Golf course developers confident that big names will draw in property investors in 2009
For years property developers have regarded golf courses as a major attraction for real estate investors and waves of them have been built in Spain and Portugal. Emerging markets like Brazil, Turkey and Morocco have also jumped on the golf course bandwagon.
But with the global credit crunch impacting on all property markets the big question is whether or not a golf course can be a saviour in 2009 when even the most optimistic analysts are not expecting markets to pick up.
One of the problems is that it has been the villas alongside the golf courses that have driven construction, not the other way around. A recent study from KPMG showed that in Europe, the Middle East and Africa the sale of villas, houses and apartments around golf courses generated more income than golf-related activities in 2006, the most recent year for which figures were available.
More than 150 golf-related real estate projects were built in the region in 2006, with 17,000 residential units generating €18.8 billion, compared to €18.5 billion from green fees and memberships.
'Buyers are prepared to pay up to a 30% premium on a property located in a golf community or golf resort,' the study concluded. But since then we have had the credit crunch and it is now becoming obvious that many of the more recent golf course-related developments, especially those in Portugal and Spain, are now struggling through a glut of golf course villas.
In the Middle East many golf course developments are still under construction and developers are hoping that when they are complete there will be plenty of interest from property investors. But the current downturn doesn't help with advanced sales.
It is estimated that there are 8,500 courses in Europe, the Middle East and Africa, but 19,000 in the US. The Caribbean is seeing new courses being built and Mexico and Brazil are emerging as major players in the golf property stakes.
For 2009 the marketing gurus are using celebrity to pull in the crowds. Basically this means that if you don't have a celeb attached to your golf development then don't expect much interest. But it can't just be any golfer; it is the world's elite players who are sought after to design prestige golf courses with clubs that can charge tens of thousands of dollars for annual membership.
One of the most prestigious currently under development is Al Ruwaya, an 18 hole par 72 course designed by Tiger Woods, the world number one golfer. The $1.1 billion project in Dubailand, which also includes a luxury boutique hotel, a restaurant run by top French chef Guy Savoy and a residential complex with palaces, mansions and villas, is due to be completed next year with the golf course penciled in to be ready in the Spring.
His first course in his native US is at The Cliffs, Carolina, with views over to the mountains. Woods is also designing an oceanfront course for Punta Brava, a private golf and ocean club on the Baja coast of Mexico. But he has said publicly that he is not going to get involved with many projects, making those he is working on all that more sought after.
'I'm not going to probably design a lot of golf courses over the course of my career. I don't have the time to design 10 golf courses a year like some guys do, nor do I want to,' he said recently.
Without a major name developers and agents might struggle to market their properties. Portugal calls itself Europe's No 1 golf destination. It has courses designed by Nick Faldo, the legendary British golfer and Ryder Cup captain. Jack Nicklaus has two courses in the eastern Algarve in a golf community that offers both apartments and multi million euro villas in a secure, exclusive community. But do these developments have the same pulling power as Tiger woods?
Because Woods is a relative new comer to the golf course design arena, say compared with veteran Jack Nicklaus, his name still has that bit of extra prestige and of course he is the current world No 1. His courses in Dubai, Mexico and Carolina have more drawing power than the two Jack Nicklaus courses at Punta Mita in Mexico, for example.
But it is not just a downturn in the market that is affecting golf course developments. In some countries there is concern about their impact on the environment and the sheer amount of water that is needed to keep those greens green as well as supply the luxury villas and apartment built alongside.
Lawyers acting on behalf of Spain's Ministry of the Environment have gone to the high court of Valencia to try and stop the Dolores Golf development from going ahead, citing insufficient water resources. The plans for Dolores Golf, near the town of Dolores in Alicante include a golf course and 2,600 properties on 160 hectares of what was traditional farm land.
In its legal action against Dolores Golf, the Ministry of Environment is asking for the project to be suspended until sufficient water resources can be established. If sufficient water resources cannot be found, the Ministry will seek a permanent ban.
The mayor of Dolores is defending the project, arguing that other developments in the area have been given the go-ahead on the promise of water from a new desalinisation plant in Torrevieja.
Environmentalists are also opposed to the development and claim it will damage the wetlands of the Hondo Natural Park, will destroy unique farmland, and will be built on a flood plain.
