Feb 26, 2021
We begin the new year 2021 taking stock of the atypical year 2020, with a strong impact on economic activity due to the COVID-19 pandemic and thinking about all the challenges that lie ahead in the real estate sector.
An exceptional year 2020 marked by the coronavirus. Who was going to tell us a year ago that we were going to have confinement, mobility restrictions, a regular use of hydroalcoholic gel and mask, postpone vacations to other countries or even regions of Spain, or avoid meetings with family and friends? The year we left behind has left us with a “new normal” that we will try to analyse.
What happened during 2020, the year of the pandemic, in the real estate sector?
To a greater or lesser extent, the coronavirus has changed everyone's way of life. The real estate market has not been immune to this reality and activity has also been altered. We give you some details.
Changes in the needs of our housing
The confinement we had to endure at the beginning of the pandemic made us spend a lot of time at home. Those weeks locked up in our home made us miss larger spaces, to telework, to disconnect, to exercise, far from urban areas.
In our portal we have seen an increase in interest in villas and chalets located in the Sierra de Altea, with large plots, swimming pool, terrace, or garden, close to green and natural spaces. Even with additional spaces such as basements, lofts or even guest apartments to be used as an office for teleworking.
A new boost in housing interest in the second half of the year
The need to look for a new home that meets our needs has caused a strong demand for housing. Since the beginning of the de-escalation, the real estate market has been much more dynamic, ranging from apartments near the sea with special offers to spacious villas surrounded by nature.
Our real estate portal has practically doubled the traffic from the summer with respect to the month of April with full confinement. The real estate sector has more than responded to this demand, applying all the anti-COVID-19 safety and hygiene measures so that the entire buying and selling process is totally safe for both owners and buyers.
From tools and platforms in the cloud such as WhatsApp Live Chat or digital documents, to the negotiation and formalization of the sale in secure environments, through the conscientious application of all security measures before, during and after visits to homes.
Today Altea continues to be one of the safest destinations against COVID-19 with a very low incidence.
Changes in the sale and purchase market
The COVID-19 pandemic has rethought the needs and requirements when deciding to buy a home. The uncertainty when buying a home is undoubtedly what most influenced the situation of the coronavirus.
Many potential buyers will surely have more doubts than before when deciding to buy a home and decide to wait for a possible price drop. Surely many owners have decided to lower these prices because they had a certain urgency to sell. But this is not being a general trend in the real estate market. The higher demand for housing has meant that prices have not experienced sharp drops.
At the moment the owners do not need to lower the price of the house for sale. The biggest drops come mainly as a logical consequence after several years of uninterrupted rises.
The rental market has also undergone changes both in price and from the point of view of supply and demand. The pandemic has caused many people to no longer look for housing to rent (interest drop from 49% to 44%), but to buy (interest increase from 39% to 43%).
Despite this, and although many vacation homeowners have switched to residential rental, the offer is not enough. Therefore, rental prices have not experienced major drops.
What is expected to happen in 2021 in the real estate sector?
The COVID-19 pandemic seems to have opened a new path in the real estate market: greater interest in buying a house compared to renting, the search for spacious single-family homes on the outskirts with outdoor spaces, etc.
The consequences of COVID-19 will probably last throughout this year 2021, where all actors in the real estate sector will have to face new challenges and changes to adapt to this situation.
Stability in the sale
November 2020 marked a turning point, recovering the downward trend in house prices. After 11 consecutive months of decline, the price rose again slightly by 0.7%. The factors that have led to this rapid stability are basically two:
- growth in demand for home purchases after lockdown,
- the property sentiment rooted in Spain, also favoured by high rental prices.
That is why in 2021 no big falls in prices are expected, although the trend may inevitably be downward. In fact, the current boom in buying and selling may cause prices to register small rises and falls during part of 2021, especially in beach areas such as the Costa Blanca or large cities. It is also expected to recover the rhythm of the new construction and the rehabilitation of used housing.
Investment in housing
The real estate sector continues to represent a safe haven in which to invest. Given the low profitability of traditional investment products, buying a home as a safe and stable investment is still a good option.
The most attractive properties to invest in will be homes in good condition, well located in large cities or near the coast, with surfaces between 80-100m2 and 3 rooms. This type of housing is the most sought after by the rental demand and will be quickly profitable by the investor.
A new way of working in real estate
Real estate agencies have had to adapt their way of working to adapt to the new normal imposed by COVID-19. The trend is to get to know the homes through photos and videos, leaving face-to-face visits for the last step. In addition, these will be very limited, following all relevant safety and hygiene measures.
