Juan Dolio - South Beach of the Caribbean !!!

[mikey007]

if that is the case fernandez dont you think with the recent comeback of the dollar reaching a 22 month high against the euro and sterling, that these dollar denominated realestate investments will appreciate in the next year in light of construction prices also increasing

[Fernandez]

The Euro weakness is due to the fact that oil has retracted, and dollar investors took to the Euro to hedge the increasing price in oil, as well as other commodities that are quoted in dollars and which are now perhaps a bit oversold. The spiraling decline in Eurobased economies will now force the CB to look at rate reductions - hence another possible factor for dollar strength. However, the price of construction goods (steel / cement / etc.) are stable at this point. There is a reason to consider these will drop again in view of the global glut in real estate- the DR might be a different case, as we know prices are inflated unrealistically. Yet if you look at the past months trades and quoted prices, you will see a significant move downwards in prices.

This is not to say it will be sustained and/or longer term, but there is a window of relief for consumers to readjust to new - more permanent- higher prices. And thus, there has been an increase over the past 2 years in prices...including those in the DR.

I think that the Juan Dolio market suffers from a few problems:
1- The buyer base (as we recall these were always defined as Europeans and primarily Spaniards if you look at the past posts) has disappeared. We were told by others more informed on condominium sales in the Juan Dolio area that sales were mostly immune from declines do to these investor types, and not reliant on USA investors who had basically disappeared. There are many more opportunities now to buy in their home countries at incredibly reduced prices which are still dropping....
2- Your point about the dollar further makes Juan Dolio (USD) real estate less attractive- as it is now at a 22 month high against their base, and thus +12% vs. their costs a few months back;
3- If you walk South Beach Miami you can come upon prices not seen in the past 10 years, and these will first be taken out before someone considers the risk associated to the Dominican Republic - both Americans and Foreigners alike.
4- The socio/economic plight that is exploding in the DR- (look at yesterdays posts about Santiago and the riots there), the dangerous currency over-valuation, the continued lack of transparency in government finances, the look for additional tax sources etc. (there are many more factors) etc..
5- Apartment Glutt...too many units hitting the market at the same time - perhaps an issue if there was transparency in sales data.

The DR is losing its luster, and its no fault of any one factor. The spectacular 90's growth rates are a thing of the past; the government is out of control and the narcotics/social unrest problems cloud the investment horizon. Apartments will sell- but I think at reduced prices and in some cases, significant discounts. People need to revisit their earnings expectations and consider a small gain a very good thing at this point.

[mikey007]

there is one additional point which might help foreign real estate investment by americans and that is the current state of the tax structure. the inheritance tax and taxes in general with respect to capital gains on real estate,there is political chatter that these taxes will increase to redistribute the wealth in america .

[mikey007]

are there more opportunities in panama and costa rica since they do not have the socio-economic issues on the same scale as dr

[mikey007]

thanks for all your well informed posts Fernandez

[Fernandez]

IE: Estate Taxes
My impression is that the USA taxes estates on capital gains based on a scale value, exempting an amount below a given threshold- the debate is if the tax adjustments under the Bush administration will be cemented and/or changed under the new administration. In either case, Dominican capital gains are still subject to USA taxes for US citizens that own real estate in the Dominican Republic-

I am traveling to Panama next month to visit a Energias- a refining and distribution project underway on the Pacific coast and being promoted by the government of Panama. I plan to spend a few days with developers there (BTESH and others) to get data on their developments. With respect to real estate investments there, I am not yet well informed and would suggest you investigate further-same with respect to Costa Rica.

[slug]

I have properties on the northcoast and I would happily take a small loss just to be rid of them. Juan Dolio is booming compared to Sosua, Cabarete, etc.

[Fernandez]

Originally Posted by slug

I have properties on the northcoast and I would happily take a small loss just to be rid of them. Juan Dolio is booming compared to Sosua, Cabarete, etc.

Maybe you can find a trade for lots or something in Juan Dolio.
What kind of properties do you have in Sosua- Cabarete?

[Fernandez]

quoted from DR1
""Overall, we plan to maintain the investment climate for tourism, and work to increase number of tourist arrivals because we are aware of the importance that this ministry has for the country and the challenges ahead so that it may contribute to improving the level of economic stability in the country," said the new minister."

An important change in a very important government position. Given the current state of affairs in the country and the economic strains being felt, the tourism market is once again a major focus of revenue. The competitive advantages of tourism in the DR have declined, and fundamental and important changes (tax/currency/costs) need to be made, and a tourism culture needs to be developed in order to bring tourists back. Right now, development projects are dead- many due to government interference and influence on deals.

Tourism will require a less expensive currency- there is significant pressure building on the peso....

[Fernandez]

QUOTED TODAY DR1
"Cement prices too high
The Dominican Construction and Housing Promotion Association (Acroprovi) is demanding that cement and metal bar producers lower prices. ACROPROVI president Jaime Gonzalez says that the price increases of 5% for metal bars and 20% for cement are unjustified since fuel prices have gone down 30%, reducing the cost to produce cement. He added that increases in material costs would eventually cause a 5% to 8% increase in the price of housing. He said housing sales have decreased 70% since January.

Another confirmation of just how bad things are ....and, as we had discussed in past posts, it is most probably going to get worse.
so- I still wonder where the buyers are, despite these great opportunities.