A proposed huge residential golf project in Nerja, Andalucia, is also the subject of much debate as it violates the local government's golf decree introduced earlier this year to sever the often close relationship between the construction of golf courses and new housing. But officials are keen for it to go ahead as it will bring jobs and tourists to the area.
But there is concern about the water supply. Environmentalists claim the project will need 500,000 cubic hectometres of water per year at a time when climate change could lead to a decrease in annual rainfall levels.
One course in Portugal is, however, taking the environmental impact seriously. The Praia D'El Rey course on Portugal's Silver Coast is the first in the region to start implementing ISO 14001, the environmental certification programme now recognized all over the world.
Its new environmental management system minimizes the resort's use of water, focuses on the use of organic fertilizers and protects the 54 endemic species of flora found on the course. It has special treatment areas to enable the proper separation, disposal and recycling of all the residues and waste materials from the course.
'By the end of 2009 the Praia D'El Rey course will be officially certified under ISO 14001, making us one of the most forward thinking and environmentally aware golf courses in Portugal,' said Director of Golf Eduardo da Silva.
However golf tourism across the world is worth in the region of €10 billion each year and as a leisure sector, golf tourism is growing at a rate of up to two and a half times faster than other leisure based travel sectors so the draw of the green and the club in finance terms can't be ignored.
'The real estate options are appealing to savvy property investors who are well aware that such resorts make the very best investment locations for both a high yielding rental strategy and a strategy relying on consistent capital appreciation and consistent resale demand,' said James Wyatt, Partner & Head of International Sales at Barton Wyatt.
James Gonzalez, Market Analyst at Obelisk International, believes golf courses will always be an attractive option for property investors. 'There are a great deal of options for people who are looking to buy an investment property but few are as good as one that is centred on golf. For those that want a buy to let investment, golf communities can be the perfect choice. Golfers will travel a long way to play the best courses and more importantly, they will return year after year,' he explained.
And certainly outside the US, Spain and Portugal golf courses are growing in popularity. Recently the International Association of Golf Tour Operators voted the Dominican Republic Golf Destination of the Year for the Caribbean and Latin America. 'The IAGTO award affirms that the Dominican Republic has arrived on the international scene as an important new destination for golf. The world is taking notice of the Dominican Republics world-class designer golf courses set amid stunning sea sides, beaches and mountains in an accessible and affordable destination,' said Francisco Javier Garcia, the Dominican Republics Minister of Tourism.
The island has golf courses designed by legends such as Pete Dye, P.B. Dye, Jack Nicklaus, Robert Trent Jones, Gary Player, Tom Fazio and Nick Faldo.
The Middle East is also a boom region for golf developments. Last month top golfing stars including Colin Montgomerie, Retief Goosen (twice US Open Champion), Michael Campbell (US Open Champion) and Camilo Villegas (twice victorious on the PGA Tour this year) were in Bahrain for the Riffa Views Invitational.
Riffa Views, known as the most distinguished residential address in Bahrain and the first residential golf resort in the island Kingdom, features a Montgomerie-designed 18-hole championship golf course.
As Wyatt says; 'When looking to buy a second home or an investment property abroad, golf properties are always a secure investment choice. Not only is golf a growing sport with more and more people now looking to play at courses overseas, golf courses also often come with additional facilities that increase their appeal as excellent long term investments choices.'
But at the end of the day it is still a big name that is needed during the current downturn. At The Cliffs, High Carolina the Tiger Woods name has helped draw in investors despite the weakened state of the national economy and local real estate market.
About 50 lots in the first phase of the luxury community were sold on the opening sales day when more than 1,000 people rode in an army of luxury SUVs for the unveiling of Woods' design.
Some of the first buyers said the fact that High Carolina will contain the first golf course Woods is designing in the United States was a big factor in their decision.
The golf course is scheduled to open in 2011 and developer Jim Anthony is confident that the beauty of the location, his company's reputation and record and Woods' involvement will all drive sales.
'There's no better property. There'll never be another first Tiger Woods golf course in the US. Yes, it's a tough market we're in, but Tiger Woods' name is going to appeal to people,' he said confidently.