Trinidad and Tobago’s house prices falling, amidst struggling economy
May 15, 2018
The country recovered more slowly from the global financial crisis as compared to some neighbors, with property prices falling 20% from 2007 to 2009. That was because foreign homebuyers, who mostly come from Britain, Germany, the United States and Canada, were blocked by a requirement introduced in 2007 that foreign investors obtain a license for land purchases in Tobago.
Things have now got worse. After a short-lived recovery in 2015, the housing market started to decline again in 2016 due to the decline in oil prices. The economy contracted by 6% in 2016 and by another 2.6% in 2017, according to the International Monetary Fund (IMF).
House prices in the islands range from around TT$1 million (US$147,500) to TT$8 million (US$1.2 million) - though of course there are super-luxurious and also low-end houses that fall outside this range.
In Trinidad, the price of one-bedroom apartments typically ranges from TT$900,000 (US$132,800) to TT$1.5 million (US$221,300). In the desirable neighborhoods of West Trinidad, modern homes are priced from about TT$3.7 million (US$550,000). Residential lots in Trinidad sell for around TT$40 (US$6) to TT$55 (US$8) per square foot (sq. ft.).
At The Crossings, located on the outskirts of the bustling town of Arima in Trinidad, three bedroom houses are currently being offered from around TT$1.8 million (US$265,500) to TT$2.2 million (US$324,500). On the other hand, residential land in The Crossings sells for less than TT$120 (US$18) per sq. ft.
In Tobago, the price of small condominiums starts at around TT$2.4 million (US$354,000) while single-family homes start at about TT$3.4 million (US$500,000).
The housing market is expected to remain weak this year, as the economy continues to struggle, according to local real estate experts.
In Trinidad, foreign real estate buyers can buy up to one acre of property for residential use without a license. In Tobago, by contrast, no license has been issued to foreign buyers since a requirement for licenses was introduced in October 2007.
Buyers are required to pay 5% to 10% stamp duty, plus legal fees.
Landlords of Jamaican residential rental property unhappy
During 2010 rents fell quite dramatically in Trinidad. Rents are now in some cases half what was offered only 1 year ago. To take a couple of examples, rents now average US$1,000 for 120 square metre apartments, and US$1,800 for 300 square metre apartments - nice for tenants, disappointing for landlords. Gross rental yields levels are lower than ever seen in Jamaica, during 6 year history of data-gathering at the Global Property Guide.
Rental income tax is very high
Rental Income: Rental income is taxed at a flat rate of 25%.
Property: For residential properties, real property tax is levied at 3% of the property’s market value.
Capital Gains: Generally, no capital gains tax is levied, except on properties sold within one year of acquisition which is taxed at a flat rate of 25%.
Inheritance: There are no inheritance taxes in the islands.
Residents: Residents are taxed on worldwide income at a flat rate of 25%.
Buying costs range from moderate to high in Trinidad and Tobago
Roundtrip transaction costs range from 7% to 16% of the property value. The wide variation is mainly due to stamp duty at 5% to 7.5%, with the first TTD850,000 (US$126,300) tax-exempt. The realtor's fee is around 3% to 5% paid by the seller.
Buyer and seller pay for their own lawyer. Legal fees are 0.5% to 1.5%, plus 15% VAT.
In Trinidad and Tobago, law is pro-tenant
Rent Control: Rents can be freely agreed, except for very small rentals covered by the Rent Restriction Act.
Tenant Security: The landlord needs an eviction notice from the courts to evict a tenant. It takes an average of 192 days to evict a tenant in Trinidad and Tobago, according the the Lex Mundi project.
The economy continues to struggleTrinidad and Tobago is one of the Caribbean’s richer nations. Unlike many of its Caribbean neighbours, which rely on tourism, Trinidad depends heavily on oil and gas production. The energy sector accounts for more than 40% of GDP and 85% of merchandise exports. Its sister island Tobago, which has a wealth of secluded beaches and rainforests, benefits from the larger island’s prosperity.
The country enjoyed strong economic growth from 1996 to 2007, with an average GDP growth of 8% annually. However wealth does not bring immunity from recession. In 2009 Trinidad and Tobago’s GDP contracted by 4.4%, followed by a 3.4% growth in 2008. There was recovery in 2010 with 3.3% GDP growth. However, the economy contracted again by 0.3% in 2011 and remained sluggish since, with GDP growth rates of 1.3% in 2012, 1% in 2013, -0.3% in 2014 and 1.5% in 2015. This was partly attributed to the crash in oil prices from 2014 to 2016.
In 2017, the economy contracted by 2.6%, after falling by 6% in 2016, according to the IMF. The economy is expected to expand by a meager 0.25% this year and by 0.2% in 2019, based on IMF estimates.
In 2017, the country’s overall inflation rate stood at 1.9%, down from 3.1% in the previous year and the lowest level in 52 years, according to the Central Bank of Trinidad and Tobago. In February 2018, headline inflation was 0.9% and core inflation was even lower at 0.5%.
The construction industry is getting a boost from the government’s development plan “Vision 2020”, which consists mainly of construction projects. In the 2018 budget, the government has allocated more than TT$1 billion (US$147.5 million) for the construction of affordable housing.
In the past several years, the government has prioritized economic diversification, focusing its efforts not just in the energy sector, but also in the non-energy sector and services sector.
While many local residents in Trinidad and Tobago are prosperous, 17% of the population lives below the poverty line. Crime involving drugs, guns, and gangs remains a challenge, particularly in Trinidad, with murders and kidnappings topping the list.