Saint Kitts and Nevis: ever better Citizenship-by-Investment scheme boosts foreign demand
Lalaine C. Delmendo | November 03, 2019
In October 2016, St. Kitts & Nevis introduced an accelerated application process for its Citizenship-by-Investment (CBI) Program. Foreigners can get citizenship applications processed in just 60 days, down from about 3 to 4 months. Then from September 2017, the CIP became more affordable for families through the introduction of the Hurricane Relief Fund (HRF), recently replaced by the Sustainable Growth Fund (SGF), both of which allow single applicants to contribute only US$150,000 to gain citizenship – sharply down from the previous US$250,000.
From April 1, 2018, applicants are offered two options:
- Single applicants invest at least US$400,000 in any approved real estate development in St. Kitts and Nevis. The buyer can sell the property after five years.
- Two applicants can now invest US$200,000 each in any government-approved luxury resort development. But the property can only be sold after seven years.
“After the closure of the sugar industry in 2006, we made a strategic decision to shift our visitor demographic towards the higher end of the market,” says Minister of Tourism Richard Skerritt.
As a result of these positive changes, the twin-island nation's CBI Program has improved significantly, particularly in terms of high security standards, residence requirements, convenient travel, and a more efficient citizenship timeline, according to the Financial Times Professional Wealth Management's 2019 CBI Index.
In St Kitts, the pace of development has increased rapidly, spurred by the arrival of the Marriott Hotel in Frigate Bay, and by an increased number of air flights into the islands. “Since the Marriott opened, property sales and prices have increased dramatically,” says local real estate agent Brian Kassab.
One of the newest developments in St. Kitts is the five-star Park Hyatt Hotel, which is partly financed by the government's citizenship-by-investment programme. Property investors who pay XC$1.16 million (US$430,000) upfront acquire a limited partnership share in Park Hyatt hotel and get permanent St Kitts & Nevis citizenship for himself and his dependents. There is no residency requirement.
“Park Hyatt raises our visibility as a tourist destination throughout the world,” says Skerritt. “The Citizenship by Investment has been in place for years, and generally worked well, but this is taking the concept to a new level.”
In Nevis, construction activity is also increasing. Notable developments either under construction or in planning stage include Wyndham Grand Hotels and Resorts, Aman Resort, Oasis Hotel, and Spring Air Resort.
“The arrival of the Four Seasons Resort in 1991, and the creation of their first branded residences [in 1995], put Nevis on the map,” says Suzanne Gordon, owner of Sugar Mill Real Estate. “That heralded the beginning of the boom in luxury developments.”
“Nevis has always been known as the more exclusive island,” says Aman Resort developer Simon Lowe.
“Nevis is essentially a villa island,” adds Gordon, “attracting artists, celebrities, and people in the know, since the 1970s.”
These developments, coupled with the second cruise pier at Port Zante, now 90% complete, will make the property market boom in coming years, local real estate experts believe.
In 2018, tourist arrivals increased 8.8% to 1,297,385 people, according to the Eastern Caribbean Central Bank (ECCB).
Visitor arrivals in St Kitts and Nevis:
2015-1018: 1.14 million people per year
2008-14: 655,000 people per year
2000-07: 318,000 people per year.
Most stay-over visitors come from the US, the UK, Canada, and other Caribbean nations.
The Eastern Caribbean dollar, the official currency of St. Kitts and Nevis, is pegged to the US dollar, at XC$2.7 to US$1. This offers long-term financial security. There is no capital gains tax or tax on personal income.
Investment Properties in St. Kitts and Nevis: rental yields range from 4.90% to 5.31%
Rental yields in St. Kitts have improved, based on the latest Global Property Guide survey . Investment properties located in Frigate Bay, Half Moon Bay and the South East Peninsula, the upscale neighborhoods of St. Kitts, cost less now than last year, but their rental income remains stable. Last year, condos and houses cost an average of US$690,000 and are rented at an average of US$2,180, earning a poor rental yield of 4.07%.
The investment climate now is better with the price of condos and houses dropping to an average of US$575,000, but the monthly rental income remains the same, and rental yields have risen to 5.11%.
In Nevis, house prices remain stable. Prices per square metre have fallen very slightly, from US$3,700 per sq. m last year to US$3,500 this year.
Minimal taxation of properties in both St. Kitts & Nevis
Rental Income: Rental income is not taxed.
Rental income remitted to individuals or companies outside of St. Kitts is subject to 10% withholding tax.
Capital Gains: No capital gains tax is levied, except on assets sold within one year, which are taxed at 20%.
Inheritance: There are no inheritance taxes.
Residents: The economic citizenship program of St. Kitts and Nevis was established in 1984 to attract foreign investors.
Buying costs are very high in St. Kitts & Nevis
Roundtrip transaction costs range between 22.5% and 37.5% of the property's value, the bulk of the cost being the stamp duty.
Sellers pay stamp duty, which is 18.5% for properties the South East Peninsula, 14% in Special Development Areas, 5% for condominiums, and 12% for other properties. The seller also pays the real estate agent’s commission, at approximately 6%.
Buyers pay for an Alien Land-Holding License at 10% of the property's value, and legal fees (1% - 2.5%).
The law is pro-landlord in St. Kitts & Nevis
Rent: Rents are freely negotiable between landlord and tenant. Most rental agreements are short-term contracts. Long-term contracts are possible, but usually last only one year.
Tenant Eviction: Evicting tenants is not difficult. The legal system is based on English common law.
Economic growth upThe Federation of St. Christopher (St. Kitts) and Nevis (pop 60,000, spread over 100 square miles) is an autonomous British colony.
An amicable relationship between the two islands has fostered political stability over the past decades.
St. Kitts and Nevis offers it all, beaches, tropical forests and fantastic scenery, in a way that no other Caribbean islands quite do. Economic progress led to significant improvements in living standards with a GDP per capita of US$17,500 in 2018.
But St. Kitts and Nevis wasn't always so fortunate. In June 2011 St. Kitts and Nevis had the second highest gross national debt in the world at around 200% of its GDP, only below Japan. It suffered a prolonged economic recession after the global crisis. The economy contracted by 1% in 2009, 2.9% in 2010, 0.9% in 2011 and 0.8% in 2012. In July 2011 its government was forced to agree to a SDR 52.3 million (about US$84 million) Stand-By Arrangement (SBA) with the International Monetary Fund (IMF), with a comprehensive debt restructuring.
The economy has continuously grown since, with GDP growth rates of 6.4% in 2013, 7.2% in 2014, 1.6% in 2015, and 1.8% in 2016. In 2017, the economy continued to expand, albeit at a much slower rate of 0.9%, mainly due to the disruptions caused by two category 5 hurricanes – Hurricane Irma and Hurricane Maria. In 2018, the economy bounced back strongly, with GDP growth of 4.6%.
Economic growth is expected to be 3.5% this year and at 3.2% in 2020, according to the IMF.