Barbados

Naturally charming and sophisticated, alive with possibilities, as boundless as the turquoise sea, endless as the sandy shore. The island was uninhabited when first settled by the British in 1627. Slaves worked the sugar plantations established on the island until 1834 when slavery was abolished. The economy remained heavily dependent on sugar, rum, and molasses production through most of the 20th century. The gradual introduction of social and political reforms in the 1940s and 1950s led to complete independence from the UK in 1966. In the 1990s, tourism and manufacturing surpassed the sugar industry in economic importance.

Historically, the Barbadian economy was dependent on sugarcane cultivation and related activities. However, in recent years the economy has diversified into light industry and tourism with about three-quarters of GDP and 80% of exports being attributed to services. Growth has rebounded since 2003, bolstered by increases in construction projects and tourism revenues, reflecting its success in the higher-end segment, but the sector will likely face declining revenues with the global economic downturn. The country enjoys one of the highest per capita incomes in the region. Offshore finance and information services are important foreign exchange earners and thrive from having the same time zone as eastern US financial centers and a relatively highly educated workforce. The government continues its efforts to reduce unemployment, to encourage direct foreign investment, and to privatize remaining state-owned enterprises. The public debt-to-GDP ratio of about 80% will likely widen as the THOMPSON administration engages in a more expansionary fiscal policy.

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Barbados Real Estate On Track To Recover From Minor Slowdown

Published on:
Wednesday, August 04, 2010

Written by:
Global Property Guide

Barbados real estate, which is the most expensive in the Caribbean, is showing signs of a rebound after a slight slowdown in 2009. New construction has resumed, and visitors are gradually returning to the traditionally thriving rental market. See the following article from Global Property Guide for more on this.

The property market in Barbados slowed in 2009 due to the global financial crisis, but property prices have remained mostly stable.

“Barbados’ strong history of increasing real estate values helped it stay strong through the last year without prices falling dramatically,” says Nick Guezen, director of real estate of Luxury Retreats, an elite broker in private villa sales and rentals in Barbados. “Sellers in Barbados had the means to wait out the storm, while buyers also waited patiently for prices to drop.”

Over the past few years, property prices in Barbados had an annual increase of 10% to 15%, with prices of luxury houses appreciating more than 15% per year.

Barbados has the most expensive luxury properties in the Caribbean, with prices ranging from US$4 million to US$40 million. For the extremely wealthy, there are houses that come with US$75 million price tags.

Luxury houses and villas still dominate the market, but apartments and condominium  units priced between US$145,000 and US$1 million are now common.

Britons make up the largest group of tourists and foreign home buyers in Barbados, followed by Americans. Their numbers, however, have declined since the global crisis hit. On the other hand, Canadian tourists and home buyers in Barbados are on the rise.

Barbados’ economic recovery, however, is still uncertain. The country enjoyed a GDP growth of 3.3% in 2007. However, growth slowed to 1.5% in 2008, due to declines in tourism and construction, and a slowdown in manufacturing. As the global crisis worsened, GDP fell by 5.3% in 2009. In the first quarter of 2010, GDP declined by under 1% on an annual basis.

Inflation soared to 9% in 2008, due to sharp increase in world food and fuel prices. In 2009, inflation was maintained at 3%. By first quarter of 2010, inflation was 3.3%.

Hopes for tourism

Tourism accounts for 15% of Barbados’ GDP. The tourism sector suffered in 2009, with stay-over arrivals dropping by 8.5% and tourism receipts down more than 11%, according to the International Monetary Fund . Construction declined 4.5%, with tourism-related projects stalled. Unemployment rose to 10.1% in the first quarter of 2009, from 7.9% in the first quarter of 2008. In the first quarter of 2010, it rose again to 10.6%.

Visitors from the US have been gradually returning since the first quarter of 2010, drawn by luxury hotels’ discounts and promotions. There was an increase of 2% in arrivals in the first two months alone.

A significant number of Canadian visitors are also visiting the country, with an increased number of flights from West Canada. Arrivals from the UK in the first quarter of 2010, however, were affected by the volcanic eruption in Iceland.

