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Jan 02, 2013

US Virgin Islands' property market on road to recovery


Since prices crashed in 2008, there has been a slump in the US Virgin Islands’ housing market.  Both on St. Thomas and on St. John, the market climbed sharply in 2007, only to fall dramatically the following year. However, it is good to remember that even taking the decline into account, property prices have risen sharply over the decade 2001-2011, with price rises of 89% for homes, and 67.6% for condo units, according to the USVI Bureau of Economic Research.  In addition, some parts of the market are now beginning to recover.

PROPERTY PRICE CHANGE (2001-2011)

HOME PRICE CHANGE(%) CONDO PRICE CHANGE(%)
St John/St Thomas
87.0%
69.0%
St Croix
109.0%
66.7%
US Virgin Islands
89.0%
67.6%
Source: USVI Bureau of Economic Research

In St. Thomas, the average sales price for all homes, condominiums and land, has fallen by roughly 25% to 50% since 2008, according to realtor Marsha Maynes. Currently, two to three bedroom single family residences sell for around US$ 350,000 to US$ 650,000. Two-bedroom oceanfront condominiums are priced ranging from US$ 300,000 to US$ 400,000.
St John’s more luxury market is recovering faster – but not without hiccups.  The average home sales price plunged by 26% to approximately US$ 1.28 million in 2012, after a rather strong climb by 34% in 2011 to US$ 1.72 million. Land prices were up by 33.8% in 2012. The average price of condominiums was up by 19.2% to US$ 512,500 in 2012, according to Islandia Real Estate.

USVI property price change

In St. Croix, average home sales prices fell by 2.45% in 2011, to US$ 379,024 according to the USVI Bureau of Economic Research. In contrast, condominium prices gained by 17.8% in 2011, to about US$ 210,361, although the number of actual units sold remained low, at 63. 

Brighter outlook for tourism and economy in 2013

Tourism is the US Virgin Islands’ main industry. It generates 2 million visitors every year, and accounts for 80% of GDP.  Tourist arrivals were up by 5.4% to 2.7 million in 2011, fuelled by a rebound in cruise ship arrivals that started in 2010. Despite a small drop in cruise ship passengers from January to September 2012, the outlook for the upcoming holiday season and for 2013 remains positive, with more ships expected next summer.

USVI stop over visitors

USVI’s economy dipped in 2008 (-4.9%) and in 2009 (-5.2%), following the U.S. economy. Based on Governor John de Jongh’s estimates, GDP was up 3.1% in 2011. However, due to the closure of HOVENSA LLC’s petroleum refinery earlier in 2012, a GDP decline of 2.1% is expected for 2012, before a 4.8% increase in 2013.

The closure of the HOVENSA refinery caused the layoff of around 1,200 employees. Unemployment is expected to spike to 12.7% in 2012, up from 9.1% in 2011. Average gross pay was up by 1.7% to US$ 38,656 in 2011 from US$ 38,000 in 2010.

Condominium decline hurts overall property sales

Residential property sales in USVI peaked in 2004, with 587 homes and 551 condominium units sold. Since then, property sales have been falling sharply—in 2011, only 272 homes and 162 condominium units were sold.

USVI property sales

In 2011, total construction permit values in USVI declined, with St. Croix’s prices dropping by 19.6%. Permit values in St. Thomas and St. John had a lesser value drop of 7.4%. After rising in 2008 by 16.9%, the value of private residential construction permits dropped sharply in 2009 (-35.6%), and the decline continued in 2010 (-7%) and 2011 (-14.5%).

USVI construction permits

Affordable housing

The Virgin Islands Housing Authority is responsible for planning, financing, constructing, maintaining and managing public housing developments, mostly on St. Thomas and St. Croix, and it manages around 15% of USVI’s total housing stock.  VIHA provides rental assistance to low-income families, elderly and disabled persons, with rentals based on the highest of three methods:

  • Income-based: 30% of the monthly-adjusted income Total Tenant Payment (TTP)
  • Welfare rent, if applicable
  • Minimum rent of US$ 25

Currently, VIHA runs 3,345 public housing units. Approximately, 1,605 units are in St. Thomas and St. John, while the other 1,740 units are in St. Croix.

Long-term rental market is small

Most landlords cater only to short-term vacationers and holiday makers.  Long-term rental residences in USVI are usually not advertised, except to locals. Most landlords only put a “for rent” signage in front of these rental apartments, which are often part of a larger house, with the landlord living next door.

