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Feb 01, 2011

Slow but steady improvement for Trinidad and Tobago's property market


 

Trinidad and Tobago’s property market is slowly recovering.  Prices fell around 20% during the recession, but there are signs of recovery, not least in demand for middle-income housing.

In the highly desirable West region near Port of Spain, interest is also slowly returning in upscale properties selling from TT$2 million to TT$8 million (US$312,500 to US$1,250,000).

The boom lasted from 1991 up to 2006, with house prices rising over 400% during this period, when the economy was boosted by the flourishing oil, natural gas and petrochemicals industries.  Foreign investment poured in. Much new private housing was built in Port of Spain, in the northwest region, and the area around Point Lisas Industrial Estate, the centre of Trinidad and Tobago’s petrochemical industry.

Luxury apartments, townhouses, and gated communities became popular. Government housing projects also expanded. Construction and labour costs soared. Properties with price tags of TT$1.5 million (US$234,375) began to be considered cheap. In the high-end property market, properties sold for up to TT$20 million (US$3,125,000).

The recession and after

As the global economic recession set in, demand fell sharply. Construction activity slowed, as projects were completed or halted.  Foreign investment fell, and unemployment rose – reaching 6.2% in 2010. Financial and investor confidence also tumbled when CL Financial, Trinidad and Tobago’s largest privately-held conglomerate (and one of the largest in the Caribbean), collapsed due to high leverage and risky investments, and had to be rescued by the government.

Then the government introduced a new property tax – a 3% tax rate on residential property and a 5% tax rate on commercial property, based on 90% of annual rentable value. This aroused a lot of anger.  After the victory of new PM Kamla Persad-Bissessar, elected in May 2010, the reform was suspended by the new People’s Partnership-led coalition government.  The previously-obtaining Lands and Buildings Taxes Act rates and values were reintroduced.

Many developments are still coming on to the market, despite the pause in new construction starts.  It will take a year or two before all the available upscale properties are absorbed.

The expat rental market

Trinidad and Tobago’s upscale neighbourhoods, mostly in the West region, became popular with expats during the boom, and commanded high rentals. The economic downturn caused an outflow of these foreign renters. As a result, a large number of these properties are now being offered at reduced prices, and are aggressively being marketed to expats.

Residential rents for the expat market range from US$1,500 to US$10,000 for an apartment, per month, depending on location.
Middle-income locals might typically pay from TT$1,000 to TT$5,000 (US$156.25 to US$781.25) per month for their apartments.

Some of the most attractive locations to rent or buy in Trinidad are:

Westmoorings – upscale Port of Spain suburb, with high-rise apartment complexes
Goodwood Park – exclusive neighbourhood near Port of Spain, with large private houses
Bayside Towers – new luxurious apartment complex
The Greens, Maraval Valley –  modern, luxurious gated community

Tobago Plantations Beach and Golf Resort, the first gated resort on the island, sells oceanfront homes, apartments, and two-bedroom cluster villas, for US$245,000 and up.

Improvements in the economy

Trinidad and Tobago is one of the wealthiest nations in the Caribbean.  The island of Trinidad is world-famous for the Trinidad Carnival, but unlike many of its Caribbean neighbours which rely on tourism, Trinidad depends heavily on oil and gas production. Its sister island Tobago, which has a wealth of secluded beaches and rainforests, benefits from the larger island’s prosperity.

However wealth does not bring immunity from recession, and in 2009 Trinidad and Tobago’s GDP contracted by 3.5%.  There was recovery in 2010, with 1.2% GDP growth.  GDP is expected to grow by around 2% for 2011, according to the International Monetary Fund (IMF).

Inflation has recently been a problem.  Inflation rose from 7% in 2009 to 9.4% in 2010, and is expected to be 8.2% in 2011 (IMF estimate).

After a period of decline, the construction industry is getting a boost from the government’s development plan “Vision 2020”, which consists mainly of construction projects.

Challenges for the new government – fighting corruption, reducing crime.

In the election of May 24, 2010, Mrs Kamla Persad-Bissessar, a former lawyer and education minister, became the country’s first woman Prime Minister. She called her new government the “People’s Partnership”, emphasizing openness and political accountability – in contrast to the previous government of Patrick Manning, who was accused of using government funds to finance his lavish lifestyle.

While many local residents in Trinidad and Tobago are prosperous, 17% of the population live below the poverty line. Crime remains a challenge particularly in Trinidad, with murders and kidnappings topping the list. Crime involving drugs, guns, and gangs has soared over the last decade.

Buying property

In Trinidad, foreign real estate buyers can buy up to one acre of property for residential use without a license. Since October 2007 foreign buyers have been required to obtain a license to acquire property in Tobago. No license had been issued to foreign buyers since.

Buyers are required to pay 5% to 10% stamp duty, plus legal fees.

  





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