Barbados still awaits stronger recovery. Hopes for improvement in tourist arrivals hinge on newly built real estate developments, as well as those still under construction.

The construction of new condominiums in The Crane oceanfront resort and residential development is expected to attract foreign visitors to the South Coast. Beachlands, a US$200 million luxury development, is also underway on the West Coast.  Investors are also anticipating the completion of the Four Seasons Hotel and Private Villas. The massive project was halted in 2009 due to lack of financing. This year the government stepped in with a loan of $60 million from a Caribbean bank, so construction will continue. If all goes well, the development will be completed in 2011.

The government has also announced that it will offer public loans to encourage renovation of tourism-related facilities. These developments are expected to bring back stronger tourist inflows and encourage more foreign investments and financing.

Mortgage market and interest rates

Barbados’ mortgage market has expanded rapidly over the past decade.  From 11% of GDP in 1999, total outstanding mortgage loans for private dwellings grew to 27.4% of GDP in 2009. By April 2010, it was up to 27.6%.

In 2009, total mortgage loans for private dwellings rose to BB$1.972 billion (US$0.97 billion), according to the Central Bank of Barbados.

Barbados has around ten mortgage lenders, but only five lenders to non-residents. Loan-to-value (LTV) ratios typically range from 50% to 70% for non-residents (minimum loan of US$300,000), with a maximum term of 15 years.

Non-residents’ mortgage loans must be foreign currency-denominated, and approved by the Central Bank of Barbados. US dollar loans have been attractive over the past few years. Their interest rate is linked to three-month US LIBOR.

Foreign buyers often end up obtaining financing externally, because mortgage interest rates in Barbados are often higher than in European and North American countries.

Since 1975, the Barbados dollar has been pegged to the US dollar at BB$2 = US$1.

Rentals

Barbados has a thriving rental market. Long-term rentals usually occur during important holiday weeks such as Christmas, Easter, and New Year. During the peak season, from November to April, long-term rental properties are difficult to find in Barbados, and rents are much higher than usual.

Rents vary enormously between properties and location—apartments vs. houses vs. villas, furnished vs. unfurnished, inland vs. beachfront, West Coast vs. South Coast vs. East Coast. Rents for beachfront properties are higher than inland properties.

The least expensive rental properties can be found on the East Coast. The most expensive properties are generally on the West Coast.

Rent for three-bedroom houses on the West Coast starts at US$4,200 per month. Four-bedroom houses can be extremely expensive, and start at more than US$10,000 per month during summer. Five-bedroom houses can be rented starting at about US$14,000 per month.

Luxury villa rentals range from US$2,500 to US$100,000 per week.

The rental market declined in 2009, but it is expected to pick up by 2011.

West Coast reigns

The West Coast, also called Platinum Coast, extends from the outskirts of Bridgetown (the country’s capital) in the south to Harrisons in the parish of St. Lucy in the north. Homes of famous celebrities and super-wealthy foreigners can be found here.

“The West Coast is still by far the strongest market on the island, and perhaps the strongest in the southern, windward Caribbean,” says Guezen.

Luxury homes and luxury beachfront properties in the area are among the most expensive in Barbados, with prices ranging from US$2 million to US$40 million.

Well-established resorts continue to lure royalty, celebrities, and business elites to the West Coast. Sandy Lane hotel and residences is still among the finest resorts in the Caribbean and one of the most exclusive, also known for its associated golf course. Homes are priced starting at US$3 million.

The five-star Royal Westmoreland also continues to offer luxury homes. The Royal Apartments and Penthouses, which were completed in 2009, are priced from US$ 429,000 to US$ 1,900,000.

In the Apes Hill luxury development, which enjoys views of both the West and East Coasts, plots of land can be purchased starting at US$500,000.

In Saint James, the West Coast’s exclusive high-end area, the Weston Resort and Residences development has just been launched. Phase I has 21 units and Phase 2, which has recently been released, has 24 units. Price starts at USD $387,117.

