The BVI's housing market recovery persists
April 16, 2013
The property market recovery in the British Virgin Islands continues. In 2012, home sales were quite strong at both the top-end of the market, as well as in the under-US$ 1 million range, according to Coldwell Banker Real Estate BVI’s Chris Smith. Homes costing from US$ 1 million to US$ 5 million are considered the softest market.
In early 2011, the price of luxury homes remained static. It gained momentum during the second half of the year due to asking price re-assessment done by vendors that caught the attention of property buyers, according to Knight Frank’s Caribbean Desk Head Christian De Meillac.
“The small size of the BVI property market, along with the continued demand and the limited supply, has helped support prices,” De Meillac added.
European buyers dominate the BVI’s luxury market, accounting for 60% of luxury sales, according to De Meillac.
Properties in the main islands of Tortola and Virgin Gorda are popular with foreign buyers, particularly the western tip of Tortola, near Smugglers Cove and Long Bay Beach. Homes with private moorings attract yachting enthusiasts. Demand for waterfront properties is also high.
Potential investors are not only looking for houses, but for land to develop—and the BVI is still largely undeveloped. In BVI, land can be bought starting at around US$ 100,000, versus around US$ 500,000 for developed properties.
Although the housing market is strong, the decline in tourism has been a problem since 2008. Premier and Minister of Tourism Premier Dr. D. Orlando Smith has proposed new port facilities to accommodate larger ships.
The economy’s “twin pillars”
The British Virgin Islands has one of the Caribbean’s most prosperous economies. After a slump in 2002 (-3.3%) and 2003 (-12%), the BVI bounced back with average annual GDP growth of 5.1% from 2004 to 2007, and then 3.2% from 2008 to 2011, according to the UN Statistics Division. Growth in 2012 is believed to have been 4%.
For 2010 and 2011 the BVI had low inflation of around 2.4% and 2.3%, respectively.
BVI’s economy is supported by the “twin pillars” of financial services (which account for 60% of GDP), and tourism, which is most of the rest.
BVI’s tourism sector has been in a slump since the financial crisis. In 2009, total visitors to the BVI fell by 8.6%, according to the Caribbean Tourism Organization. In 2010 visitors were down 0.9% despite stop-over visitors rising 7%, and in 2011, total visitors fell 1.1%. As of November 2012, the BVI had 302,647 stop-over visitors, a 0.3% decline. The decline in cruise passengers has worsened in 2012, falling by 19.4% to 390,579 from 484,715 in 2011.
During his budget address in December 2012, Premier Smith, who is also the Minister for Tourism, pointed out that BVI will continue to experience a decline in cruise ship arrivals unless the government builds new port facilities to accommodate today’s most popular cruise line ships.
According to Smith, BVI Tourist Board (BVITB) new marketing strategies include: rebuilding relationships with key industry players, focusing on the destination strengths, expanding the calendar of annual events, and developing the wedding and honeymoon market. Advertising campaigns will also be expanded in North America.
The financial services sector suffered a dip in 2009, but has since largely recovered. New international business incorporations decreased by 32%, after a 20% decline in 2008.
Among the 69 leading international financial centres, the BVI ranked 37th in the Global Financial Centres Index published in 2009, down from 34th place in 2008. In 2010 company incorporations increased by 26%, and by 8% in 2011. As of July 2012, new incorporations were up by around 6%. Premier Smith expects slower growth in the financial services sector in 2013, due to slower pace of global economic growth as well as increased incorporation activity from other jurisdictions.
Rents and Yields
In Tortola, rents for three-bedroom villas are from US$3,000 to US$4,000 per month. For four- to five-bedroom luxury villas, rent starts at around US$4,000 per month.
The average rent for a one-bedroom apartment in BVI is around US$ 1,100 per month. A two-bedroom apartment has an average rent of around US$ 1,700.
Overall, average rental rates for apartments in Tortola and Virgin Goda slightly rose to US$ 1,900 per month in 2012, higher than US$ 1,800 per month in the previous year.According to Global Property Guide research as of February 2012, gross rental returns for houses are poor, a mere 2.85% on average.
Overseas property buyers are required to obtain a Non-Belonger Land Holding License (NBLHL) to purchase property in the BVI. The NBLHL application is administered by the Ministry of Natural Resources and Labour. The license approval usually takes around 3-9 months to attain, and about a year to complete the process from application to closing. The license also extends to undeveloped properties.
Since belongers or British Virgin Islanders have the first choice of any property for sale in BVI, the Ministry requires that the property the foreigner wishes to purchase must first be advertised locally for four consecutive weeks in a local newspaper.
Property transactions of non-belongers are subject to a 12% stamp duty. Belongers, on the other hand, have a lower stamp duty of 4%.
If a foreigner wants to buy undeveloped land, he is required to build a single-family home worth not less than US$250,000, within two to three years. If he fails to do so, the government can impose a fine up to 40% of the sales price.
Undeveloped land cannot be resold until the development commitment has been fulfilled, or a penalty is paid to the government.
BVI’s main islands: Tortola and Virgin Gorda
Tortola is the BVI’s largest and the most populated island, known for pristine white sand beaches, aquamarine waters and yacht charters.
A public and private partnership is expected to build a “Tortola Pier Park”, a cruise pier dock and land development in Road Town that could draw in an estimated minimum of 425,000 passenger arrivals per year. The four acre land project will cost around US$ 75 million, US$ 25 million will be used for pier and excursion dock; US$ 25 million for land side development; and US$ 25 million for community investment, according to Minister for Communications and Works Hon. Mark Vanterpool. The government will be leasing the land to the developers for 48 years.
The long awaited Brandy Wine Bay Beach development project could also continue now as there will be no further stalling of the project according to Deputy Premier and Minister for Natural Resources and Labour Dr. Kedrick Pickering. The project aims to provide an alternative beach site for 500,000+ annual cruise passengers visiting BVI, and was commenced in 2004.
In contrast to the crowded and overdeveloped Tortola, Virgin Gorda is secluded and peaceful, making it the choice of the wealthy who want ultimate privacy.
Virgin Gorda has high-end resorts which include the new exclusive resort Oil Nut Bay, as well as the newly opened yacht club and marina Yacht Club Costa Smeralda. The Oil Nut Bay offers beachfront and hillside homes, and 27 estate lots ranging from 1.5 to 10 acres.
Starting at around US$ 1.9 million, buyers can get a plot by the marina. Beach villa plots can be bought starting at around US$ 4.9 million, while 10-acre top of the hill plots at around US$ 15 million. A five-bedroom show villa costs at around US$ 8.5 million.
For around US$ 20,000, a two-bedroom villa could be rented in The Baths, another residential area in Virgin Gorda.
- BVI: luxury house prices rising but demand still weak - June 06, 2016
- The BVI's housing market recovery persists - April 16, 2013