Sales of Puerto Rican luxury houses and condominiums are spiking during the pandemic, with buyers from New York, California and other higher-tax states embracing the island’s low-tax status.

Developers of luxury projects are reporting increasing sales volume and prices compared with 2019. The uptick comes despite years of natural disasters and financial and political upheavals that made many wary of buying property in Puerto Rico.

Residents of the territory—who must live there at least 183 days a year—pay a Puerto Rico income tax of up to 33% but no other federal or local income taxes. Many wealthy individuals also are exempt from taxes on interest, dividends and certain capital gains.

Some U.S. cities or states, where some people already pay over 40% in income taxes, might raise taxes further to cover budget shortfalls. New Jersey Gov. Philip Murphy reached a deal this month with legislative leaders to increase taxes on incomes over $1 million. Opponents of that “millionaires tax” have said it would trigger an exodus of wealthy people from the state.

“As awful as the [pandemic] is, it breathes new life into the Puerto Rican economy,” said Rodrick Miller, chief executive of Invest Puerto Rico, a not-for-profit organization trying to attract business investment.

While up-to-date residential sales figures for the island overall aren’t available, developers of high-end projects report brisk business in recent months. The St. Regis Bahia Beach Resort, a high-end hotel and residential project developed by hedge-fund manager John Paulson, has made 34 sales of condominiums and home lots since the pandemic hit. That compares with 20 sales during the same time frame in 2019, according to Fahad Ghaffar, Mr. Paulson’s partner in Puerto Rico.

The average price of a beachfront condo has increased to $1,360 a square foot from $1,000 a year ago. “We’ve had a closing with a Zoom buyer that purchased a $5.4 million penthouse that hasn’t even been here,” he said, referring to the popular videoconferencing platform.

Demand also has been strong at the Dorado Beach resort. Developer CPG Real Estate LLC has signed 46 contracts for homes in The Isles, one of the resort’s new phases, with prices in the $1.9 million to $4 million range, according to Kenneth Blatt, a principal.

Most of the sales were signed after the pandemic hit. Buyers from the mainland are seeking low taxes while those from San Juan are seeking the open spaces and lower density of the gated community.

“It’s not dissimilar from what you’re seeing with people leaving New York for Westchester and Greenwich,” Mr. Blatt said.

Puerto Rico still hasn’t recovered from its own budget problems and Hurricane Maria in 2017. But rebuilding efforts were stoked earlier this month when President Trump said he was releasing $13 billion to rebuild the island’s electrical grid and schools.

The U.S. territory also is pressing hard to attract remote workers and businesses that face prolonged and uncertain returns to their traditional offices. Invest Puerto Rico has beefed up its outreach efforts to educate remote workers about the island’s tax incentives.

“In this Covid[-19] environment, [remote workers] can’t go to all the places that they used to because they’re not open to the U.S.,” Mr. Miller said.

These efforts are helping bring failed Puerto Rican residential developments back to life. Mr. Ghaffar said that he and Mr. Paulson in 2016 purchased 150 units of a failed project in the Palmas del Mar Resort on the island’s east coast that targeted middle market buyers. “We were selling about 10 per year and this year we sold over 28 units,” he said.

The demand also has encouraged some developers to plan groundbreakings on their first new Puerto Rican projects in years. Royal Palm Cos. plans to announce two branded resorts next year including a total of 95 residences on the island’s northeast coast, with prices for three-bedroom units starting in the $1 million to $2 million range.

The venture has changed its plans to increase the number of residences because of the pandemic. “It made sense because of the demand for residential now,” said Daniel Kodsi, chief executive of Royal Palm. “The primary driver right now in Puerto Rico is taxes.”

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