Another new development in Saint James is The Grove, the residential component of the Limegrove Lifestyle Center, the first mixed-use development  in Barbados. Each villa has 3,433 square feet of living space and is priced at US$1,325,000.

In Port St. Charles, a luxury residential marina development, resale prices of beachfront villas are around US$4 million and prices for 1-bedroom apartments start from about US$1 million.

In Mullins, St. Peter, prices of inland condominiums and townhouses start at US$350,000.

New developments on the South Coast

The South Coast, which begins at Carlisle Bay in Bridgetown and heads towards East Point on the Atlantic east coast, is less busy and has a more local feel.  It caters mostly to the mid-market and has seen tremendous growth, with numerous developments already completed and delivered.

Property prices typically range from US$350,000 to US$2 million.

The Crane Resort and Residences, built in 1887, is one of the oldest resorts in Barbados. Its residential component has expanded over the years, and new villa-style residences have been completed in 2009. Prices of residences start at US$425,000. Construction of condominiums is also ongoing.

Ocean One is a 21-unit beachfront condominium in Maxwell. The West Penthouse is priced at £2,200,000. Ocean Two is a newly completed condominium-hotel which offers freehold ownership.

The Palisades development consists of 16 townhouses, each unit costing US$850,000.

In the 54-unit Sapphire Beach Condominiums, 2-bedroom units sell for US$699,867 and 3-bedroom units sell from US$890,050 to US$1,057,091, depending on unit size.

In The Palm Beach Condominiums, prices for condo units 2,200 square feet and larger start at US$950,000.

East Coast to remain “local”

The East Coast on the Atlantic side of Barbados is better known for its rugged beauty. Because of huge Atlantic waves crashing along the shorelines, swimming is not advisable. However, beaches on the east coast are popular for walking, surfing and beachcombing.

Much of the eastern coastline is protected land and part of a National Park. Hence, though foreign investment interest in the area has significantly increased in the past years, it is difficult to obtain building or planning permission from the government.

In a recent statement by Prime Minister David Thompson, more tourism development will be allowed in the East Coast, owned by Barbadians. Efforts will also be made to ensure that the East Coast does not end up like the crowded and overdeveloped West Coast.

The Edgewater in Bathsheba is a new development consisting of duplex villas and apartments for sale.

In The Merricks Beach Resort and Residence in St Phillip, luxury apartments and villas are available for sale. All suites have a 2-year rental guarantee of 10% of the original purchase price.

In The Little Good Harbor in St Peter, ocean-view apartments and beachfront villas are priced from US$395,000 to US$1,870,000.

This article has been republished from Global Property Guide. You can also view this article at Global Property Guide, an international real estate analysis site.

Bahamas Real Estate Attracting Growing Interest From Foreign Investors

Published on:
Monday, August 02, 2010

Written by:
Global Property Guide

As the Bahamas real estate market starts to recover from the global recession , there are many factors making the market attractive. With high yields on rental properties, tourist arrival rates climbing, expansion of the country’s infrastructure underway, no restrictions on foreign buyers, and no income, sales or estate taxes, there are many advantages for foreign investors looking to buy real estate in the Bahamas. See the following article from Global Property Guide for more on this.

The Bahamas property market is gradually recovering from the effects of the global recession as US and UK buyers return to the islands. There is a considerable amount of development in the second-home market as investment interest from Latin American and Asian buyers also increases.

The Bahamas does not release official house price figures, but the average price of a luxury home is about US$1 million. Condominium and apartment units range from US$300,000 to US$100,000, depending on the location. In the Bahamas, it’s not uncommon for wealthy buyers to go for properties that cost as much as US$14 million.

The Bahamas has enjoyed stable economic growth , with an average annual GDP growth rate of 3% between 1997 and 2007. However, due to sharp declines in tourism and financial sectors in 2008, GDP growth was estimated to have slowed to 1%. In 2009, GDP declined by 3.9%.

