, in comparison, 10% annual returns on capital invested in markets located in Los Angeles or New York are virtually unheard of. As the real estate markets of developed countries such as the USA and Canada continue to stagnate, places such as Punta Cana are still able to offer savvy investors extraordinary returns without the risks associated with more volatile countries.
Convenient Location and High Inherent Property Values
When looking at Punta Cana real estate sales, the concentration of listings is often found within 30 minutes driving distance of the international airport. Location plays a huge part in determining premiums paid for a given property. The fact that most of the famous beaches and tourists attractions can be reached by car in less than 10 minutes from the airport add a significant value-add to any old or new property in the area. Because of the inherent premium home buyers such as those looking for vacation homes are willing to pay in the area, investors may make significant returns by purchasing older properties and renovating for sale in the near future.
Furthermore, particular parts of the beachside location have reliable track records of producing returns that are high even within Dominican Republic standards. For example, exclusive residential areas that are found in Cap Cana have gained in value significantly higher than the average rate of 10% per annum. Speculation amongst investors suggests that other high-growth areas may include properties found close to the luxury La Cana Golf Club. Smart investors will keep an eye out on specific locations that have started to become trendy in Punta Cana to cease early and lucrative investment opportunities.
The right location for an investor will be highly dependent on how much capital they are looking to invest. The previously mentioned example of properties in Cap Cana is notably more expensive than the average price paid for properties in the area. Exclusive and luxury locations often have higher barriers to entry for regular investors, however, investing in these areas may be worth the opportunity for superior returns. Expensive luxury villas owned by famous individuals such as Oscar de la Renta have appreciated in value exponentially larger than the market at large.
Dynamic and Versatile Real Estate Opportunities
An interesting aspect of the Punta Cana real estate market is that high levels of returns are observed throughout all different investment mediums. From residential properties, large hotels and small commercial buildings, return on investment has been very similar. It is speculated that high population growth rates experienced in the Dominican Republic are fueling real estate market strength in all sectors. As the local population in areas such as Punta Cana grow in tandem with projected increases in the amount of visiting tourists, all components of real estate from commercial to residential benefit. In comparison, other Caribbean areas such as Puerto Rico are seeing negative population growth rates.
What this means for real estate investors is the opportunity to diversify their real estate holdings. Research has shown that in scenarios where real estate markets face downturns, commercial properties and residential properties are affected in differing paces and varying degrees. Although the market in Punta Cana is not expected to see any slowdown for many years to come, in the implausible scenario of a market downturn, diversification in investment properties will easily allow investors to mitigate any losses.
If anything, the strong performance of various categories of real estate is further evidence of the attractiveness of the Punta Cana market. If the most recent statistics of Punta Cana real estate sales are anything to go by, the amount of sales volume is increasing dramatically and is noticed throughout all types of real estate properties. Many successful investors in the area are noted for having various holdings in hotels, small commercial properties as well as conservative residential homes that have high inherent value due to location and other aspects such as architecture.
High Yielding Luxury and Developmental Opportunities
Considering the strong economic growth indicators and real estate market metrics of Punta Cana, many potential investors ask the question of where they can make the most out of their capital. Although great returns are experienced frequently in the area, smart investors understand that it’s important to always maximize opportunities for return when analyzing a particular market. Currently, much reporting has suggested that luxury properties, as well as new developments, are the best type of real estate investment to make in Punta Cana.
When looking at hotel rooms, only 8% of all rooms available in the Dominican Republic are considered to be luxury. When compared to other Caribbean countries, the percentage of luxury rooms is higher, with some being up to 15%. This trend is also noticed in tourist areas such as Punta Cana, where when compared to similar tourists destinations nearby, the amount of luxury rooms, as well as properties, is lacking.
Considering the statistics showcasing that tourism and organic population growth is set to boom in the coming years, investors that capitalize on the ongoing increases in demand for luxury properties will likely be rewarded. Interestingly, because the average home price in Punta Cana is relatively low when compared to American homes, at approximately $100,000USD, the price for luxury dwellings is nowhere near as out of reach as some may be led to believe.
Also, the ongoing flow of tourists means that tourist developments will be particularly high yielding in the future. Those with high amounts of capital to invest may find that getting in touch with local developers will allow them to invest in more exclusive developments such as luxury resorts that are projected to be valued multiples higher than what they initially cost.
Investor Friendly Taxation and Financing
Property taxation in the Dominican Republic is very relaxed, with property tax only having to be paid if valuation is over a certain threshold. Currently, properties that are valued at under 6 million pesos will be exempt from a large amount of taxation. Punta Cana real estate sale stats show that investor strategies of purchasing large amounts of cheaper dwellings to take advantage of tax laws are common.
However, the taxes required for properties that are over the designated threshold are quite low. Currently, the law states that a flat 3% property tax has to be paid on all real estate and that an extra flat rate of 1% needs to be paid on values over the threshold of 6 million pesos. Certain developed European countries are known to have property taxes upwards of 10%. Hence, these low and flat tax rates are very favorable for investors.
In addition, recent legislation has allowed tax exemption status for specific developments that are considered to be essential to the tourism boom being experienced by the country. Hence, a wide range of large-scale tourism developments is exempt from tax for up to 10 years. This extended timeframe means that investors can seize a lucrative opportunity then exit without having to pay any tax at all.
Finding Suitable Real Estate Opportunities in Punta Cana
The question of how to go about investing in Punta Cana is straightforward. The process is the same as any other developed real estate market. There are many comprehensive real estate listing websites available that outline all of the properties that are available in the market. Easy to use filters regarding cost, amenities and location can easily be applied to find suitable investments that fit investor criteria.
Furthermore, many highly experienced real estate agents are available throughout Punta Cana. These agents are often fluent English speakers and can assist experienced as well as novice foreign real estate investors for a variety of different purposes. These agents are readily found throughout the internet.
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