What’s Driving Puerto Rico’s Real Estate Demand Today? Insights by Juan E. De Jesus

Explore the current drivers of Puerto Rico's real estate demand, including inventory shortages, tourism impacts, buyer challenges, and the role of tax incentives with the expert Juan E. De Jesus

Puerto Rico's real estate market remains robust despite signs of a gradual slowdown, driven primarily by a persistent lack of inventory and strong demand from buyers seeking homes to live in rather than smaller investment properties.

The surge in tourism has notably influenced property values in popular areas by fueling a short-term rental market that reduces residential availability and pushes prices higher. Local buyers face significant challenges including high mortgage qualification barriers, low inventory, competitive bidding, and questionable industry practices.

Meanwhile, construction struggles to keep pace with demand due to high costs and limited government support for middle-class housing. Although tax incentives exist, they often complicate and slow down transactions, with most growth concentrated in high-end developments. Juan E. De Jesus, Leasing & Administration Director, predicts that once the current market bubble bursts, repossessions may create new opportunities for investors and qualified buyers.

What’s driving real estate demand in Puerto Rico right now?

J: Real Estate demand is being driven by a lack of inventory and a market that though showing signs of slowing down it's still strong.

Are more people buying homes to live in or as investments?

J: Most people are buying homes to live in. Due to pricing the housing market is not very attractive for smaller investors.

How is tourism affecting property values in popular areas?

J: As in many popular tourist areas tourism is driving a short term rental industry that is converting residential properties, even in places that are not fit for tourists, and converting them to short term, which ends up contributing to the shortage of residential inventory and increasing asking prices.

What challenges do local buyers face in today’s market?

J: Main challenges for buyers include qualifying for mortgage based on price and interest rates which lowers the purchasing power of a buyer, low inventory , competition from other buyers, dealing with real estate brokers that are advising their clients to sell over appraisal value, and shady practices that are becoming common in the industry.

Is there enough housing being built to meet demand?

J: Due to construction costs and a lack of government programs for middle class buyers not enough housing is being built.

How are tax incentives and federal programs shaping real estate growth?

J: There are local incentives for first time buyers, but using such incentives to buy a home slows down the mortgage process and the home you're trying to buy might be sold to another buyer that doesn't need the incentive. Besides federal low income housing tax credits for low income housing projects not many programs there aren't many options that would drive real estate growth. 

Growth seems to be driven by high end housing projects that at this time are sold at a record pace, but once the economy slows down and the bubble bursts another round of bank repossessions will drive a new market fit for investors and qualified buyers.