Puerto Rico

Puerto Rico's Residential Real Estate Market Analysis 2025

Lalaine C. Delmendo

Puerto Rico's housing market is showing signs of improvement, with surging residential property prices. This is supported by booming tourism and improving residential construction activity. Yet, the overall economy remains weak.

Table of Contents

Housing Market Snapshot

During the year to Q4 2024, the seasonally-adjusted purchase-only house price index in Puerto Rico rose strongly by 27.1%, following y-o-y growth of 23.2% in Q3 2024, 10.7% in Q2 2024, 8.3% in Q1 2024 and 0.9% in Q4 2023, according to the Federal Housing Finance Agency (FHFA). It marked the largest year-over-year increase recorded since the data series began in Q1 1995.

When adjusted for inflation, house prices across the island were up by 24.7% during the same period, also its strongest performance ever recorded since the data series began.

Quarter-on-quarter, house prices increased by 4.58% (4.45% inflation-adjusted) in Q4 2024.

Puerto Rico's house price annual change:

The Puerto Rican housing market has suffered tremendously for most of the decade. The island has experienced a prolonged economic crisis, massive debt, high unemployment, and continuing population loss. With US$70 billion in debt and US$50 billion in pension liabilities, Puerto Rico's bankruptcy filing in May 2017 was the biggest in the history of the United States.

In recent years, the housing market showed some signs of recovery, despite the adverse impact of the Covid-19 pandemic and global economic slowdown.

Property demand showed mixed results, with the number of home sales continuing to decline, while the total value of homes sold is now increasing. In the first nine months of 2024, the total number of houses sold in Puerto Rico fell by 9.7% y-o-y to 7,394 units, following annual declines of 4% in 2023 and 17% in 2022, based on figures from the Office of the Commissioner of Financial Institutions. However, in terms of value, total home sales rose by 3.9% y-o-y to US$1.65 billion in the first nine months of 2024, following annual declines of 2.4% in 2023 and 12.1% in 2022.

Residential construction activity is also improving. In the first half of 2024, the total number of construction permits issued for housing units in Puerto Rico was unchanged at 2,133 as compared to the prior year, an improvement from annual declines of 18.2% in 2023 and 3.2% in 2022.

Likewise, cement production and sales - another key indicator of the current condition of the construction industry - are picking up again this year. In the first two months of 2025, cement production rose by 7% y-o-y to 1.38 million bags, and cement sales were up by 5% y-o-y to 2.43 million bags.

Despite signs of recovery, the outlook for Puerto Rico's housing market remains uncertain, weighed down by the island's persistently fragile economy.

After suffering a pandemic-induced contraction of 4.2% in 2020, the Puerto Rican economy grew by a meager 0.4% in 2021, 3.6% in 2022, and another 0.6% in 2023. Then in 2024, the island recorded a modest economic growth of 2.1%, primarily driven by robust domestic consumption, as well as increased exports, according to the Statistical Institute of Puerto Rico.

However, the overall economy is expected to slow again this year, with the International Monetary Fund (IMF) forecasting a contraction of 0.8%. In contrast, the Puerto Rico Planning Board offers a bit more optimistic outlook, projecting a base-case GDP growth of 1.4% for FY2025.

Demand Highlights:

Demand indicators showed mixed results

Property demand indicators are showing mixed results, with the number of home sales continuing to decline, while the total value of homes sold is now increasing.

In the first nine months of 2024, the total number of houses sold in Puerto Rico fell by 9.7% to 7,394 units as compared to the same period last year, following annual declines of 4% in 2023 and 17% in 2022, based on figures from the Office of the Commissioner of Financial Institutions.

In Jan-Sep 2024:

  • For existing houses, which accounted for 92.8% of total transactions, sales dropped 9.5% y-o-y to 6.864 units, after falling by 3.7% in 2023 and 17% in 2022.
  • For newly built houses, sales dropped by 12.7% y-o-y to just 530 units, following annual declines of 7.9% in 2023 and 16.3% in 2022.

Total home sales averaged 10,800 units annually in the past decade (2013-2023).

Puerto Rico Home Sales graph

In terms of value, total home sales rose by 3.9% y-o-y to US$1.65 billion in the first nine months of 2024, following annual declines of 2.4% in 2023 and 12.1% in 2022, according to figures from OCIF.

