_The Caribbean's road to recovery

Far from a homogenous market, the Caribbean residential sector, which extends across 7,000 islands and approximately 1 million square miles, has ebbed and flowed at different rates since the market downturn in 2007.

Kate Everett-Allen January 15, 2018

The performance of the Caribbean’s prime residential market varies significantly from island to island.

In recent years momentum has been firmly focused on the island of Mustique, the Bahamas (in particular New Providence and Paradise Island) and prior to Hurricane Irma, St Barts.

These islands have all recorded strong sales activity, the only constraining factor being their lack of inventory. Elsewhere, the BVI and Barbados have experienced weaker market sentiment.

In the decade post the global financial crisis prime prices across the region declined on average by about 30% but some islands such as St Barts and Mustique have recorded positive annual price growth in the last few years.

According to the Caribbean Hotel Association, 70% of the Caribbean was unaffected by Hurricane Irma which battered the central belt but left the southern islands such as Barbados and Mustique largely untouched.

Irma’s impact on the market has been augmented by Brexit, UK Stamp Duty changes, the Zikavirus, the US election, and for those islands popular with UK buyers, the weaker pound, has influenced UK applicant numbers.

However, there have been positives too. For British buyers purchasing on USD-denominated islands, sterling’s weakness has served as a catalyst for UK vendors to be more flexible on price.

Further optimism is evident in the region’s GDP forecasts. Following 2016 when the region’s economy contracted, the IMF forecasts the economy to expand by 1.1% in 2017 and 2% in 2018.

For owners looking to rent their holiday home, the latest tourist figures also provide welcome news.

The growth in tourist arrivals in the Caribbean outpaced world wide growth for the third consecutive year in 2016, according to the Caribbean Tourist Organization.

Demand from the Canadian market has proved notably strong, rising by 6.4% year-on-year in 2016 according to the Caribbean Tourist Organization, with cruise ships and boat charters a growth segment within the industry.

Future tourist spending will be critical to the region’s recovery particularly on those islands hit hardest by Irma including St Barts and the British Virgin Islands (BVI).Additional challenges for the BVI include its post-Brexit discussions with the UK regarding its status as an Overseas Territory, as well as the OECD’s new Common Reporting Standards for offshore financial centres.

A recent survey by our partners Terra Caribbean, which assesses investor attitudes, found that real estate remains the number one investment choice on the island of Barbados with many focusing on rental income rather than capital growth in the short to medium-term.

With the US economy in good health, US private equity firms are investing in key infrastructure projects across the region once more. The Bahama’s new US$4.2billion Baha Mar resort launched in 2017 and on Barbados, the Beachlands development near Holetown, consisting of four beachfront villas, has injected some dynamism back into the market.

Download the Caribbean Inside View for our detailed market overview and buyers' guide.