Register - if you don't have an account

Yes! Sign me up for Global Property Guide's fortnightly email newsletter.

Login - for registered users

Forgot Password?
Explore destinations
continent map couldn't be loaded Pacific Europe & Russia North America Latin America Asia Africa Middle East Caribbean


Financial Overview


Property Search

Global Statistics

Regional Statistics

Last Updated: Jan 02, 2016

Puerto Rico’s housing market is now showing some signs of improvement, after previous house price declines. During the year to end-Q3 2015, the seasonally-adjusted purchase-only house price index rose by 3.97% (4.51% inflation-adjusted), in sharp contrast with the annual decline of 5.7% a year earlier, according to the Federal Housing Finance Agency (FHFA). On a quarterly basis, house prices increased 2.76% (1.88% inflation-adjusted) in Q3 2015.

In fact, the luxury segment is thriving, according to local property experts. This is because Puerto Rico’s high-end market attracts mostly high net worth individuals and foreign investors who are not affected by the debt crisis, and who want to take advantage of tax incentives being offered by the Puerto Rican government.

Puerto Rico’s luxury segment saw a spectacular 105% sales growth in 2013-14, according to Christie's International Real Estate, after Puerto Rico was established as a tax haven in 2012.

“The luxury market is thriving,” said Roberto Trápaga of the Association of Home Builders of Puerto Rico. “We have a supply shortage.”

“The opportunity to acquire luxury real estate at very low prices is now better than ever, especially for foreign buyers,” said Professor Juan Lara of the University of Puerto Rico.

Puerto Rico house pricesDemand for luxury beachfront properties in exclusive areas such as Dorado, Palmas del Mar and Rio Grande is expected to outstrip supply in the coming years, according to Carlos Xavier Velez of real estate consulting firm, RE Advisors.

In 2015, Puerto Rico’s real GNP growth was estimated at -0.7%.  In 2014 it dropped 0.9%, after a decline of 0.2% in 2013 and growth of 0.5% in 2012, according to the Government Development Bank (GDB).

Analysis of Puerto Rico Residential Property Market »

Last Updated: Mar 23, 2016

Average rental yields on apartments in San Juan, Puerto Rico, are again slightly down on last year, at 7.1% on 2 bedroom apartments, and 7.3% on 3 bedroom apartments.

This year, like last year, we were unable to gather sufficient data on apartments in coastal areas of Puerto Rico such as Condado, Miramar and Dorado, but two years ago they had much lower rental returns at 3.8%.

Round trip transaction costs, i.e., the costs of buying and selling a property, are very low in Puerto Rico. See Property transaction costs analysis for Puerto Rico and Puerto Rico transaction costs compared to other counties.

Read Rental Yields  »

Last Updated: Jul 21, 2014

Rental Income: Nonresidents earning rental income effectively connected with business are taxed at progressive rates. Income-generating expenses are deductible when computing taxable income.

Capital Gains: Capital gains taxes are imposed at a flat rate of 29% for nonresidents.

Inheritance: Inheritance taxes are levied on the net asset’s value, and imposed at progressive rates from 18% to 50%.

Residents: Residents are taxed on their worldwide income at progressive rates.

Read Taxes and Costs  »

Last Updated: Mar 25, 2008

Roundtrip transaction costs range from 6% to 10.50% of property value. The real estate agent's fee, at around 4% - 6%, accounts for the greater part of the costs. Maximum notary fee allowable is 1% of the property value for the first US$500,000 plus 0.5% of the amount in excess of $500,000.

Read Buying Guide  »

Last Updated: Jun 13, 2006

Rent: Rents and rent increases can be freely negotiated. The tenant must pay the rent on time and the landlord must maintain the property for the tenant’s use.

Tenant Security: Expiration of rental agreement, non-payment of rent, breach of contract, and misuse of the premises are grounds for eviction in Puerto Rico. The renewal of the contract is one year for yearly rental agreements and one month for monthly rental agreements.

Read Landlord and Tenant  »

Last Updated: Jan 02, 2016

Puerto Rico continues to struggle

Puerto Rico real gnpHistorically, Puerto Rico’s economy has closely mirrored trends in the United States. However the latest economic downturn has been more intense and has lingered longer in Puerto Rico than in the United States.

Puerto Rico’s recession began in the fourth quarter of 2006.  GDP has grown very little or declined over the past eight years. The economy contracted every fiscal year from 2007 to 2014, with an exception in 2012 when the economy grew slightly by 0.5%. There’s been high unemployment, massive emigration, and a near-catastrophic national debt crisis and credit rating downgrades.

Moreover, the housing market has suffered tremendously.  After huge annual house price increases in the early 2000s, the housing market came crashing down in 2008. Prices have dropped 23% (31% inflation-adjusted) from Q1 2008 to Q3 2014.