Over the same period:

  • For existing houses, sales value rose by 3.4% y-o-y to US$1.45 billion, after falling by 4% in the whole year of 2023 and 12% in 2022.
  • For newly built houses, sales value increased by 7.9% y-o-y to US$192.32 million, following a growth of 12.2% in 2023 and a drop of 12.8% in 2022.

U.S. mainlanders account for a substantial share of property demand in Puerto Rico. Foreigners can freely buy property on the islands. It is important to hire a real estate agent as knowledge of Spanish is essential. A foreigner can alternatively buy through a corporation (US$300 for Corporate Resolution). Registering a property by a corporation can be completed in around 15 days.

Puerto Rico Value of Homes Sold graph

Supply Highlights:

Residential construction activity improving

In the first half of 2024, the total number of construction permits issued for housing units in Puerto Rico was unchanged at 2,133 as compared to the prior year. This was an improvement from annual declines of 18.2% in 2023 and 3.2% in 2022.

Puerto Rico Total Construction Permits for Housing Units graph

Cement production and sales, another key indicator of the current condition of the construction industry, declined last year, albeit at different rates.

  • Cement production fell by 9% y-o-y to 8.2 million bags in 2024, following annual growth of 8.6% in 2023 and 11.6% in 2022 and declines of 29.5% in 2021 and 14.6% in 2020, according to the Office of the Commissioner of Financial Institutions (OCIF).
  • Cement sales, on the other hand, declined slightly by 0.8% to approximately 14.6 million bags in 2024 from a year earlier, after increasing by 1.3% in 2023, falling by 6.8% in 2022, and rising again by 12.5% in 2021 and 2.8% in 2020.

Though there are signs that both cement production and sales are picking up again this year. In the first two months of 2025, cement production rose by 7% y-o-y to 1.38 million bags, and cement sales were up by 5% y-o-y to 2.43 million bags.

Puerto Rico Cement Production and Sales graph

Rental Market:

Rental yields are moderate, rental market remains volatile

Rental yields in Puerto Rico are moderately good, averaging 5.26% in Q1 2025, down from 8.42% in the same period last year, according to research conducted by the Global Property Guide.

But rental yields vary considerably by city:

  • In San Juan, apartments offer gross rental yields ranging from 2.65% to 7.75% in Q1 2025, with a city average of 5.27%.
  • In Isla Verde, rental yields for apartments range from 5.92% to 7.05%, with a city average of 6.34%.

Puerto Rico's rental market remains volatile, with a vacancy rate of about 12.3%, up from 10% in 2010 and 7.4% in 2000, mainly due to continued population loss, according to the U.S. Department of Housing and Urban Development (HUD).

"Continued population loss in Puerto Rico has led to increasingly soft rental market conditions and rising vacancy rates," said HUD.

In San Juan, the average monthly rent for one-bedroom apartments stood at US$2,600 in Q1 2025, while it was US$3,800 for two-bedroom apartments. Over the same period, rents for larger three-bedroom and four-bedroom (or more) apartments averaged US$4,500 and US$6,500 per month, respectively.

Round-trip transaction costs, i.e., the costs of buying and selling a property, are very low in Puerto Rico.

Mortgage Market:

Residential mortgage loans increasing modestly again

In Q3 2024, the total amount of residential mortgage loans in all of the island's financial institutions rose by 3.5% to US$10.97 billion as compared to the same period in the preceding year, according to OCIF. Yet it remains far below the US$17.22 billion in residential mortgage loans recorded in 2014.

Though as a percent of GDP, the size of the residential mortgage market in Puerto Rico remained at about 9.1%, nearly unchanged in the past three years.

Puerto Rico Residential Mortgages graph

Residential foreclosures falling sharply, delinquent mortgages also declining

In the first three quarters of 2024, residential foreclosures in Puerto Rico fell sharply by 52.8% to 925 units as compared to the same period in the prior year, according to data released by OCIF.

The total amount of residential units foreclosed during the said period totaled US$105.04 million.

Similarly, delinquent mortgages continue to fall. As of September 2024, there were a total of 340,813 delinquent mortgages recorded in Puerto Rico, down by 1.8% from a year earlier. This was equivalent to about US$31.11 billion.

During the onset of the Covid-19 pandemic, residential foreclosures dropped sharply due to the imposition of moratoriums to help struggling homeowners. As a result, the number of foreclosures in Puerto Rico plunged by almost 78% y-o-y to just 911 units in 2020, in contrast to the 31.3% rise in 2019 and the lowest level recorded in recent memory. However, in 2021, when the moratoriums were lifted, foreclosures surged again by a whopping 235.5% y-o-y to 3,056 units.

