SWEET MOMENT FOR THE REAL ESTATE SECTOR IN THE DOMINICAN REPUBLIC? DO WE HAVE THE DATA?

In the Dominican Republic, the real estate sector continues unstoppable being one of the sectors that leads the incipient economic recovery, threatened by the supply crisis, rising prices of construction materials, energy crisis and the war in Ukraine.

The gradual recovery of demand is affected by the increase in interest rates and the willingness of banks to lend in this scenario changes and slows down, as the minimum interest rates have led to the highest in a decade in the signing of mortgages on homes.
Mortgage loans showed an increase in their rates, going from 9.0% in December 2021 to 10.2% in March 2022.

The active and passive weighted average interest rates (TIPP) of multiple banks closed in March with levels of 10.3% and 4.8%, (+1.12 and +2.53 percentage points since December 2021) respectively. The rate of consumer loans registered increases compared to the previous quarter to be established at 16.2% per year. While the commercial rate also observes an increase compared to the previous quarter, registering the level of 9.3% to the month of March. By this date, the increase continues.
The weighted average interest rate on mortgage loans has increased by 0.90 percentage points, from 9.3% to 10.2% from March 2021 to March 2022. The mortgage loan portfolio has remained stable as a proportion of the total loan portfolio, representing 17.2% on average for the last 5 years, standing at 18.7% at the March 2022 cut.

In Spain, I like to take it as an example, other types of data are handled, the number of mortgages constituted on homes soared by 18% in the month of March, to add 43,378 loans, which is the highest figure in eleven years, since February 2011, and chains 13 consecutive months of increase.

Unlike other activities such as tourism or commerce, the real estate sector has managed to improve its numbers compared to the levels prior to the start of the Covid-19 crisis, since mortgages have practically doubled compared to pre-Covid levels.

The data published by the National Institute of Statistics (INE) partly reflect the good conditions of current interest reduction offered by the banks, which are causing many small savers to start buying housing.
In fact, the signing of mortgages to buy housing has soared by 20.2% in the first quarter of the year, while the borrowed capital has rebounded even more, by 29.4%. In monthly terms (September over August, 2021) the mortgage firm rose by 18.7%.

The average amount rises by 6.5%: 145,715 euros per mortgage
In parallel to the increase in the firm, the average amount rose by 6.5%, to 145,715 euros, while the capital borrowed soared by 25.6% year-on-year, to 6,320 million euros, its maximum value since February 2020.
-In parallel to the decrease in the incidence of the pandemic, mortgages for the acquisition of homes above pre-pandemic levels have skyrocketed, and also the improvement in other types of farms, although the upward trend has been noticed especially in the urban area, but it has not moved with the same intensity in the rustic. In fact, he relented.
In Spain, the fixed rate is imposed

In mortgages constituted on homes, the average interest rate is 2.53% and the average term of 25 years. 72.7% of mortgages on homes are already constituted at a fixed rate and the remaining 27.3% at a variable rate, so the fixed rate continues to be imposed, which accumulates eleven months in a row above 60%, according to the INE.
Experts in the real estate sector explain that a fixed-term mortgage allows the fee to be paid not to change, which generates certainty as it is always the same and allows families to plan more in the economy of their home, especially in the current context. By always applying the same interest rate during the life of the loan, users avoid sudden changes according to the increases or decreases of the Euribor. However, experts and entities such as Caixabank warn of a possible increase in the price of fixed-rate mortgages due to the rise in rates.
In turn, the average interest rate at the beginning is 2.15% for mortgages on variable-rate homes and 2.68% for fixed-rate mortgages. The Euribor is the rate to which the highest percentage of variable-rate mortgages is referenced, both before changes in conditions (65.8%), and after (42.4%). (Data from the end of 2021).

Now, what are the consequences of the parity of the Euro with the Dollar?
For countries and individuals or companies that issued dollar bonds, the depreciation of the euro increases the cost of repayment. The depreciation of the euro accelerates inflation and this may prompt the European Central Bank (ECB) to raise interest rates more quickly.

In theory, the depreciation of the euro makes prices more competitive and stimulates exports, so for companies that are export-oriented they benefit from the fall of the euro as their prices become more competitive, but companies dependent on raw materials and energy and that export little will register an explosion in their costs. Rates are going to go up.

With regard to Tourism, in a very simple way, fewer Europeans will be able to go to the United States and more American citizens will be able to enjoy Europe.

Returning to Spain, the regions with the largest population are those that concentrate most of the mortgages. The classification by communities is led by Andalusia, where 8,966 credits have been subscribed for the purchase of housing. It is followed by Catalonia (7,545) and the Community of Madrid (7,308), although they rise mainly in La Rioja (+55.2%), Aragon (+51.4%) and the Canary Islands (+37.6%).
However, the volume of money borrowed varies greatly between them as a result of the increase in prices in large cities. The Community of Madrid leads this classification with a disbursement of 1,604 million euros, which represents an increase of 17.5% per year.

Can we at the moment obtain facts and figures like the Spanish ones? Number of monthly and annual mortgage loans? Average amount of these loans? What are the regions with the highest growth and demand? What are the homes with the highest growth and demand? What is the type of rate that is imposed in the DR, fixed or variable?

Far from being an expert in economics or mortgages, I would like to handle more information on these issues, I would be even better Real Estate Advisor, for my clients.