A low rate of growth of 2% is anticipated from 2010 to 2011 as tourism receipts by air and sea improve due to increase in air services and cruise operations.

Tourism-related construction projects led by the government are also expected to encourage development plans for real estate projects and attract more foreign investments.

Tourism and construction

Tourism and tourist-driven construction remain the backbone of the Bahamas’ economy, accounting for approximately 60% of its GDP and employing more than 40% of the total workforce. Offshore finance, the second largest industry, accounts for around 15% of GDP.

A construction boom in the private sector (hotels, resorts, and residences) began in 2006 due to a steady flow of tourist arrivals and increased foreign investments, which resulted to a solid GDP growth. As the recession deepened, the tourism industry saw a significant decline in visitor arrivals and occupancy. The country’s GDP declined by 2.4% in 2009, from 1.5% in 2008.

During the first quarter of 2010, there was a slow but steady increase in tourist arrivals, which recovered by 9.2% to 1.4 million from a 2.9% decline in 2009, according to the Central Bank of the Bahamas (CBOB). Stopover arrivals improved in Grand Bahama (up by 14.9%) and New Providence (up by 16.9%), where new cruise ships are operating. This, however, meant that passenger delivery to the Family Islands in the southeastern part of the Bahamas, once the first port of entry, declined by 4.8%.

In 2009, there was an estimated 3.5 million tourist arrivals in the country, dominated by Americans and Europeans. To stimulate economic activity and boost the real estate market, the government approved the plans for a new harbor for larger cruise ships are under way. This will transform a run-down, industrial part of Nassau, New Providence  and can spur the development of more residential and construction projects in the area.

Construction of several government infrastructure and facilities projects is also either completed or ongoing. These projects include:
• The US$275 Phase I redevelopment of Lynden Pindling International Airport - new US Departure Terminal to open in 2011
• The US$130 million New Providence  Road Enhancement Project, (part of the US$1 billion infrastructure program to be invested over the next five years) - new road corridors completed in June, 2010
• The road networks in the Family Islands: Abaco, Acklins, Current and Current Island, Eleuthera, Harbour Island, and Ragged Island
• And two new ports, in North Abaco and Exuma, respectively.
Market focus: multi-use resorts and second homes

Several high-profile projects were halted in 2008 as foreign investors lost partners and found difficulty in obtaining funds. Unemployment rose from 8.7% in 2008 to 12.4% in 2009 as many workers were laid off, and construction workers were disengaged from projects.

Beginning in 2010, however, with the best construction workers in the island now available and with less competition in the market, developers of large projects have become more optimistic and construction activity has resumed (see Prime Minister Ingraham’s 2010 State of the Nation Address), creating thousands of much-needed jobs.  These include:
• The newly opened luxury Sandals Resort at Ocean Bight, Exuma
• The nearly completed US$75 million Phase I of the Caves Heights condominium on West Bay St and Blake Road; the US$25 million Phase II is ongoing
• The Phase I development of Albany, an oceanfront resort with a mega-yacht marina and golf course in New Providence
• The US$2.6 billion Baha Mar Resorts on Cable Beach, Nassau, with residential condominiums available for private ownership, to be completed in 2013
• And the US$4.9 billion multi-purpose Ginn Sur Mer development with residential, hotel and entertainment facilities, marina with boat slips, and a private airport, in Grand Bahama.
The majority of the country’s second-home buyers come from the UK and the US, which were the most affected by the global financial crisis. Residential prices fell by as much as 20% in 2008.

According to John Christie, Vice-President of HG Christie Ltd, a leading real estate company and exclusive affiliate of Christie’s Great Estates in the Bahamas, conditions in the property market have improved from the previous year. Sales are up by 10-15%, which is fairly good. Homes worth US$1 million and up sell well in the islands of Abaco, Nassau, and Paradise Island.

The Out Islands of Exuma, Eleuthera and Long Island, however, are lagging behind. Several tourism-related projects that were resumed, like the Sandals Resorts in Exuma, should help renew interests in the property market.

