BY FANG BLOCK From MANSION GLOBAL

Booming tourism, price stabilization foretell an investment opportunity

Major markets in the Caribbean are looking attractive again for investors, as thriving tourism boosted consumer confidence in the region and average resale price of luxury homes leveled off, according to Knight Frank’s “Caribbean Insight 2016” released Monday.

“The Caribbean property market is gaining traction [after] having been hit hard by the global financial crisis,” said Kate Everett-Allen, partner of International Residential Research at Knight Frank, a global real estate consultancy.

“The stage and speed of the recovery varies from island to island.” In particular, “St. Barts and Mustique have recorded steady sale rates in recent years, popular with buyers seeking a secure and discreet lifestyle,” she added.

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In 2015, the average value of luxury homes dropped by 1% cross major second-home markets in the Caribbean, suggesting that prices are poised to bounce back from the bottom. Meanwhile, consumer confidence has reached a nine-year high, with the number of tourists increasing 7% the same year.

The Caribbean’s economic ties remain firmly linked to the United States, but China is becoming a major player in the region, with a 500% increase in foreign direct investment during the 10 years prior to 2012, according to Knight Frank.

With tourism booming, investment properties are likely to rent out more easily and thus in shorter vacant periods, which feed through to higher demand, according to Knight Frank.

“While for some, the repercussions from the Brexit decision, Trump’s electoral victory, currency shifts, and in some cases, lingering oversupply may add an element of uncertainty, for others they represent a buying opportunity,” Ms. Everett-Allen said.

“The expected U.S. rate rise in early 2017 will result in a stronger U.S. dollar, potentially providing an advantage for U.S. buyers looking in euro-denominated markets such as St Barts,” Ms. Everett-Allen told Mansion Global in an email.

Here, a closer look at the top second-home hotspots in the Caribbean, according to the report:

Bahamas

Property prices fell 30% to 40% from their peak in 2008, but the annual rate of decline slowed to less than 5% in 2015. Most luxury buyers are from the U.S., U.K., and Canada in the price range of US$3 million to US$5 million.

St. Barts

St. Barts has recorded steady sales in recent years, due in part to the weakness of its currency, the euro. U.S. dollar buyers purchasing a home in October 2016 are seeing an effective discount of 21% compared with three years ago, due solely to currency rates. Buyers from the U.S., France and the U.K. are the top three groups, with prices ranging from US$3 million to US$5 million.

British Virgin Islands

The superyacht development at the YCCS yacht club and the ongoing renovation of Little Dix Bay Hotel are indicating a renewed optimism in this segment of the market. The top three groups of buyers are from the U.S., U.K. and Italy, with prices ranging from US$1 million to US$4 million.

Mustique

The island of Mustique is home to around 100 villas. Due to strong demand and limited supply, prices recorded a small increase since 2014. Buyers from the U.K., France, the U.S. and Switzerland seek privacy, security and exclusivity here, mostly spending US$5 million to US$15 million.

Barbados

About 70% of the island’s prime buyers originate from the U.K. with Canada following behind. Although British buyers have been hit by a 17% plunge in currency against the dollar since June 2016, sellers are readjusting their prices with an average reduction of 15%. The most active price bracket in the luxury segment here is US$2 million to US$6 million.

Write to Fang Block at [email protected]

IMAGE: The St. Barts is looking attractive to dollar-backed buyers in 2017, according to Knight Frank.
ST. BARTH PROPERTIES SOTHEBY’S INTERNATIONAL REALTY

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