EFFECT OF RECESSION ON TOURIST PROPERTIES

Many countries enjoyed a real estate boom between 2003 and 2007. And as such, after the storm comes peace: in 2008, one of the biggest recessions of the century was kick-started. Property prices dropped in many cities, especially those located in tourist areas. In the case of the Puerto Plata province, many of these apartments and houses are secondary houses for foreigners, making them the first to be put up for sale when their owners lose their jobs or are in need of cash flow.

As a consequence of a recession, the sale volume decreases, sometimes down to 80% of what is was before the recession, and the inventory of properties on the market for sale increases. In part, prices are determined by supply and demand, and since there is a surplus of properties on the market which is not selling, the owners in bigger need are forced to lower their prices. This lowering of prices drags those who did not want to sell with such urgency too, for if they would wish to sell they would have to hope for less, because there are more attractive prices available.

Tourist properties in the Puerto Plata, Sosua, and Cabarete areas were affected by the recession that started to show in 2009. Poor real estate activity during the 2008-2011, and as a consequence, also big opportunities for buyers seeking the same properties as before, but now being able to pay prices lowered by an average of 20%. In many cases, these owners were willing to sell at a price 30% to 40% under the original price, accepting a great loss.

The majority of tourist property sales made in 2012, which were relatively few, were done under big discounts. This is still happening in 2013, but less frequently because such underpriced inventory is being sold. Therefore, we are seeing a return to prior market values.

It should be noted that some of the new projects developed over the last few years did not suffer such a harsh drop in sales prices for they were new products and the developer often had no urgent need to sell. Plus, some of these products already had competitive prices.

Now is a good time to buy properties that have been up for re-sale for some years. A big part of these properties sold between late 2012 and the first month of this year, but some good offers still remain. In addition, many of the owners who are motivated to sell offer financing options for several years under low interest rates.

 Market-Opportunities2

This scaled effect is not applicable to properties outside tourist areas, due to the fact those properties are usually occupied by their owners or renters, and do not remain vacant most of the year, as is the case with tourist properties, which are used by their owners only on vacations.

This effect only took place in the south of the United States, for because of its warm weather, many North Americans have a second property.

Juan Perdomo

Real Estate Advisor: June 2013

 

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Neighborhoods: How to find that Perfect Fit

You’ve heard it – we all have – when buying or selling a home: “Location, location, location!” But what does that really mean? For some, it is the proximity to certain features of an area or locale. For others it is a view or access to water. Some prefer areas where properties are larger, for others it means places where there is access to entertainment or work, schools or healthcare. But, in many cases, it all boils down to one word: Neighborhood.

For some, when the word “neighborhood” is mentioned, it is a ticket to time-travel to their youth – complete with images of playing with friends in the cul-de-sac or street close to home, and mom calling kids for dinner. Sometimes it is the house, sometimes the other homes, the street, features of the landscape, proximity to the town center – however you slice it “neighborhood” is a powerful word. It speaks of cohesion, a sense of community, even of family. And it certainly can be part of how we shape our identity.

An attractive neighborhood can drive up the value of a property. The personality of a neighborhood shows up in the homes, yards, streets, schools, parks and stores that service the area. Neighborhoods also have life cycles – some are on the rise, while others seem to struggle, some are in transition, waiting to see who moves in to tackle whatever challenges might be facing the area. Places where homeowners are willing to interact and talk with one another can take on even difficult issues like crime, vandalism and litter or fun things like holiday celebrations and garage sales.

Neighborhoods are loosely defined; sometimes geography comes into play, or divisions created by roads or traffic flow. A neighborhood is a localized area within a larger city or town that often has its own social interactions where common values are expressed as individuals and groups of people interact. Chances are that when you find that perfect home, it is not going to be on its own – it is going to be in some neighborhood, and that neighborhood will affect your quality of life.

When you are considering a property, especially with a family, you might want to familiarize yourself with the various neighborhoods in your target area. The best way to determine if a neighborhood will live up to its reputation is to spend time there. If you cannot explore an area in person, ask your realtor or use the internet to do research. Visit the chamber of commerce for the town, and find the local newspapers online. Talk to people who have lived in that region and don’t be afraid to ask the tough questions: what do they like and/or dislike about an area, and why?

Issues like faith, politics, or tolerance for diversity are also revealed as you experience the climate of a neighborhood. These big issues are “timeless” – they permeate the day-to-day life as you walk to and from your home, as you work on projects and even decorate in and around your home. Explore the neighborhood around holiday times if you can and notice the details. How many cars are on the street? How do the outsides of the homes and buildings appear to you? Are there kids and families, and is that important to you? Do people seem to entertain and have friends and family about? Or do the houses seem empty and people celebrate in some remote locale? New Year’s, July 4th or other times – is it an endless party, or a tranquil enclave? Answers to these questions will aid you in finding a neighborhood that is right for you.

Taking enough time when you visit neighborhoods can be difficult, but worthwhile. If you can get to the area where you will move, try to mimic your own daily routines as you explore. If it is a work day, seek to drive the streets around the times that you might leave and return from work. Have meals in local restaurants and visit the grocery stores during the time of day that you might shop. Notice the details and sense how you feel in these places. If you will commute to work from the new neighborhood, try driving the route. Keep a record of your experiences and feelings, as they might help you to clarify a tough decision. Try having coffee and reading the local paper in a place with people your own age and see who is there. If you run, bike or play a sport, try to find out where you would do that in this new area. It is your lifestyle, and your neighborhood should fit that.

