Mid-range properties are 'hot' in St. Lucia
August 31, 2018
Property prices dropped 20% to 30% from 2009 to 2014, due to the global crisis. The housing market started to pick up only at the end of 2014.
“The market has been very depressed since the 2008/2009 recession,” according to Doubloon Real Estate's Managing Director David Farrin. However, there is a growing interest in St. Lucia's property market, especially in the mid-level properties. "This is the best it has been in seven years. We're seeing growth around the $500,000 market; it is quite active at that price range," Farrin added.
Mid-range homes priced around the US$350,000 mark are also gaining popularity at Blue Reef Real Estate, especially among foreign buyers from Canada and the United States. "We have continuous growth around that price," according to Blue Reef Real Estate's Sales and Marketing Co-Director Donnelly John.
John also expressed optimism in the housing market's future, despite currently being "not the greatest time [for the real estate sector]". "It is a good time to take advantage of all-time low prices – sometimes 15 to 25 per cent off the listing price. We only see growth from here."
Overall, the property market remains a buyer's market. The “vast majority of transactions” are by vacation-home buyers, according to Poravas.
Poravas noted that he has numerous listings ranging from US$500,000 to US$10 million.
The north and south areas of St. Lucia currently have "a wide variety" of new houses and condominiums, according to Bellevue Properties managing director Heather Flossiac. A single-family home can be bought at US$166,000, while villas in high-end resorts are priced at around US$9 million.
- In The Landings, in Rodney Bay on St Lucia's northwest, two-bedroom apartment prices now start at US$700,000. The Landings was St. Lucia's first residential private yacht harbour. It opened in December 2007. About 70% of buyers are British.
- In Mount du Cap estate, situated in Gros Islet, three to four-bedroom luxury homes are priced from US$2.5 million.
- Also located in Cap Estate, Gros Islet is the Tradewinds Golf Villas development, where prices of high-end villas start from US$1.1 million.
- In the Windjammer Landing, located in the Gros Islet, prices of private suites and villas ranging from one to four bedrooms start from US$700,000.
- At The Ocean Breeze development on Mount Layau, prices of three to four-bedroom villas start from US$437,000.
"Tourism is the engine that drives real estate" in St. Lucia, says Poravas. However "it is still very much an up-and-coming destination, a much smaller market in its early stages of development" compared to other Caribbean countries like Barbados, St. Martin and Antigua. It was tagged as the fastest growing tourism destination in the region in 2017 by the Caribbean Tourism Organization.
Most foreign homebuyers in St. Lucia come from the United States, Canada, and the United Kingdom.
Tourism arrivals in St. Lucia reached a record high in 2017, rising by 10.9% y-o-y to 1,113,579 people, according to St. Lucia Tourist Board.
In addition, in January 1, 2016, St. Lucia started to accept applicants to its Citizenship by Investment program, joining Dominica, Grenada, Antigua & Barbuda, and St. Kitts & Nevis, as a Caribbean country offering citizenship to foreign investors. The program was expanded in 2017, implementing changes including the removal of the 500-applicants cap allowed to apply every year.
"There is a lot of investor interest for projects that have been on pause or for new projects [and] there is land being sold to developers or people who plan to develop," says John. This was proven by the continued upswing of the construction sector in 2017. Aside from an over 850 new hotel rooms added to the island's inventory in 2017, there are also reports of major hotel chains heading to St. Lucia in the near future:
- a 350-room "Hilton" branded property on the island, as well as a150-room beachfront property by its sister brand 'Curio, by Hilton' in Rodney Bay Village;
- Honeymoon Bay Resort's 250-room all-inclusive resort, and an 80-room luxury property in Cannelles, Vieux Fort;
- a 120-room resort and 37 villas in Choiseul by Fairmont Hotels;
- Ritz Carlton Black Bay Development including a 180-room Ritz Carlton hotel in Black Bay, Vieux Fort.
Rental incomes in St. Lucia - poor rental yields, at 3.57%
There has been a modest increase in the average price of houses in St. Lucia this year. Last year’s average house price was US$1,826 per square metre (sq. m.), and this has increased this year by 4%, to US$1,915 per sq. m..
This slight improvement is welcome since in St. Lucia, house prices have been falling since 2009. The most dramatic fall was in 2010, when prices fell for as much as 20%.
Rents have not yet risen with prices. As a result yields are now poor. A 200-sq. m. house earns a rental return of 3.57%, whereas last year, the same house might have earned a rental return of 5.25%.
Rental income tax is high
Rental Income: Rental income is taxed at progressive rates. Tax rates start at 10% and can go up to 30% depending on the tax base.
Property: Property taxes are levied at a flat rate of 5% of the property’s annual rental value, as determined by the Inland Revenue Department.
Capital Gains: Capital gains are not taxed in St. Lucia.
Inheritance: There are no inheritance taxes in the island.
Residents: Residents must pay taxes on their worldwide income.
Buying costs are very high in St. Lucia
Round-trip transaction costs, i.e., the total costs of buying and selling a property, range from 11.50% to 21.50%. If the seller is a foreigner, the vendor’s tax is 10%. The seller also pays for the 6% real estate agent's commission. The buyer pays legal fees (0.50% to 2.50%) and stamp duty (2%). Foreigners need an Alien Landholding License to buy landed properties.
Research in progress.
Economy buoyant in 2018St. Lucia's economy remained buoyant in 2017 as real GDP grew by 3% from the previous year, according to the International Monetary Fund (IMF). This was a strong follow-up from previous years' GDP growth rates of 3.4% in 2016, -0.9% in 2015, and 3.6% in 2014. St. Lucia's economy is expected to expand further by 3.5% in 2018 and 3.7% in 2019.
Economic growth in St. Lucia is driven by tourism and construction. Following the robust growth of the tourism sector from 2013 to 2015, tourism dropped in 2016 due to weaker cruise ship arrivals. However, there was a strong recovery in 2017, with a significant rise in cruise passenger arrivals combined with strong growth in stay-over arrivals.
In 2017, the total number of visitor arrivals in St. Lucia reached a record high at 1,113,579 people, a 10.9% increase from the previous year.
Out of the total visitors in 2017, around 60% were cruise passengers, 34.7% were stay-over visitors, 4.5% were yacht passengers, and 0.8% were excursionists. The stay-over visitors mostly came from the United States (44%), other Caribbean countries (20%), the United Kingdom (19%), and Canada (11%).
For the third consecutive year, St. Lucia's construction sector continued its robust growth, rising by 10.8% in 2017, after increases of 5.1% in 2016 and 14% in 2015, according to the Central Statistical Office(CSO) of Saint Lucia.
Several private sector projects dominated in 2017, such as the completion of the Royalton Saint Lucia Resort & Spa, and the Harbour Club's near finalization. Numerous hotels were also renovated and expanded last year, including the Windjammer Landing Villa Beach Resort, Tides Sugar Beach, and the Coconut Bay Beach Resort & Spa.
After two years of deflation, consumer prices slightly increased by 0.1% in 2017, according to the Central Statistics Office (CSO).
St. Lucia's unemployment rate slightly improved, declining to 20.2% from 21.3% in 2016, based on the figures from the CSO.