St. John has the most expensive rental houses and villas. Monthly rents for one-bedroom apartments range from US$950 to US$1,800. Three to four-bedroom beach houses can cost from US$2,000 to US$7,000 per month. Recently, more condominiums have been built near hotels and resorts in St Thomas and St Croix.

St. Thomas, the “Rock City”

Mountainous St. Thomas is an ocean lover’s paradise. Hillside houses usually have magnificent views of the ocean. Snorkeling, scuba diving and windsurfing are popular tourist activities. St Thomas is home to USVI’s capital and largest city, Charlotte Amalie.

Recent residential developments in St. Thomas include:

  • The Residences at Cabes Point: a luxury gated community along Lindqvist Beach on Smith Bay, on the east end of St. Thomas. It has a full-time in-house manager as well as a tennis court and pavilion, and a private beach club. It has slots for only 17 residents.
  • Dolphin Cove: a luxury community situated on St. Thomas´ "Gold Coast"; with around 20 acres of oceanfront property, Dolphin Cove plans to build at least 4 oceanfront bungalows, 64 villas, and 36 luxury flats offering views of Nazareth Bay and St Croix and the channel between St. Thomas and St. John.
  • The Preserve at Botany Bay: 360 acres of land designed to be a high end, exclusive community which consists of plans for 150 homes/lots. Lot prices start at US$950,000.
  • Cabrita Point Estate: the creation of a new luxury developmentcomprising of 35 home sites ready for construction was announced by the Ritz-Carlton Development Club in cooperation with John Foster Real Estate on July 2010. The site offers oceanfront and water views.

St. John, the “Love City”

St. John is known for its well-preserved natural beauty and picturesque hills dotted with lavish villas. Unlike the overdeveloped St. Thomas, real estate developments in St. John are restricted. The island is the wealthiest and most expensive of the US Virgin Islands.

St John is home to the territory’s National Park, which protects more than half of St John’s land area. The National Park includes some of the best beaches and coral reefs in the world.<

Some of the condominium developments on St. John offer full ownership while others operate as timeshares or run on fractional ownership. Most of these residential projects are located in Cruz Bay.  Some existing condominium developments include:

  • Sunset Ridge: located in Cruz Bay, Time-share and condo units are available as well as some units under construction. From $575,000. Weekly time shares from $8,000 and up.
  • Pastory Estates: located on the hillside just five minutes from Cruz Bay, it has four buildings with thirteen one and two bedroom condos. One-bedroom units are priced at least $350,000.
  • Pond Bay Club: located in Chocolate Hole just three miles from Cruz Bay, it is an exclusive 15-acre fractional time-share development consisting of 50 furnished three-bedroom cottages and villas and other recreational facilities. The partially-completed Pond Bay Club was up for auction at St. Thomas Superior Court on May 2, 2012.

St. Croix, the “Twin City”

St. Croix is the largest island in the US Virgin Islands, but is more laid back than the other two islands. Unlike St. Thomas and St. John’s mountainous landscape, one of St. Croix’s charms lies in its varied topography, which goes from uncrowded white-sand beaches to rolling hills to rain forests.

St Croix is nicknamed the Twin City because of its two main towns: Christiansted and Frederiksted. Out of the two, Christiansted is more developed featuring shops and superb restaurants with a modern setting. This town is also known for architectural and historic richness, present in its 18th-century Danish-style buildings constructed by African slaves. Meanwhile, Frederiksted, with its historic landmark Fort Frederik, has been the main port for cruise ships in St. Croix.

Some notable attractions in St. Croix include the Buck Island Reef National Monument, the renowned Cane Bay Wall, St. George Village Botanical Gardens and the Cruzan Rum Distillery. St. Croix is also the only island in the US Virgin Islands that has a casino, the Divi Carina Bay Casino.

There were plans to build another three new resort-casinos in St. Croix:

  • The Robin Bay Seven Hills Beach Resort and Casino;
  • Golden  Resorts´ proposed development at Great Pond Bay; and
  • Williams and Punch resort development – “Amalago Bay”

However, these three projects were reportedly suffering from tight financing due to USVI’s poor economic climate in 2011, and went into hiatus. In August 2011, the USVI Supreme Court asked the lower court to review the Golden Resorts’ case, with no updates as of December 2012.

Last September, there were protests against the National Oceanic and Atmospheric Administration (NOAA) and the Environmental Protection Agency for causing delays in Amalago Bay’s permit process. Protesters believe that the two agencies were preventing Amalago Bay from getting a permit from the Army Corps of Engineers. The project, a 322-room casino-hotel complex, was given a Coastal Zone Management (CZM) permit in 2009.





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