[dropcap]I[/dropcap]t’s been a rocky road to recovery for the region’s realtors. The sector was badly impacted by the financial crisis of 2008 and has been slowly regaining its feet ever since. Last year was another tumultuous year with hurricanes, geopolitical developments and fluctuating currency markets all having an impact on buyers. Caribbean realtors can afford to be optimistic, however, as foreign investors are expected to show renewed interest in the region this year, thanks to growth in tourism, confidence among US buyers and investment in infrastructure.
“A couple of big deals recently, around US$10m, suggests a certain appetite has returned to the market,” says Edward de Mallet Morgan, Head of the Caribbean Department at global real estate consultants Knight Frank. “Buyers who have been contemplating the Caribbean for years, and who are perhaps unsure about investing in Europe, or who are deterred by the cooling market in the UK, are feeling that now is the time to reconsider the Caribbean.”
PERENNIALLY POPULAR
The Caribbean has always been a popular choice for foreign property hunters, thanks to its pleasant climate, relaxed island lifestyle and beautiful natural environment. Notwithstanding, the market has been experiencing a decade-long downturn since the global financial crisis of 2008. The formerly lucrative second home market was badly impacted, and real estate investment in the region slumped significantly.
In the years since, the Caribbean property market has been taking tentative steps towards recovery, bolstered by climbing tourism numbers and a slow but steady rise in GDP.
Summarising the region’s tourism performance at the end of 2017, Caribbean Tourism Organization Secretary General Hugh Riley said: “The Canadian market was a strong performer for most of 2017, with arrivals up by 6.4%. We can now look forward to more expansion of that market in 2018. We also continued to focus on our two primary markets, the United States and Europe, with the UK in particular taking a central role. These markets were more robust in 2017 and we trust this will continue in 2018.”
More tourists means more buzz, a greater investment in infrastructure and resort projects and a steady stream of revenue for those buyers who are looking to purchase and then rent their properties. It also means greater accessibility with airlines adding more Caribbean destinations to their schedules and upgrades to airports across the region. This year US-based carrier JetBlue will begin new routes from Fort Lauderdale to Grand Cayman and the Dominican Republic and Canadian company Sunwing recently announced new flights into Bonaire and Antigua.
Many visitors are making the leap from tourist to resident and investing in property that they can enjoy themselves all year round. Saint Lucia’s innovative Citizenship by Investment Programme (one of the least expensive in the region) was amended in 2017 to incorporate a lower threshold for residency and allow for more applications to be processed each year. This week St Kitts and Nevis followed suit, adjusting its CIP in response to pressure from real estate developers. Families acquiring citizenship through investment in St Kitts and Nevis properties will now see a reduction in the associated government fees.
LOYALTY
The Caribbean encompasses over 7,000 islands and territories so there are plenty of options for house hunters to choose from. Long-term visitors, members of the Caribbean diaspora and investors often show loyalty to one particular island; this is especially true with smaller countries such as Saint Lucia where residents become part of a close-knit community and form an attachment to their neighbours.
In recent years the region’s real estate hotspots have been The Bahamas, St Barts and Mustique, according to Knight Frank. In its Caribbean Insight 2018 report, the consultancy firm noted that prices have declined across the region by 30% in the last decade although St Barts and Mustique saw positive annual price growth in recent years.
Last year’s hurricane season was one of the most active on record, with back-to-back category 5 storms Irma and Maria causing widespread destruction and becoming two of the most expensive natural disasters to hit the region. Those islands within the hurricane belt are steadily rebuilding while those outside are enjoying new popularity as they are seen as a safer option for hurricane-wary foreign buyers.
FOREIGN BUYERS
Interest from American buyers, in particular, is on the rise. As the US economy continues to strengthen, consumer confidence is up and more high net worth individuals are looking to invest in property offshore. Thanks to increased flights, the Caribbean is now more accessible than ever and house hunters can extend their search beyond well-trodden destinations, like The Bahamas, to the Eastern Caribbean. Less regulation and taxes in the States has led to more high-end US buyers putting their money in the region’s real estate, either by buying, building or investing in resort projects.
Edward de Mallet Morgan says that these buyers are looking for safety, diversity and the tropical lifestyle, and highlights Mustique as being particularly popular.
“A noticeable trend is that American buyers are back in Mustique,” he says. “Some [US buyers] are cautious about investing further in New York in the current political climate, or are deterred from Miami by its softening market. They have homes already in Manhattan and the Hamptons and want a place to get away from their usual social set. They want their children to meet a more diverse range of people from around the world but in a place with a reassuringly safe, old-school feel.”
In the long-term, British buyers could also have a positive impact on the market. While concerns over Brexit and resulting fluctuations in the pound have dampened buyers’ confidence, analysts believe this will be restored once negotiations are concluded. In the post-Brexit environment of 2019, UK buyers who have traditionally sought their winter sun in southern Europe may be convinced to look further afield, especially given the increase in direct flights between the Caribbean and Europe. Knight Frank cautions, however, that any recovery would be subject to currency volatility.
THINKING LONG-TERM
Seen for many years as a luxury destination, the Caribbean will always have its fans among high net worth buyers but, like any market, real estate has to change with the times. In the long-term, a number of significant global economic and social trends will have a ripple effect on the industry. These include an increasingly migratory population, a growing middle class in emerging markets and the aging global population.
The international real estate market is also set to become more competitive as emerging economies develop and inventory increases. Analysts at Pricewaterhouse Coopers predict that the amount of investable real estate worldwide will more than double between 2012 and 2020. As competition deepens between destinations, the Caribbean has to look beyond its natural assets and offer something unique if it wants to regain and retain foreign business. Favourable tax environments, affordable citizenship programmes, unique and varied inventory and reliable infrastructure can keep buyers coming back year after year as they realise that there is more to the islands than a dose of winter sun.
