Puerto Rico’s housing market is gaining momentum, after several years of house price falls. During the year to Q2 2019, the seasonally-adjusted purchase-only house price index rose by 14.01% (13.24% inflation-adjusted), a sharp improvement from the previous year’s minuscule growth of 1.35%, according to the Federal Housing Finance Agency (FHFA).
It was the highest y-o-y growth ever recorded since FHFA started publishing data in 1995. During the latest quarter, house prices increased almost 5% (3.76% inflation-adjusted) in Q2 2019, in contrast to a q-o-q decline of 6.7% (-7% inflation-adjusted) in the same quarter last year.
During 2018, sales for newly built houses surged 78% from a year earlier while existing home sales rose by 17%, according to Estudios Técnicos, Inc. (TSI). Home sales are projected to continue rising this year.
Demand is rising sharply, thanks to new initiatives, including tax incentives and other housing stimulus measures. Insurance and federal aid money are pouring in, coupled with growing interest from Americans looking for a bargain. The top three municipalities with the highest number of home sales included Ponce, Mayagüez and San Juan.
The momentum is expected to continue this year, with total home sales rising by 3.5% to 5,393 units in the first half of 2019 as compared to the same period last year. Likewise, The total value of home sales rose by 16.1% to USD 845.35 million in the first half of 2019 from a year earlier.
Yet construction remains weak, amidst low investor confidence. In 2018, the value of residential construction fell 28.2% y-o-y to USD364.5 million, according to the Puerto Rico Planning Board – far below 2007’s USD2.33 billion. Private and public residential construction fell by 27.9% and 34.2%, respectively.
The housing market is expected to remain fragile, given the island’s prolonged economic crisis, massive debt and continuing population loss.
The economy is projected to contract by 1.1% this year and by another 0.7% in 2020, after almost 14 years of depression, according to the International Monetary Fund (IMF). Puerto Rico filed for the equivalent of bankruptcy protection in May 2017, unable to pay its massive debt or provide its citizens effective services.