Why Is Real Estate So Cheap in the Dominican Republic? Here’s Why
Why Is Real Estate So Cheap in the Dominican Republic? Here’s Why
The vibrant city life, stunning mountain scenery, and historic architecture of the Dominican Republic is why 6 million people visit every year making it the most popular tourist destination in the Caribbean.
For this reason, it can seem like a perfect place to live, but why is real estate so cheap in the Dominican Republic?
In our helpful article, we will cover some of the reasons to include the Dominican Republic in your property portfolio.
Let’s head straight into the mini takeaway, before delving into the details as to why, including plentiful lands, relaxed building regulations, and its moderate climate enabling house building to continue all year round.
The Dominican Republic has an abundance of land, meaning more real estate is available. Along with lower wage rates, relaxed building regulations, lack of buyer negotiation, and cost reduction in house building. Real estate is very cheap, and the warm climate ensures building all year round.
So with the short answer in mind, let’s begin by discovering how an abundance of land is one of the chief reasons to purchase real estate in the beautiful Caribbean destination which is The Dominican Republic.
An abundance of available lands
Although it may seem like a small nation on the map, the Dominican Republic is abundant in land supply, which is a fundamental reason why you might find real estate cheaper here.
It’s for this reason that many foreigners are attracted to buying lands in the Dominican Republic as an investment.
Also, the flexible rules for FDI in the Dominican Republic are another reason which keeps land costs low.
So anyone wondering why real estate is cheaper in the Dominican Republic, another main reason is the availability of land.
“The Dominican Republic is abundant in land supply, which is a fundamental reason as to why you might find real estate cheaper here.”
Excess land supply
In healthy market conditions, excess supply when demand remains the same, causes the prices to drop. It’s this principle that keeps land here cheaper.
This same excess supply principle applies to property and real estate.
The price of real estate usually includes the cost of the land when bought, the value of the land when selling (depending on the availability of lands at the point of selling), and the cost of building it.
Only building costs need to be added
So when the cost of purchasing land is less, only the building cost will need to be added. This includes the value of land, which results in the end selling price is cheaper.
Here’s a simple diagram explaining how land and building costs are cheaper in the Dominican Republic when compared to other nations, such as the USA.
More lands, less added costs
With the Dominican Republic having a surplus of land and fewer added costs, real estate is overall cheaper when compared to neighboring countries in the Caribbean.
In simple terms, the availability of excess land in the Dominican Republic has made it cost-effective and cheaper to buy real estate.
The more land there is, the more houses and the more supply there is on the market, which reduces the overall price of real estate.
Lack of price negotiation
Many buyers in the Dominican Republic are aware of the supply patterns and the range of prices real estate is usually offered by agents and owners.
So even if real estate owners increase the price of lands and properties, customers are less likely to negotiate as they are fully aware of the abundant land supply and the booming real estate industry.
Instead of negotiation, buyers will often go with cheaper options.
For this reason, real estate owners generally place their properties at the lowest in the market to attract buyers.
This competitive pattern has made real estate steadily cheaper in the Dominican Republic for many years now.
Lower wage rate
Most of the people in the Dominican Republic are low-middle income earners, who live a simple lifestyle.
Wages here are generally on the low side. So for this reason, many locals are unable to afford high-priced real estate. Even a low-priced villa under $60k is still largely out of many local’s price bracket.
The income pattern of countries directly affects monthly wages, which in turn affects real estate prices. Which is one of the other main reasons property and real estate is cheap in the Dominican Republic.
Lower labor cost
Again connecting to the low-wage rate, real estate prices directly depend on the cost of building, which significantly depends on the cost of human labor.
So as it’s fairly easy to see, the low land price (because of abundance) added with low labor cost makes it possible for real estate owners to tag their properties at a low price.
Alongside making a solid profit, perhaps triple or even above the cost incurred to buy a land or build a home.
Adding to this, labor is also easily available in the Dominican Republic.
This is mainly because the white-collar job market is very narrow in the country. This reduces sourcing costs, facilitating cheaper end prices for real estate.
“Wages here are generally on the low side, so for this reason many locals won’t be able to afford high-priced real estate.”
Relaxed real estate and building regulations
One of the major reasons why real estate is expensive in many parts of the world is because of different rigid regulations imposed on land, building properties along with higher real estate taxes.
Even if you consider simply purchasing land there is a wealth of taxes and regulations.
Rigid regulations generally discourage house building, which in turn reduces or limits the real estate supply.
In normal demand and supply conditions, low supply naturally surges the prices, making real estate expensive.
However, in the Dominican Republic, with its relaxed regulatory environment, it’s simpler to build and sell real estate.
On the other hand, It’s worth understanding that real estate in the Dominican Republic is up to accepted safety qualities as builders do have to abide by certain established quality standards for approval.
Other permissions, which often mean home-builders have to wait a considerable time before building homes, are not a consideration here in the Dominican Republic.
Fewer hold-ups mean more houses can be built and sold.
“Rigid regulations generally discourage house building, which in turn, reduces or limits the real estate supply.”
Lastly, another reason for Dominican republic real estate to be cheaper is its natural moderate and relatively tropical climate.
When building homes here, the right season to build is not an issue that has to be considered by home-builders.
House building can often require the right weather conditions and seasons which means it can often take a long time for houses to reach the completion stage.
Homebuilders in the Dominican Republic have less precise engineering to consider when building property that can withstand issues like hurricanes or rough winters.
Houses built in areas with extremely cold weather which then changes to a warmer season can be costly as home builders need extra infrastructure and facilities in order to withstand the temperature changes.
This increases the building costs and makes the end selling price expensive.
The all-year-round steady temperate climate of the Dominican Republic makes it easier to build homes and put them on sale faster at a cheaper price to compete in the market.
More Real estate help in the Dominican Republic
So if this article has given you everything you needed to know about why real estate is so cheap in the Dominican Republic, don’t forget to check out our website to find some of the best properties you can view in the Dominican Republic.