Reports on the Bahamas by the Oxford Business Group indicate that homes priced at US$1 million and up are easier to sell because they are used mainly as second homes and not for investments. On the other hand, there is less demand for homes and condominiums priced between US$300,000 and US$1 million.

More plans for second-home developments are under way. Investment interest and private purchases have been coming from South America, particularly Venezuela. This was partly due to aggressive promotions by hotels, resorts and their airline tie-ups. Developers are also now looking as far as Russia and China for potential buyers and investors.

Increased interest in Grand Bahama 

Grand Bahama is the closest Bahamian island to the United States by way of Florida. In the past years, promoting the island as a tourist destination has been a little problematic because it has an Americanized appeal, compared to Nassau, the country’s capital, which has retained much of its traditional charm.

Grand Bahama is receiving a considerable amount of attention from the government and private sectors. The island is four times bigger than Nassau, and like the capital, its income relies on tourist arrivals by sea.

With the expanded cruise operations in the island, it is anticipated that more visitors will come beginning this year.

The construction of the large-scale Ginn Sur Mer multi-purpose development not only creates much-needed jobs in Grand Bahama (unemployment in the first quarter of 2009 was 9.2%), but will significantly increase the number of rooms in the island. Cottages in Ginn Sur Mer have an average price of $1.5 million.

Ginn Sur Mer is expected to help boost the local economy by attracting more long-stay visitors to the island and by encouraging more foreign investments in tourism and real estate development.

Mortgage market and stamp duty

From February to March 2010, the interest rate for residential mortgages dropped by 6%, from 8.29% to 8.23%. Rates hovered around 8% to 9% from 2007 to the first quarter of 2010, mainly because the Bahamian bank rate has been almost static.

In 2005, the CBOB reduced the benchmark rate to 5.25% from 5.75% (where it had been since 1999). The key rate has since been unchanged.

The Bahamian mortgage market has expanded significantly, from 26.7% of GDP in 2003, to 40.9% of GDP in 2008.

Local banks largely lend to Bahamian households with loans denominated in local currency (BSD1 = USD1). Real estate purchases by wealthy foreign buyers are mostly paid in cash.

A 2% increase in stamp duty took effect beginning July 1, 2010, which the real estate industry fears will cause confusion on ongoing transactions, and put off some potential buyers. The new rates apply to all transactions, excluding those involving first time buyers, and are as follows:

Properties between $0 and $20,000 – up from 2 to 4%
Properties between $20,000 and $50,000 – up to 6%
Properties between $50,000 and $100,000 – up to 8%
Properties between $100,000 and $250,000 – up to 10%
Properties higher in value – up to 12%

Rents and yields

Properties in the Bahamas give good rental yields, according to Global Property Guide research (based only on long-term rentals).

Among the different types of properties in Nassau, inland houses have higher yields (ex: 8.40% p.a. for 250 sq. m.) than houses along the waterfront (ex: 5.88% p.a. for 250 sq. m.). Nassau waterfront condominiums have slightly higher yields than inland condominiums.

In Nassau, the average rent for houses is around US$5,000 to US$6,500 per month while penthouses rent for US$9,500 per month. In the Out Islands, three-bedroom houses can be rented for US$3,000 per month.

Rent in the Bahamas is 15% of the value of the dwelling. There is an additional charge for furnished homes, which is 15% of the value of the furniture (Rent Control Act).

Property ownership by foreigners

There are no restrictions on foreigners buying property, except for a permit from the Government before the transaction, if the property is on undeveloped land with an area greater than five acres (20,234 sq. m.).

Foreigners who own properties in the Bahamas are eligible for a homeowner’s residence card (renewable annually) and those who purchase properties valued at least US$500,000 are given priority in permanent residence applications. However, neither permanent nor annual residence gives a foreigner the right to work in the country.

There are many tax advantages and incentives for foreign real estate buyers in the Bahamas. There are no income, sales, and estates taxes. The only direct tax is real property tax.

This article has been republished from Global Property Guide. You can also view this article at Global Property Guide, an international real estate analysis site.