Foreclosures fell again by 27.7% to 2,210 units in 2022 but increased by 4.8% to 2,315 units in 2023.

The pre-pandemic level of residential foreclosures averaged 3,800 from 2008 to 2019.

Puerto Rico Foreclosures of Residential Units graph

Historic Perspective:

Economic crisis, natural disasters, and the housing market

Puerto Rico's recession began in the fourth quarter of 2006. GDP has grown very little or declined over the past decade, contracting every year from 2005 to 2018, with the exception of 2012 when the economy grew by a meager 0.03%.

Puerto Rico GDP Growth and Inflation graph

After huge annual house price increases in the early 2000s, the housing market came crashing down in 2008. The market remained depressed in the following years, with house prices falling by more than 31% (41.3% inflation-adjusted) from Q2 2007 to Q3 2018.

There's been high unemployment, massive emigration, and a near-catastrophic national debt crisis credit rating downgrades. Puerto Rico has lost about 20% of its jobs since 2007. The population shrank by more than 17% over the past two years (2004-24). Nearly half of Puerto Rico's population lives in poverty, and household income is about US$18,000 annually - less than half that of Mississippi, the poorest U.S. state. And public health and retirement systems were insolvent.

Puerto Rico Population graph

The loss of net worth among Puerto Ricans associated with the collapse of real estate prices in the past several years has been close to US$ 30 billion, according to economic consulting firm Estudios Tecnicos's CEO, Jose Villamil.

Puerto Rico's economic collapse was accompanied by a banking crisis, with non-performing loans at elevated levels. Most of the problem was in the housing market, which represented about two-thirds of total loans, according to Scotia Bank. In 2006, before the crisis, the prime interest rate stood at 7.26%. It dropped to 3.25% in 2009 and has remained very low since, but despite this, about 80,000 families have been unable to refinance their loans and risk losing their homes.

Puerto Rico filed for the equivalent of bankruptcy protection in May 2017, unable to pay its massive debt or provide its citizens with effective services. With US$70 billion in debt and US$50 billion in pension liabilities, Puerto Rico's bankruptcy filing was the biggest in the history of the United States, dwarfing Detroit's US$18 billion bankruptcy filing in 2013.

Puerto Rico Government Gross Debt graph

As if Puerto Rico's economic woes were not enough, Hurricane Maria struck the island in September 2017, killing an estimated 2,975 people, severely damaging the island's infrastructure, adversely affecting thousands of small businesses, and destroying nearly all agricultural production. The category 4 storm caused an estimated US$90 billion in damage. A total of 357,492 homes in Puerto Rico were damaged, according to the Federal Emergency Management Agency (FEMA). Overall, about 23% of the island's housing stock was affected, with around a third of them located in the San Juan metropolitan area and other coastal counties.

In response to Hurricane Maria, the US Department of Housing and Urban Development (HUD) approved US$1.5 billion for the Community Development Block Grant-Disaster Recovery (CDBG-DR) Action Plan in July 2018 to assist in rebuilding. The grant included US$1 billion for housing projects, US$100 million for infrastructure, and US$10 million for rental assistance to vulnerable households and the elderly.

Then, in March 2019, HUD allocated another US$8.2 billion in funds to the program - the largest funding approved by HUD for the recovery after a disaster. Of which USD2.85 billion is allocated for housing.

In 2021, former US President Joe Biden approved another US$10 billion relief recovery funding for Puerto Rico for housing and infrastructure reconstruction, among other social programs.

In 2022, more than US$947 million in U.S. Bipartisan Infrastructure Law funding has been announced to be allocated to Puerto Rico. About US$566 million of which has been used to invest in roads, bridges, public transit, ports, and airports, and over US$78 million for clean water.

The Community Development Block Grant-Disaster Recovery (CDBG-DR) plan for Puerto Rico's reconstruction also presents a huge opportunity for the construction industry, particularly for new housing construction.

At least twenty more hurricanes struck the islands from 2018 to 2024, but the damage was trivial when compared to Hurricane Maria.

The economy improved in 2019, registering a growth of 1.7%. However, it was immediately cut short by the pandemic, dragging the economy back to recession with a 4.2% decline in 2020.

The economy started to bounce back in 2021, registering a meager real GDP growth rate of 0.4%, according to the International Monetary Fund (IMF), followed by an expansion of 3.6% in 2022.

