Year-on-year inflation moderated to 5.13% in August, but price behavior was not uniform. According to the Central Bank of the Dominican Republic (BCRD), while the Consumer Price Index (CPI) rose 0.38% during the month, non-tradable goods and services registered a variation of 0.52%, more than double that of tradable goods, which was 0.24%
SANTO DOMINGO. – For the real estate market, this data offers a different interpretation than that of general inflation: several of the expenses that are part of the recurring household budget increased during August, creating competition with the installment that a family must assume when deciding to finance a home.
According to the Central Bank, the sector that registered the largest monthly increase was Education, at 2.72%. The institution attributed this result primarily to increases in private school tuition fees for preschool, primary, and secondary levels, associated with the start of the school year and the enrollment process. The Central Bank also reported increases in university education, textbooks, and school transportation.
The effect on the family budget is different from that of an increase in housing prices. Education is a recurring expense, and for households that undertake it, it forms part of the commitments that must be considered when assessing how much income remains available for other payments.
The Food and Non-Alcoholic Beverages group registered a variation of 0.42%, according to the Central Bank report. The institution reported increases in several products, including potatoes, fresh chicken, rice, purified water, fresh vegetables, green pigeon peas, soft drinks, and passion fruit, although other food items decreased, moderating the group's overall result.
According to the Central Bank of the Dominican Republic (BCRD), transportation increased by 0.26%, mainly due to adjustments in the prices of regular and premium gasoline and diesel, as well as increases in motorcycle transportation services and school transportation.
Reductions in car prices and airfare helped to moderate the variation.
According to the Central Bank, Furniture and Household Goods also increased by 0.45%, and Health by 0.34%. In the first case, the entity noted increases mainly in cleaning and household maintenance products; in the second, in certain pharmaceutical products.
These are different expenses, but they have one thing in common for a household considering buying a home: they are part of the consumption obligations that are met with the same available income.
The CPI data does not allow us to calculate how much a family's ability to afford a mortgage decreases through this route, but it does show which components of spending registered increases during the period.
Tradable and non-tradable?
The Central Bank uses this classification to analyze price behavior. Tradable goods are those that can be traded internationally, so their prices may be affected by factors such as external market conditions and exchange rates.
Non-tradable goods and services have prices determined primarily by internal economic conditions, because they are not traded internationally in the same way.
According to the Central Bank of the Dominican Republic (BCRD), tradable goods increased by 0.24% in August, while non-tradable goods registered a variation of 0.52%. The difference indicates that, during that month, the price variation was greater in the non-tradable component of the Consumer Price Index (CPI).
The classification does not mean that all non-tradable goods are services, nor that their prices depend exclusively on internal factors. It is a statistical classification used by the Central Bank to analyze price trends.
A different kind of pressure on the budget
The August results also show differences according to income level, and this is confirmed by the data. According to the Central Bank, the monthly variation in the CPI was 0.32% for the lowest income quintile, 0.35% for the second, 0.37% for the third, 0.37% for the fourth, and 0.35% for the fifth.
The entity explained in its publication that the lower variation in the first quintile was mainly related to a lower incidence in the Education and Restaurants and Hotels groups, while in the higher income quintiles, reductions in car and air ticket prices helped to moderate inflation.
The result is relevant for real estate analysis because the ability to afford a home depends not only on the property's price. Expenses the household must maintain after acquiring it also play a role.
However, the Central Bank report does not establish a relationship between CPI variations and borrowing capacity or housing demand.
Construction and tourism
The Central Bank's inflation report does not include a new construction cost indicator that would allow us to determine whether the cost of building a home changed during August. Nor does it allow us to establish a specific change in hotel prices.
According to the Central Bank, the Restaurants and Hotels group increased by 0.39%, but the bank explains that this result was mainly due to price increases in meals prepared outside the home, particularly the daily special. Therefore, the figure cannot be attributed entirely to hotels.
The report also notes a reduction in airfare prices, which the Central Bank attributed to a seasonal decrease in demand following the peak travel period of the holidays. This data is linked to tourism consumption patterns, but it is not, in itself, an indicator of activity in the sector.
Thus, in summary, the August report contributes to the real estate analysis, mainly from the household spending side, that: overall inflation slowed, but some of the components that are part of their daily commitments registered increases.
For housing, the relevance lies in that composition of the expenditure, not in a causal relationship that the CPI data does not demonstrate.
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