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Jan 16, 2012

Thriving property market in Seychelles

by Lalaine Delmendo

Blessed by nature, the Seychelles is an archipelago of 115 islands with superb beaches, an unspoiled landscape, virgin forest, amazing marine life, lots of orchids, bougainvilleas, hibiscuses, gardenias and frangipani, and a profusion of bird species found nowhere else. It is 1,600 km off the coast of East Africa, with a population of only 81,000.

The Seychelles is outside the cyclone belt so the weather is stable all year round, a humid equatorial climate with an average maximum daily temperature of 29 degrees. There’s no malaria or yellow fever. It has the highest human development index in Africa, with a per capita GDP of US$10,714.

Foreign property buyers in Seychelles mainly come from South Africa, Italy, France, Russia and the UK. Seychelles culture is largely French-influenced, and the population is highly racially mixed. Tourism employs 30% of the labour force, and powers the economy. Independent from Britain in 1976, Seychelles became a one-party state (1979-1991) under president France Albert René, who continued to dominate politics after 5-yearly elections were introduced till 2004, when he stepped down in favour of president James Michel.

Property is expensive. Dwelling prices in Mahe, the capital, start at SCR2.34 million (US$160,000) (end-2010), according to Jean-Paul Maurel, director at Premium Realty, and a furnished two-bedroom house sells for about SCR9.35 million (US$640,000). Land prices in the capital vary from SCR731 (US$50) per square meter (sq. m.) for a land with no view to USCR21,921 (S$1,500) per sq. m. for prime beachfront properties.

In Praslin, the Seychelles’ largest island, property prices are about 20% higher than in the capital because most properties are located on or near the beach.

Recently, a few high-end residential developments have been constructed. These include the following:

  • Eden Islands, a marina development on a reclaimed land linked to Mahe by a bridge. It comprises about 450 luxury two- and three-bedroom apartments, mansions and villas. Property prices start at about SCR4,384,230 (US$300,000).
  • Four Seasons Private Residences Seychelles, an exclusive residential development located at the Petite Anse Bay on Mahe’s southwest coast. Four- to six-bedroom villas are priced for about SCR102.3 million (US$7 million).

Most foreign buyers pay cash. Foreigners can secure residency in Seychelles for a fee of SCR50,000 (US$3,421). There are no property taxes or capital gains taxes in Seychelles but a foreign homebuyer should expect to pay a processing fee of 1.5%, a sanction duty of 11%, and a stamp duty of 5%.

Purchasing requires Government Sanction from the Cabinet Ministers of the Ministry of Land Use and Habitat. The property must be used only for residential benefit of the buyer and his family. A minimum of SCR1 million (US$68,427) must be brought into the Seychelles, and converted to Seychelles rupees (SCR) to be used for the transaction.

The Immovable Property (Transfer Restriction) Act prohibits the lease of immovable property owned by a non-Seychellois.

The fateful depreciation of the Seychelles rupee

seychelles exchange rates

In November 2008, a balance of payments crisis forced the Seychelles to abandon its fixed exchange rate regime and move to a floating exchange rate. The overvaluation of the Seychelles rupee – estimated at between 11% to 33% against the US dollar - combined with a very active black market, had made the cost of living in Seychelles very high.

After overshooting in the first quarter of 2009, the rupee briefly stabilized against major traded currencies, but has since depreciated to US$1 = SCR14.6 (January 2012), according to the Central Bank of Seychelles (CBS), improving the competitiveness of the country’s tourism sector.

Tourism flourishing

seychelles tourism

Tourism accounts for about 70% of the country’s revenues and contributes about 25% of GDP. As of November 2011, there were about 176,478 tourist arrivals in Seychelles, up 11% to 174,529 in 2010. Europe accounted for about 75% of visitor arrivals.

Healthy economic growth

seychelles gdp

Seychelles’ economy expanded by around 5% in 2011, from annual GDP growth rates of 6.2% in 2010, 0.7% in 2009 and -1.25% in 2008. In 2012, the economy is projected to grow by 4%.

The country’s unemployment rate was 4.1% in 2011, down from 4.6% in 2010 and 5.1% in 2009. In 2012, overall unemployment is expected to fall to 3.7%, according to the IMF. Consumer prices rose by 5.1% in November 2011, according to the National Bureau of Statistics (NBS). In 2010, the overall inflation rate was -2.3%, up from the dramatic inflation during the post-depreciation years of 31.8% in 2009, and 37% in 2008.

Construction sector growing

seychelles housing stock

Construction activity picked up significantly in 2010, driven by hotel and residential developments, but this growth decelerated in 2011 as major projects were completed.

In addition the government allocated about SCR212.53 million (US$14.54 million) for housing in 2010, well up on the totals in previous years (US$4.57 million in 2009, US$8.62 million in 2008, and US$10.7 million in 2007). Seychelles’ housing stock was up 29% during the 8 years from 2002 to 2010, to 25,929 units, with homeownership at 69.3%, up from 66.3% in 2002. On the other hand, the number of households renting fell to 19.4% in 2010, down from 24.2% in 2002.

Mortgage market stagnating

seychelles mortgages and housing loan

Due to high interest rates and lack of banking competition the country’s mortgage market has stagnated for the past six years, and was about 3.5% of GDP in 2010, down from 5.2% of GDP in 2003. In December 2011, interest rates on housing loans offered by leading commercial banks ranged from 7% to 10%, unchanged from last year, according to the CBS.

   





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