Puerto Rico's economy weakened again in 2023, with its real GDP growing by a minuscule 0.6%. In 2024, the island recorded a modest economic growth of 2.1%, primarily driven by robust domestic consumption, as well as increased exports, according to the Statistical Institute of Puerto Rico.

The Housing Stimulus Act

To rescue the island's plunging housing market, former Governor Luis Fortuño implemented the stimulus program "Impulso a la Vivienda" (Act 152) in 2010. The idea was to cut home inventories and stimulate new housing construction. Even before the ratification of Act 152, a "combo program" allowed people to buy second homes at a reduced rate, through a US$25,000 incentive, plus a US$10,000 voucher covering closing costs.

Act 152 provides:

  • Loan-to-value mortgage ratios of 105%
  • A 100% exemption from net rental income tax for a 10-year period.
  • A 100% tax exemption during a 10-month window, plus a 100% exemption from capital gains tax at the time of resale of the new property, and a 100% exemption from fees, stamps, and vouchers. There is also a 100% exemption on temporary property tax and a five-year exemption from property taxes.

Effectiveness of Acts 20 & 22 disputed

Two laws, which came into effect in early 2012, provided significant new tax benefits to foreign individuals and businesses relocating to Puerto Rico:

  • The Export Services Act 20 (now Chapter 3 of the Puerto Rico Incentives Code 60) offers tax incentives to export services.
  • The Individual Investors Act 22 (now Chapter 2 of Code 60) provides a total exemption from Puerto Rican income taxes on all passive income realized or accrued after becoming a bona fide resident of Puerto Rico. Aside from this, other benefits offered to residents include tax exemption on gains from sales of property acquired after becoming a resident. However, the tax exemptions will apply only if the individual is a bona fide resident of Puerto Rico and if they start the process of becoming one before January 1, 2035.

Then, in December 2014, the government expanded the coverage of both Acts 20 and 22, expanding the period of tax exemption. On July 11, 2017, Act 45 further expanded Acts 20 and 22, adding "medical tourism services" and "telemedicine facilities" as eligible services under Act 20; abolishing the minimum number of employees required for most Act 20 businesses. In 2020, the two laws were consolidated into Act 60.

Recently, the government introduced a new "Test" in Act 60. According to the new Act 60 program, an individual with a tax exemption decree must purchase real estate property within two years of obtaining it. This property must also be the individual's primary residence throughout the term of the decree.

However, a decade since their introduction, some claim that these two laws have not generated the expected investments and job creation in Puerto Rico, causing them to lobby for their repeal.

Though the Economic Development Department (DDEC) remains supportive of the said laws. "Studies have shown that these laws have been positive for the economy of Puerto Rico," said Carlos Fontán of DDEC. "They provide economic activity that we may not otherwise receive. Repealing these laws would give the false impression that Puerto Rico is not open for business."

Based on a study conducted by Econometrika Corp. and commissioned by DDEC, Acts 20 and 22 created about 33,000 new jobs between 2012 and 2017. In the said five years, Act 22 attracted 1,332 individuals and their families to live in Puerto Rico, while Act 20 approved another 781. This helped Puerto Rico to increase its employment rate by 3% and total production by 2%.

The number of decree holders plunged in 2020 due to the pandemic, but in the succeeding year, 579 additional decrees were approved under Act 22 and 710 under Act 20.

Since Act 20 was enacted in 2012, at least 3,198 tax exemption decrees have been approved, according to the Puerto Rico Institute of Statistics. In addition, around 6,000 tax exemption decrees were approved under Act 22 since it was enacted, according to Carlos Fontan of the Puerto Rico Department of Economic Development.

Moreover, Puerto Rico's government has also reformed the business permits system to attract more investment.

Major reforms include the following:

  • Effective June 7, 2019, new and existing businesses on the island can obtain a single permit, consolidating all licenses, authorizations, and certifications;
  • A Unified Information System for the filing and processing of permits, authorizations, licenses, and certifications for land uses and the operation of businesses.
  • Time limits for the issuance of permits. Getting building permits now takes only 20 days, on average, a significant improvement from the previous 98-day timeline.

Socio-Economic Context:

Puerto Rico's economy to weaken again, but labour market still strong

The economy is expected to slow again this year, with the IMF forecasting a real GDP contraction of 0.8%. In contrast, the Puerto Rico Planning Board offers a more optimistic outlook, projecting a base-case GDP growth of 1.4% for FY2025. This projection is supported by a lower anticipated inflation rate of 2% and a 10.6% increase in federal Community Development Block Grant (CDBG) funding, amounting to US$2.05 billion.

