Some builders risk being sued by buyers, others have preferred to reduce their profit margins; some have halted construction awaiting stability; and others fear going out of business
SANTO DOMINGO– The COVID-19 lockdown reaffirmed the importance of having a home where people can find refuge on a daily basis. The obligation to remain indoors for an extended period forced many to rethink their priorities and bring forward their plans.
The growth of the construction sector, evidenced by the figures in many countries around the world, could be interpreted in multiple ways, and perhaps the most unquestionable would be: housing is a basic necessity for every human being, and owning one alleviates the hardships of the COVID-19 era.
The housing sector has its own chapter in the crisis generated by the paralysis of the global economy, and when we look at the local level, the reality indicates that, although the growth figures appear favorable, the situation of the sector does not look so simple.
Housing costs have skyrocketed by figures ranging from 12 to 30%, presenting diverse scenarios: builders risk being sued by buyers, others have preferred to reduce their profit margins to survive; some have stopped construction waiting for market stability; and a portion fear going out of business.
The coronavirus crisis is not without its consequences; its impact will continue to affect the economy for a long time. Regarding the work El Inmobiliario has been doing on the rising prices of construction materials, we consulted several industry players to get their perspective on the matter.
“I have a project under construction in Mirador Norte. When the pandemic started, we had sold 50% of the project; during the process, we reached 80%, and the 20% we sold afterward had to be increased by 12%,” explains Amel Rosario, from Constructora Palmetto.
This young entrepreneur explains that, because it was one of his first projects, he decided to sacrifice his profit margins, but that this increase does not correspond to the exorbitant increases recorded in construction materials.
Joan Báez, of Báez Mueses Real Estate, estimates that housing prices have risen between 25 and 30%. “All builders have been raising prices; there’s no way to finish a project at the previous prices.” She adds that some families have had to reconsider the type of home they choose to fit current costs.
Wilton Mueses, sales associate at Remax, detailed the current scenarios:
“Those who bought a year ago haven't been notified of the increase. Next year, the courts will be flooded with lawsuits due to the bankruptcy of some construction companies because many engineers or builders who sold some time ago, even if they don't have the clause for price increases, will be forced to raise prices. Others will absorb the increase, and others will go bankrupt because the cost of all materials has risen between 30 and 60%, and even land prices have increased.”.
He knows of cases where builders have backed out of business with buyers. To bolster his arguments about the general price increases, he mentions that an elevator he bought a year ago for $31,000 now costs $61,000.
The president of the Dominican Confederation of Micro, Small and Medium Construction Companies (Copymecom), Eliseo Cristopher, regrets the situation and assures that the last thing builders want is to raise project prices, but the current crisis leaves them no other options.
He also agrees that small and medium-sized construction companies will likely have to face buyers in court. “Many of us are building apartments under a trust agreement, with units that were pre-sold 18 months ago.”.
For the sector he represents, things get worse in a system where large corporations always have the upper hand. “The Dominican financial system is exclusionary because banks only lend to those who already have money. The most exemplary case is Banco de Reservas, which is supposed to be more open and yet puts up the most obstacles for small and medium-sized businesses when it comes to granting loans.”.
When analyzing possible growth indicators, even in the midst of this crisis, he cites: saved resources, increased remittances, low-interest bank lending, and the perception of growth instilled by the government.