Drive around and notice the gas stations and schools, scheduling your trips when you might be seeing parents drop off or pick up their kids. Parents of preschoolers might want to explore the local parks and take some time in them to determine the level of use and how comfortable you feel there with your children. Whenever possible, talk with people and see what they enjoy about living in the area. If you are a person of faith, you will probably want to inquire about houses of worship, and possibly attend a service. Be sure to drive the streets of your neighborhood at night. Is there adequate parking? Do you feel safe? How are the noise and light levels? Who is on the streets? You should feel comfortable with the answers to these questions.

Wandering the streets as a “tourist” in what might be your new town or neighborhood is not the same as living there, so you might want to slow yourself down and seek to experience the mundane. Try using the library, working out at the pool, community center, or gym. Go to the equivalent of places where you or family members frequent in your current home. Pop into the dry cleaners or Laundromat, corner store and pharmacy. Go to a post office or a bank, ask for help at a hardware store, locate town hall, and find the courthouse or police station. You might never need these services, but familiarizing where they are in relation to your target neighborhood will help you to understand the people living in the area and give you a sense of who they are. While you might not feel comfortable in these places now, you should be able to imagine yourself coming back again and again, and seek to find a neighborhood near to places where you feel the greatest sense of potential or possibility.

There are those who enjoy a challenge – they purchase homes or properties in neighborhoods that are “less desirable”. While the home may be just what they were looking for, the neighborhood is not. Overcoming the obstacles of a neighborhood that is not to your taste can call a person or family to reach further and deeper than ever before. When this is the case, consider your ability to communicate with those around you, and try to understand the climate for change. Perhaps the change starts with you. This is a risk, but you know it going in. If you have done your due diligence in exploring the neighborhood in advance, then you can decide whether you will be involved in the development of the neighborhood or “wait it out” in a more passive way as the neighborhood changes about you.

Discovering a neighborhood is “finding yourself” all over again – it is a chance to rekindle what is important to you. In fact, you might find that you have a neighborhood where you will live and another neighborhood in which you will work – and they might be close or far apart. You may have other neighborhoods where you shop or find your entertainment – but when you plan to move to an area, take the time to see beyond the minutes to work or school. Seeking out the soul of neighborhoods can ground you in a place and help you to understand where you fit in and how you can make a difference.

Our Dominican Central Bank Economic Overview

Central Bank Economic Overview

For the third straight year the Dominican economy exhibited a solid growth of 8.5%between January and December of 2007. The country’s GDP, calculate donm Base 1991, grew on average 9.5% between 2004 and 2007. adding the dynamic growth displayed by the Dominican economy is the continued growth of different sectors including finance (25.6%), communications (14.9%), commerce (13.9%) energy and water (9.7%), transport (6.8%), teaching (5.7%) and other services (5.2%), Also, the nation’s local manufacturing sector registered an increase of 4.8% while construction hotels (bars and restaurants included) and agriculture grew 3.2%, 3.7% and 1.2%, respectively. However, there were some sectors of the Dominican economy that did experience negative growth during 2007 including mining (-1.4%), free trade zones and (-10.0%). 

In terms of costs, private spending increased 12.3% as a result in the strengthening exchange market and a relative inflation stability. Other factors which attributed to the to the dynamism of private consumption was a 31.4% increase ion banking credit to the private sector and the expansion by 22% of dollar valued goods.

Inflation at the close of 2007 was a stable 8.88%, maintaining single digit numbers despite international and external pressures on the Dominican economy. According to the Central Bank inflation could have been as low as 5.68% had it not been for the exorbitant rise in international petroleum prices. Also, according to a Central Bank report the Tropical Storms Olga and Noel caused massive damage to the country and caused for an increase in the levels of inflation. Unemployment, at the close of 2007, saw a 0.1% decrease with a15.5% unemployment rate in relation to April 2007 and a 4.2% decrease in relation to October of 2007. These figures reflect the creation of 392,113 new jobs between April 2004 and October 2007. 

The balance on the current accounts in 2007 was –US$2.23 billion, according to the Central Bank, due principally to the increase in the defect on the balance of payments

In absolute terms imports in 2007 grew to US$13.81 billion, for a total increase of US$1.64 billion when compared to 2006. The increased need for peotroleum and te sky prices reflected an increase in total imports. Petroleum imports increased by US$479.3 million during 2007 . 

In absolute terms exports, including free trade zones (FTZ) grew by US$627 million in 2007. this was due to the genral price increase on merhcandie and the increase in worl nickel prices, of which the DR is a top producer. Another factor in the increase in exports was the increase in non traditional products which grew by US$263.8 million 2007. FTZ exports during the same period decreased by 2.5%. 

In terms of the balance of services, torusim generated an additional US$108.7 million in revenues with a 1.7% increase in the amount of tyourist and a 3.1% increase in spending by tourists. 

Remiitances also experienced increases. According the Central Bank remiitancs grew by 10.8%, which represnted 7.4% of the GDP and 89% of transferred registred in the balcnce of payments. 

Foreign direct investment (FDI) has also been on the rise. Accroding to initial figures the financial and capital accounts closed with a US$2.554 billion surplus in 2007, more tan US$764 million at the close of 2006. 

The DR has continued its continued growth and at the end of 2007 the Central government had a surplus of US$1.619 billion. The Non Finacial Public Setcor (SPNF) also ended the year with a surplus of RD$1.450 billion, whioch is amazing considering the government also increased its spending during this period, dur in part to TS Olga and Noel. ECLAC reports that about RD$14.125 billion were spent on storm recovery. Governmnet revenues increased 25% during the period in question, in relation to 2007, going from RD$188.9 billion in 2006 to RD$236 billion in 2007. However spending increased by a total of RD$36.14 billion (17.6%) in comparison to 2006.