Energy continues to pose a significant challenge in Puerto Rico, where electricity costs remain persistently high.

Despite this, inflationary pressures are now beginning to subside. Overall inflation eased to 1.4% in February 2025, down from 1.8% in the previous month and 1.9% in the same period last year, based on figures released by the Government Development Bank of Puerto Rico.

From 2012 to 2020, inflation in Puerto Rico was very low, averaging just 0.5% annually. However, it began to climb in 2021, reaching 2.4%, and surged to 6% in 2022. This sharp rise was driven by soaring energy prices, global supply chain disruptions, and the economic fallout from natural disasters. Inflation remained elevated at 3.5% in 2023 before easing to an average of 1.6% in 2024, signaling a return to more stable price conditions.

The labor market continues to improve. Unemployment stood at 5.3% in March 2025, unchanged from the previous month but down from 5.7% a year earlier, according to Departamento del Trabajo y Recursos Humanos, Puerto Rico. Though it remains above the U.S. unemployment rate of just 4.2% over the same period.

The jobless rate in the islands dropped to an annual average of 7.9% in 2017-24, from 16.4% in 2010 and 15.9% in 2011. Many of the new jobs are in rebuilding, which has created many construction jobs, and much of the improvement is in fact due to the emigration of labor. And we should remember that these additional jobs in construction are mostly temporary.

Puerto Rico Unemployment Rate graph

Tourism growing strongly

Puerto Rico's tourism sector continues to grow strongly, welcoming a record-breaking 6.6 million passengers at Luis Muñoz Marin International Airport in 2024. This was over 518,000 more passengers, or around 8% growth from the preceding year.

The figure does not yet include the visitors arriving from the island's two cruise ports, which welcome over 500 ships annually.

"Puerto Rico's tourism industry has reached new heights in 2024, solidifying our position as a leading global destination," said Leah Chandler, CMO of Discover Puerto Rico. "This milestone year reflects not just the appeal of the Island's vibrant culture and natural beauty, but the tireless dedication of our team and partners who have embraced innovative strategies to elevate Puerto Rico's profile. As we set our sights on 2025, we're focused on sustaining this momentum and continuing to inspire travelers around the globe to visit our Island."

Over 1.4 million cruise passengers visited San Juan Cruise Port last year, up by about 10% from the preceding year.

Puerto Rico's tourism industry generated around US$2.6 billion in total visitor spending in 2024. This figure includes both air travelers and cruise passengers, with air travelers contributing about US$2.5 billion and cruise passengers accounting for the remainder. Notably, 93% of visitors hailed from U.S. jurisdictions.​

Other indicators also point to the strong growth of the tourism sector:

  • For lodging demand, there were nearly 7.3 million rooms booked last year, up by 7% from the prior year, according to STR and AirDNA. The lodging sector recorded a 9% y-o-y increase in total lodging revenues in 2024 to reach US$1.95 billion.
  • An overall satisfaction score of 89%, underscoring that visitors continue to enjoy their time in Puerto Rico. According to the 2024 Visitor Profile by Discover Puerto Rico, nine out of ten travelers felt "highly satisfied," 86% said they plan to return, and 89% would recommend the island to others.
  • Total registrations in hotels and paradores in Puerto Rico increased by 3.8% y-o-y to 1.38 million in the first half of 2024, following annual growth of 3.2% in 2023, 5.5% in 2022, and 103.7% in 2021, based on figures released by the Puerto Rico Planning Board.
  • Supply of luxury class hotels rose by 7.1% y-o-y in 2024, following an annual growth of 2.1% in 2023, according to CoStar.
  • A record 101,700 people were employed in leisure and hospitality-related jobs in November 2024, up by 5% from the prior year, according to the U.S. Bureau of Labor Statistics.

Puerto Rico Number of Persons Employed in Leisure and Hospitality graph

Puerto Rico's tourism industry is expected to continue growing this year, buoyed by new hotel openings, the inaugural Puerto Rico Wine and Food Festival, and the introduction of more direct flights from cities across the U.S., including a direct route from San Antonio.

About 55% to 65% of visitor arrivals in Puerto Rico in the past five years came from the United States.

Tourism accounts for about 7% of Puerto Rico's GDP.

Puerto Rico Total Registrations in Hotels and Paradores graph

Sources:

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