In the same way, it will be important to implement new platforms and online communication tools, such as virtual visits, cloud documentation, digital signatures, chats, video calls. Not only thinking about anti-COVID-19 security measures, but also as a way to make all kinds of paperwork and procedures more flexible and streamlined.
Growth of The Real Estate Sector By 2021
If you dedicate yourself to the real estate business, you will be aware of the expansion that it has enjoyed in recent years. However, given the current situation, you may have many doubts about what the future of the sector will be like.
To help you clear up these questions and see everything clearer for 2021, we give you the keys that will mark the coming events of the world of housing in the Dominican Republic.
The Dominican companies dedicated to housing are in a period of change. Changes that, well analysed, represent an opportunity if we take the appropriate actions. Among these, those aimed at digitization have a special role.
Being in the final stage of the year, the time has come to look further and contemplate what the situation of the sector will be like in 2021. Something that will be essentially marked by the trend experienced so far, to which we must add the factors of the current situation.
The Growth of The Dominican Real Estate Sector
At the beginning of this year, the figures for the Dominican real estate sector were most encouraging for the rest of 2020. This is shown by data such as those offered by the President of the Association of Real Estate Companies (AEI), Claudia Castillo. Among these, we can highlight:
- An upward trend in the real estate market.
- The main drivers of this growth were investment apartments, tourist residences and low-cost housing.
- Bank loans for homes had grown more than RD $ 6.8 billion, according to the Central Bank of the Republic.
- In 2019, the contribution of the real estate sector to the national Gross Domestic Product (GDP) was 10.6%.
- Real estate activity was the one that contributed the most to this rise in Dominican GDP in the last two years.
- The Monthly Indicator of Economic Activity (IMAE) of the Central Bank of the Republic offered a year-on-year growth of 4.7% in January.
- Among the economic activities that contributed the most were real estate and construction activities.
State Initiatives to Promote Real Estate Activities
This very favourable situation of the real estate sector in the Dominican Republic has several causes. Among them, we highlight the initiatives that public institutions have taken in favour of the acquisition of homes.
On the one hand, we can highlight Law 189-11 for the development of the mortgage market and the trust in the Dominican Republic. According to his second article, his main goals are:
Object of the law:
The purpose of this law is to create the necessary legal figures and strengthen the existing ones, in order to develop the Dominican mortgage market, channelling resources from voluntary or mandatory savings, for financing in the long term to housing and construction in general, deepening the capital market with the expansion of alternatives for institutional investors and promoting the use of debt instruments that facilitate said channelling, which, together with the creation of special incentives, State contributions and process economies serve to promote housing projects, especially low-cost ones, as well as to encourage savings for the acquisition of housing by the population, in order to mitigate the significant housing deficit in the Dominican Republic.
In addition, we also highlight Smart City lahore which constitutes 8% of the value of the home for families who are going to buy their first home. In this way, the Tax on Transfers of Industrialized Goods and Services is offset.
Low-cost home construction trusts are also worth noting. With them, projects can be exempted from paying certain taxes.
Finally, among the State aid for the acquisition of a low-cost first home, we have the Land Bond. With this, the buyer will be free to pay the fraction of the price of the house corresponding to the land on which it is located.
Outlook for The Dominican Republic's Real Estate Sector In 2021
Returning to the reflections of the head of the Association of Real Estate Companies, this proposes a more than probable scenario for the real estate sector after the health crisis.
As he says, the current situation will only mean a parenthesis for the favourable trend in the world of housing in the Dominican Republic. Among the reasons that support this forecast are:
- The proximity to the United States and Canada, great economic drivers.
- The Foreign Investment Law, which favours doing business in the national territory by companies from other countries, with the consequent minimization of risk.
- With confinement, many families have realized that they need more space to live.
In addition, the importance that digital transformation will have for the sector is highlighted. Among these digitization actions, we have:
- Plans in electronic format.
- Virtual visits to homes.
- Digitized document management.
The Digital Signature for Real Estate Companies Of 2021
Within the new paradigm that is the new normal for real estate companies, the electronic signature is a fundamental element. This is applicable in multiple circumstances within the routine activity of these businesses. Among them, we can highlight:
- Promise and contract of sale.
- Payment of related taxes, such as transfer and registration taxes.
- Request for aid and bonds to the State.
- Registration of the sale in the Registry of Titles.
- Issuance of the Certificate of Title.
- Investigation in the Registry of Titles.
- Checking by surveyors.
- Inspection of improvements in a property.
- Materialization of internal procedures in real estate agencies.
In conclusion, the Dominican real estate sector expects a return to the favourable trend shown until the health crisis. Of course, to achieve this, the adoption of digital solutions is key.
Among them are those of electronic signature and authentication, essential for the management of all the documents involved, both with clients, with other businesses and with public bodies.