"The sector has already grown considerably in these first 7 months. Future growth will depend on several factors, including: the North American and European economies, the stability and/or decrease in construction material prices, and the growth of other productive sectors," explains engineer Rafael Durán.
SANTO DOMINGO.- The rise in construction material prices did not stop the sector's growth during the past year, which according to figures provided by the Central Bank of the Dominican Republic ended up as the second category among those that registered the greatest increase in the period January-December 2021, with 23.4%.
However, since the start of the COVID-19 pandemic, the halt in maritime freight and, consequently, the shortage of many of the materials that the country imports, began to put pressure on the national market and drive up the prices of many of the items used in the construction process.
Although somewhat resentful of the situation, the industry nevertheless managed to stay afloat, amidst a scenario where housing became a high-demand commodity due to the pandemic effects that highlighted the need and importance of having a roof over one's head or expanding the existing one, given the uncertainty that the virus would not disappear and the lockdown would be prolonged.
The housing boom spread during the pandemic, as real estate agencies reported record sales, construction companies rushed to sell their projects in response to the surge in demand, and both new and traditional investors bet their capital on real estate.
“Without a doubt, 2021 has been a record year for sales and growth in the operations of our agents and companies in the real estate sector of the Dominican Republic,” declared Alberto Bogaert, president of the Association of Real Estate Agents and Companies (AEI), in January.
The ABA, the Association of Multiple Banks of the Dominican Republic, revealed that multiple bank credit to construction stood at RD$70,290 million as of December 2021, which implied a growth of 20% in relation to the portfolio registered at the end of the previous year.
The association highlighted that construction companies benefited from an expansion of credit in 2021 amounting to RD$11.641 billion. It noted that the growth rate in this sector was higher than that of the total loan portfolio of multiple banks, which increased by 11% during the same period.
2022 arrived with good projections and optimism
In her 21 years working in the sector, Alenny Garabito had never experienced such a buying frenzy. “We have been blessed; anyone who hasn't sold or has sold very little in the last two years should take a hard look at themselves,” stated the experienced agent, who added that the Airbnb boom contributed to growth during 2021.
"The outlook is promising, the reason is basically because as a country we have four engines driving the economy and as long as they work our sector will benefit," explained Bienvenido Paulino, of Plusval Venta Directa, when considering the outlook for 2022.
The sectors he referred to are tourism, remittances, free trade zones, and construction. He cited several specialized international publications that rank the country as a destination to consider for investment, which he believes will benefit the sector.
But no one counted on the unforeseen global events, and the chain of difficulties arrived threatening the dynamism of one of the most dynamic sectors of the national economy, which nevertheless struggles every day to stay afloat despite the multiple challenges.
In the first four months of this year, the Central Bank of the Dominican Republic's Monthly Indicator of Economic Activity (IMAE) registered a 4.6% growth for the construction sector. In January-May, it increased 3.2% year-on-year, a result influenced by the considerable rise in the price of construction inputs and by the statistical effect of the base of comparison, since in the same period of 2021 this sector registered a significant expansion of 53%.
“We developers are facing a complex situation because prices have undoubtedly risen enormously, and for anyone who started building before the pandemic with set prices, things have become complicated because prices have risen astronomically,” says engineer Juan Alberto Chalas.
His project was barely in the excavation phase when the pandemic started, so he has been affected by all the price increases recorded in the various items.
A recent study by El Inmobiliario, a digital newspaper, revealed that construction materials have registered increases of up to 250% in the last two years.
To the litany of price increases triggered by the pandemic were added the tanks, fired from Russia and Ukraine since February, adding a new difficulty to those already existing in the sector, given that both countries are among the main suppliers of steel. “We imported more than $300 million worth of iron and steel from Ukraine last year,” stated economist Magin Díaz.
More than 35% of the iron and molten metal consumed in the Dominican Republic came from Ukraine, said the Dominican Steel Association (ADOACERO).
The ongoing war between the two countries has caused global economies to become unbalanced and their growth projections to change due to the inflation unleashed by the conflict.
The United Nations (UN) predicts that the war in Ukraine will decrease global economic growth and could generate a recession in developing countries
The UN Conference on Trade and Development (UNCTAD) reduced its global growth forecast for 2022 by 1%, placing it at 2.6%, while ECLAC estimates that the economies of Latin America and the Caribbean will grow by only 1.8% in 2022.
At the beginning of the year, the Central Bank of the Dominican Republic (BCRD) projected economic growth of between 5.5% and 6.0% for 2022. However, given the uncertainty associated with the international environment and the orientation of monetary policy by most central banks towards normalizing liquidity levels to stabilize the inflationary process, the BCRD indicates that the prospects for economic expansion have become more conservative, revising global growth projections downward from 4.4% to 3.6% according to the latest IMF .
“Following the effects of the pandemic and the conflict between Russia and Ukraine, the cost per square meter of construction has increased by 38%, according to the Housing Cost Index (ICDV), due to the rise in construction materials,” stated the Association of Housing Developers and Builders (ACOPROVI) this week. The association expressed its opposition to the current application of taxes to the Airbnb platform, the latest battleground for the sector against hoteliers who insist on taxing digital platforms, arguing the need to regulate short-term rentals.
"The sector has already grown considerably in these first 7 months. Future growth will depend on several factors, including: the North American and European economies, the stability and/or decrease in construction material prices, and the growth of other productive sectors," explains engineer Rafael Durán.
He argues that the sector has grown significantly, taking into account the rise in construction materials.