Many Puerto Ricans have been forced to sell at a loss following the crisis, given the high unemployment rate – at an average of 15.3% in 2009 and 16.4% in 2010. The government is burdened by more than USD70 billion in debt and its credit rating has been cut to junk. The economic crisis has reduced both consumers’ savings and confidence, with many postponing their home-buying decisions.

The loss of net worth among Puerto Ricans from the drop in real estate prices is close to USD30 billion, said economic consulting firm Estudios Tecnicos’s director, Jose Villamil.

Hundreds of thousands of Puerto Ricans have been forced to migrate to the United States, according to the Census Bureau’s Community Survey. During the decade 2004-2014 about 280,000 locals left, the largest migration wave since the 1950s, when close to 500,000 Puerto Ricans migrated to the mainland. As a result, Puerto Rico’s population dropped by about 7.3% to 3.6 million in 2014 from its peak in 2004.

Aside from migration, the island suffers from an ageing population and a declining birth rate.

Puerto Rico’s banking sector is also in crisis, with nonperforming loans at elevated levels.  Most of the problem is in the housing market, which accounts for about 2/3 of total loans, according to Scotia Bank. At the start of 2006, before the crisis, the prime interest rate was at 7.26%. It fell to only 3.25% in 2009. Interest rates remained very low in recent years to buoy the struggling economy. Despite this, around 80,000 families have been unable to refinance their loans, despite the lower interest rates, and many risk losing their homes.

To abate the situation, many new initiatives have been introduced, including tax incentives and other housing stimulus measures. But demand, though now gradually rising, remains far below the pre-crisis levels, and residential construction remains depressed.

Puerto Rico is “effectively in default”
As the financial situation worsened, the government accumulated a public debt of more than USD70 billion, approximately 100% of GNP.  Over the past thirty-five years, government debt has risen from USD6 billion to USD70 billion, an annual compound growth rate of 7%.

In mid-2015, all major rating agencies downgraded the island’s credit-rating to junk status: Fitch “CC”, Standard & Poor’s (S&P) “CCC-” and Moody’s “Caa2”. The three major credit rating firms all maintain negative outlooks for Puerto Rico.

In April 2013, the government enacted comprehensive reform of its largest public employee retirement system to address the system’s deteriorating solvency.

Then in March 2014, in a desperate move to avert financial ruin, the Puerto Rican government issued bonds worth USD3.5 billion at a rate slightly below 9%, to attract interest from the financial markets. Despite their negative view of the island economy’s financial markets, the credit rating agencies welcomed the bond sales and the government’s austerity measures.

But those efforts have failed. The economy continues to shrink. The government has been forced to slash spending in order to keep up on its debt payments.

“Puerto Rico has a terrible financial problem. They're essentially insolvent," said U.S. Treasury Secretary Jack Lew in December 2015. "They have $70 billion in debt. The debt needs to be restructured,” Lew said. "They've already been taking money out pension funds to pay current bills. They've been shifting money for one creditor to pay for another creditor.”

According to Puerto Rico governor Alejandro Garcia Padilla, the island will need to miss about US$37 million in interest payments due this January 2015 to ensure that the government has enough funds to pay salaries, pensions and other creditors.

Unemployment remains a serious problemPuerto Rico Unemployment
In November 2015, the seasonally-adjusted unemployment rate in Puerto Rico stood at 12.5%, slightly up from 12.4% in the previous month but down from 13.8% in the same period last year, according to the GDB.

The number of unemployed people (seasonally-adjusted) in Puerto Rico was about 143,000 in November 2015, from 142,000 people in October 2015 and 157,000 people in a year ago, based on figures from the GDB.

Since 2004, the total number of jobs has fallen by 15.4%, with only just over 1.1 million jobs available in 2015, according to the Department of Labor and Human Resources.   Puerto Rico´s labour force participation has also dropped, with only 41% of Puerto Ricans taking part in productive economic activities, comparing unfavorably to the United States and Latin America, where the average rate is about 60%.

The administration has begun implementing a plan to create jobs, the Jobs Now Act, under a law passed February 2013. The law grants an energy credit to participating businesses, speeds the permits process, and establishes a salary subsidy for businesses hiring previously laid off employees.  The Jobs Now Act has produced 44,704 new positions during the first fifteen months of its implementation.

  • Dynamic, robust economy
  • Moderate yields in San Juan
  • High rental income tax
  • Pro-tenant rental market
Price (sq.m): $1,007 For a 120 sq. m. property, usually an apartment.
Rental Yield: 7.12% For a 120 sq. m. property, usually an apartment.
Rent/month: $717 For a 120 sq. m. property.
Income Tax: 3.15% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 8.82% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 29.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

News & Discussion

Free Newsletter

Fortnightly updates from the global property arena directly to your inbox.

Email Address:

Connect to professional advice in Puerto Rico


Download free property reports from international research houses

Our Newsletter

Fortnightly updates from the global property arena directly to your inbox.

Manage subscriptions