Turks and Caicos' luxury property market heats up
Lalaine C. Delmendo | June 20, 2019
“Turks & Caicos Islands is now a household name in the luxury sector with high demand from the rich and famous and other discerning travelers,” said Joe Zahm, the president of Sotherby's International Realty Turks and Caicos. “One can hardly go a week without a young celebrity posting amazing images to the world in their social media. There is a major buzz in the air that started on our humble shores and now permeates in major cities and elite neighborhoods in North America and beyond.”
Condominium prices rose by 6.75% y-o-y in 2018 to an average of US$916,742, according to Sotheby's International Realty. The condo market was led by the development of five-star condominium resorts such as Grace Bay Club, The Shore Club Condominiums, The Palms, Seven Stars, and a bevy of other five and four-star condo resorts.
Likewise, the average price of single-family homes rose by 6.24% in 2018 from a year earlier, to about US$1.46 million. Some of the most exquisite standalone luxury villas in Turks and Caicos include Saving Grace, Coral House, and Hawksbill on Grace Bay, Turtle Tail Estate in Turtle Tail, Mandalay and Long Bay House in Long Bay. Other new managed villa projects in the islands that are gaining international attention include The Residences by Grace Bay Resorts, Beach Enclave North Shore, Beach Enclave Long Bay, Beach Enclave Grace Bay, Gansevoort Villas, The Dunes, Blue Cay Estate, Shore Club Villas and Rock House by Grace Bay Resorts.
Land prices increased 2.12% in in 2018 from a year earlier, to an average of US$310,740 per transaction.
Demand is strong. During 2018, there were 347 residential real estate transactions, up 9.8% from a year earlier, Sotheby's International Realty. Likewise, the value of transactions rose by 9% y-o-y to US$255.78 million.
By property type:
- The number of single-family homes sold rose by 3.7% to 84 units during 2018 and the value increased 10.2% to US$123.03 million. It included more than 20 home sales over the US$3 million mark, including the highest recorded home sale at US$7 million.
- The number of condominiums sold rose by 2.7% to 77 units during 2018 and the total value increased 9.6% to US$70.59 million.
- There were 173 land transactions in 2018, up 14.6% from a year earlier. Likewise, the value of lots sold soared 17% y-o-y to US$53.76 million. There were 12 land sales over US$1 million.
The luxury housing market is expected to remain robust in the coming years, amidst a surge in demand, especially from foreign buyers coupled with the arrival of several high-end residential developments.
"With other exciting developments in the pipeline such as the under-construction Ritz Carlton, Grace Bay Resorts' Rock House, The Club at Beach Enclave Long Bay, Southbank – a residential resort and marina - the Bight Hotel, Vista/ Hyatt ANDAZ and others, we can expect this exciting trend to continue," Zahm said.
Tourism is the bedrock of the economy. The government is yet to release the overall number for tourist arrivals in 2018, but preliminary figures showed that cruise ship passenger arrivals surged 22.8% y-o-y to 1,021,741, in contrast to a 2.1% decline in 2017. In fact, the number of cruise ships to Turks and Caicos increased 22.1% to 320 during 2018, according to the Statistics Department. Almost half of Turks and Caicos' gross domestic product (GDP) is generated by the hotel and restaurant sector. In 2018, the economy grew by 2.5%, an improvement from a contraction of 1.5% in 2017 but down from an average of 5% per year from 2014 to 2016.
The economy is expected to strengthen further with projected GDP growth of 3.5% this year, mainly driven by an increase in construction activity led by tourism-related and public sector rebuilding projects, according to the Caribbean Development Bank (CDB).
There are no restrictions on foreign ownership. Foreigners wishing to buy property in Turks and Caicos need not ask permission from the Government.
Turks and Caicos - prices have moved down, especially for larger condos
Prices in Turks and Caicos have tended to move down over the past year, especially at the higher end. Prices of US$4,400 are typical for condominiums in Providenciales, so that a 120 square metre condominium would fetch around US$530,000
Somewhat higher prices per square metre are typical for larger condominiums. However, it is in this sector that the downward pressure has been most pronounced, with prices of large condominiums moving down to an average of US$5,500, from around US$7,400 a year ago.
Turks & Caicos has absolutely no taxes
There are no income taxes, property taxes, capital gains taxes, or inheritance taxes in the Turks and Caicos Islands for residents and nonresidents alike.
Buying costs are high in Turks & Caicos
Roundtrip transaction costs are around 10% to 22% of the property value, inclusive of the real estate agent’s commission at 6% to 10%.
Turks & Caicos law is pro-landlord
Rent: Rents and rent increases can be freely negotiated.
Tenancy Contract: Rental agreements in Turks and Caicos are either short-term contracts (up to a month) or long-term contracts (more than a month). For long-term rental agreements, tenants usually pay a security deposit equivalent to one month’s rent before occupancy.
Economy improving, amidst strong tourismRapid economic growth blessed the Turks and Caicos Islands from the 1990s until 2006, with growing investment inflows, visitor numbers, employment, and revenues. Growth peaked at 13% in 1995, and averaged 8% after that.
However the economy went into decline after the 2008 financial crisis. The islands were also hit by hurricanes Hannah and Ike, which devastated the capital, Grand Turk, and smaller islands. Many hotels and resorts slashed their room rates from 30% up to 50% to attract guests. Tourism developments ground to a halt. GDP fell by 18.49% in 2009 followed by a further decline of 2.33% in 2010, according to the Turks and Caicos Islands Development Strategy 2013-2017.
At the same time a commission of inquiry set by the Foreign and Commonwealth Office found widespread "political amorality." The UK’s Foreign Office partially suspended Turks and Caicos’ constitution, dissolved the government and the House of Assembly, and imposed direct rule in August 2009.
Home rule was restored in November 2012 and a new parliament was elected.
The economy expanded by an average of 5% per year from 2014 to 2016, fuelled by strong growth in the tourism sector. For the first time, the number of tourist arrivals crossed the 1.3 million mark in 2014.
The economy contracted by 1.5% in 2017, as hurricanes Irma and Maria adversely impacted tourism in the islands. Despite this, Turks and Caicos remained the second best economic performer in the Caribbean region in 2017, next to Grenada.
The economy grew by 2.5% in 2018, buoyed by a recovery in tourism and booming construction sector, according to the Caribbean Development Bank (CDB).
“The main driver was construction. Value added in this sector increased by 10% buoyed primarily by large scale tourism projects,” said the CDB.
The government is yet to release the overall number for tourist arrivals in 2018, but preliminary figures showed that cruise ship passenger arrivals surged 22.8% y-o-y to 1,021,741 last year, in contrast to a 2.1% decline in 2017. In fact, the number of cruise ships to Turks and Caicos increased 22.1% to 320 during 2018, according to the Statistics Department. Almost half of Turks and Caicos’ gross domestic product (GDP) is generated by the hotel and restaurant sector.
Tourism growth is largely concentrated in the island of Providenciales, famous for the beautiful 12-mile Grace Bay Beach. It caters to a total of over 360,000 stay-over visitors each year while the Grand Turk Cruise Center, the country’s first cruise port, has hosted more than 700,000 tourists every year since its opening in 2007.
To grow tourism, the country has been reaching out to the South American travel market - particularly Brazil - while exploring opportunities to attract Asian luxury travelers. The country recently received "Approved Destination Status" from the Chinese government.
The economy is expected to expand by 3.5% this year, mainly driven by an increase in construction activity led by tourism-related and public sector rebuilding projects, according to the CDB.