Grenada’s property market recovering slowly
August 22, 2015
Grenada’s property market continues to recover. The economy is expected to expand by 1.8% this year - some expect even stronger growth - from an earlier estimate of 1.1%, according to the International Monetary Fund (IMF).
Residential property prices in Grenada have been stable in recent months. In prime residential areas, condominium units are typically priced from $300 to $500 per square foot (sq. ft.) while the average price of houses ranges from $200 to $500 per sq. ft., according to Hyacyinth McBarnette of Re/Max Grenada.
The prices of developments in some of Grenada’s luxurious residential areas ranges from $460 to $1,600 per sq. ft.
|Residential areas||Price per sq. ft.|
At the luxurious Bacolet Bay resort in St. David on the south coast, a hotel cottage is priced at $430,000 while a two-bedroom apartment is being sold at $575,000. On the other hand, the average price of one-bedroom villas is $605,000, with a price of $1,062,500 for two-bedroom villas.
Foreigners can buy land. Non-nationals must pay the Alien Land Holding Tax at 10% of the property´s value to buy an Alien Land Holding License.
The spice of the Caribbean
The Spice Island Grenada (pop. 106,000), earned its moniker because of the abundant spice trees in the country. The island breeze is filled with scents of nutmeg, cinnamon, vanilla, and ginger, and produces one-third of the world’s supply of nutmeg. Grenada also exports cocoa, banana, and sugar. Grenada´s GDP per capita was around US$8,125 in 2014, according to the IMF.
The small country of Grenada is a tri-island nation composed of Grenada, Carriacou, and Petite Martinique. Grenada brims with gorgeous beaches, with both black and sugar-fine white sand. Divers savour elegant coral reefs and the largest shipwreck in the Caribbean, and a breathtaking underwater volcano.
From boom to bust
Following years of political unrest, Grenada’s house prices started to rise in the early 1990s and continued to increase substantially over the next two decades, said the realtor McBarnette. Prices have tripled from 1990s to 2009 in prime residential areas on the south shore, especially in Lance aux Epines, True Blue and Westerhall Point, added McBarnette.
The country was devastated in September 2004 by Hurricane Ivan, a catastrophic event which damaged 90% of the island´s infrastructure and dwellings. However, property prices continued to rise.
The country’s property market started to feel the pinch in 2009, when the global economic and financial meltdown flattened residential property prices. In some locations, house prices fell by about 10% annually from 2010 to 2013.
In recent years, the property market has shown signs of recovery, thanks to improving economic conditions. Yet Grenada’s house prices are a bargain compared to elsewhere in the Caribbean.
Foreign buyers are fuelling housing recovery
An increasing number of foreigners have showed interest in Grenada. International airlines now fly directly from major American and European cities. The majority of foreign buyers in Grenada are from the United States, Canada and Britain. Most foreign homebuyers purchase in the $300,000 to $1 million price range.
In 2014, visitor arrivals surged by 18.6% to 374,007 persons from a year earlier, according to the East Caribbean Central Bank (ECCB). About 31% of the 133,521 stay-over visitors were from the U.S., followed by 18% from the U.K., 17% from other Caribbean states and 10% from Canada.
Despite the increase, this was still far below the annual average visitors of 435,000 between 2007 to 2011.
Politics: a new beginning
In elections held on February 19, 2013, Keith Mitchell´s New National Party (NDP - conservative) swept all fifteen parliamentary seats with 59% of the vote, and the moderate opposition party, the National Democratic Congress (NDC - liberal), undermined by the weak economy and internal squabbles, lost all representation, despite winning 41% of the vote.
Grenada was once one of the Caribbean´s fastest developing economies. Its GDP grew by 8% p.a. 1997-2000. But GDP fell by an annual average of 0.7% annually from 2008 to 2013, due to the adverse impact of the global economic and financial crisis.
Many ministers in the previous government had spent their formative years under Maurice Bishop, leader of a socialist revolutionary government from 1979 and 1983 (in 2009 the airport was renamed Maurice Bishop International Airport in his honour). Faced with a stagnant economy after 2009, the NDC government fell apart, in dissention over to whether to stimulate the economy by spending, or pursue economic reform.
The new government is reformist. Prime Minister Mitchell has the distinction of being the only Caribbean politician to sweep all seats on two separate occasions, in 1999 and 2013. Because there is now no opposition in Parliament, Governor General Carlye Glean, the titular head of state, has appointed 3 Senators to the (wholly appointed) Senate, to serve as de facto opposition.
Grenada has very high national debt, at 100% of GDP. In 2013 the new government entered "selective debt default" and agreed restructuring with some creditors at 50c in the dollar. It also entered into a three-year US$21.7 million extended credit facility arrangement with the IMF in June 2014.
The good news is that Grenada’s fiscal performance has been stronger than anticipated. The deficit fell to just 1% in 2014 from 4% in the previous year. Real GDP growth rose to 1.5% in 2014.
Legislation has been passed to reform the Inland Revenue Service, to improve oversight of government spending, and to reform the public sector. A referendum has been held on a new constitution, but it appears to be in abeyance due to worries about its cost. As part of this, legal appeals would go to the Caribbean Court of Justice, rather than London. "The IMF is supportive of these reforms," says Peter Clegg, Senior Lecturer at the University of the West of England.
Grenada’s economy is expected to expand by 1.8% this year, from an earlier estimate of 1.1%, according to the IMF. The government is negotiating with Chinese investors for a reported US$2 billion development in Mount Hartman, which would be one of the biggest investments in the Caribbean. However while the economic outlook has improved, it will still be below potential over the next two years, as private and public balance sheets are repaired, said the IMF.
Unemployment is very high at around 32.5%, and youth unemployment is 45% - down 10% from the catastrophic situation two years ago.
Grenada´s currency is the East Caribbean dollar (XCD), which has been pegged to the US dollar at 2.7CD since 2001.
Mortgage market shrinking
Grenada’s mortgage market has been shrinking in the past several years. In 2014, the size of the mortgage market was equivalent to about 26.2% of GDP in 2014, from 28.9% in 2013, 30.2% in 2012, and 32% in 2011, based on figures from the ECCB.
Likewise, the total amount of housing loans outstanding in 2014 dropped 6.5% to XCD609.4 million (US$225.7 million). Then in the first quarter of 2015, housing loans declined again by 6% y-o-y to XCD598.75 million (US$221.76 million). About 42.6% of which were drawn for house and land purchases while the other 57.4% were used for home construction and renovation.
In April 2015, interest rates for residential mortgages remained unchanged from 6.99% to 11.5%, according to the ECCB.
- Grenada’s property market recovering slowly - August 22, 2015