Sales volumes up in the Caribbean as wealthy buyers return

Last year was a watershed for several property markets in the Caribbean with prime real estate Barbados and the British Virgin Islands in particular seeing sales volumes increase, according to the latest analysis from Knight Frank.

Purchasers have started to see real buying opportunities in the market and critical to this turnaround has been the renewed confidence amongst buyers from Europe and the United States, the firm’s Caribbean Prime Residential Insight report says.

Barbados and the British Virgin Islands saw the number of prime sales increase by 10% to 15% in 2013 while the average price of a luxury home on the Bahamas, Mustique, St Barts and Jumby Bay rose marginally by up to 2% in 2013.

British, US and Canadian buyers continue to represent the key component of foreign demand across the Caribbean, the report also shows. There is evidence of higher disposable incomes in the mid market with interest in the $2.5 million to $4.5 million price bracket strengthening,particularly amongst US buyers.

The report points out that the weak dollar has fuelled interest from Euro denominated buyers. An increase in enquiries from Swedish, French and Eastern Europeans was particularly noticeable in 2013.

The report shows how currency fluctuations have helped buyers from Europe. In 2010 a French buyer looking at purchasing a $2 million property in Barbados would have paid €1.53 million. In 2013, due to currency rates and price movements, the same property would cost the buyer closer to €1.26 million.

According to Christian De Meillac, Knight Frank’s head of Caribbean sales, vendors need to be realistic on price given the volume of properties on the market following six years of subdued market activity.

The report also reveals that the Caribbean’s development market is improving with projects such as Oil Nut Bay and Albany recording strong sales rates.

Overall luxury homes across the Caribbean islands were not immune to the global financial crisis but prices on the smaller, more exclusive islands such as Mustique, Jumby Bay and St Barts have performed better than some of their neighbouring islands over the last six years.

The report points out that larger markets, such as Barbados and the Bahamas, where residential and leisure development had been expanding rapidly in 2007 to 2008, felt the reverberations more strongly.

Some islands have seen luxury prices fall by around 30% since 2007 but the rate of decline has slowed significantly in the last 12 months. However, De Meillac points out that despite the revived optimism there remains a large inventory of properties on the market across the Caribbean. ‘Those vendors that want to sell need to price their home realistically as buyers are highly price sensitive,’ he said.

The report says that 2013 saw a marked turnaround in Barbados’s prime market as confidence levels amongst buyers picked up but supply continues to outpace demand although the market is rebalancing.

Sales volumes increased by around 15% in 2013 year on year and this has resulted in prices starting  to stabilise following several years of declining values. ‘The government’s new Entry and Reside permit is contributing to stronger enquiry levels. It allows persons who invest a minimum of BDS$2 million in Bajan property to gain an indefinite special entry permit. To qualify the funds must originate from outside of Barbados,’ explained De Meillac.

He added that foreign interest remains focussed on the key locations of St Peter, St James and Christ Church and the new development market is starting to pick up with a few boutique developments along the beachfront emerging.

The number of sales on the exclusive island of Mustique rose steadily in 2013 as some vendors lowered their asking prices marginally. The availability of homes, particularly at the lower end of the market, is limited, the report points out.

Buyers are still predominately British, Western European and North American. ‘The majority of interest is in the $6 million to $10 million price bracket and the level of wealth on the island means most are discretionary vendors, who are under no financial pressure to accept less than they feel their property is worth. As a result, values remain largely stable,’ said De Meillac.

He added that there is minimal development on the island. The building plots that were available have been sold and there is little prospect of any new plots entering the market. As a result, there is a willingness amongst buyers to undertake extensive renovations and refurbishments on some older properties. The island is experiencing record levels of rental interest, enabling owners to generate a good return on their property.

Prime prices softened on Grand Cayman in 2013 but activity is rising, which the report says is an indication of renewed confidence and limited new supply. Sales in 2013 were focussed on Seven Mile Beach, South Sound and the Eastern Districts.

‘We estimate prime prices have slipped by around 5% on Grand Cayman in 2013 but we expect price growth to remain static in 2014. Sales have been particularly strong in the $1 million to $5 million price bracket with interest from US, Canadian and British buyers notable,’ explained De Meillac.

St Barts saw a significant rise in sales volumes in 2013 and the report says market activity remains strongest below €10 million but 2013 also saw an increase in the number of transactions above €10 million. Price movement has been relatively static since 2009 but edged upwards in 2013.

‘The number of homes coming to the market has remained flat but demand and consequently sales have increased. Unlike Mustique there are some unique opportunities for those looking to buy a plot and build their own home on St Barts. This section of the market is particularly healthy,’ De Meillac pointed out.

St Barts remains popular with North American, South American, Western European and British buyers and holiday rental activity is high with restaurant, hotel and villa owners noticing an increase in demand and occupancy.