Hurricanes slow Turks and Caicos' property market
Lalaine C. Delmendo | May 17, 2018
The average price of residential properties dropped 2.8% to US$748,123 during 2017, according to Sotheby's International Realty.
Condominium prices fell sharply - by 21.7% y-o-y in Q2 2017 to an average of US$790,433. The condo market was led by the development of five-star condominium resorts such as Grace Bay Club, The Palms, Seven Stars and Gansevoort, and a bevy of other five and four-star condo resorts.
Villa prices fell by 15.4% y-o-y in Q2 2017 to about US$1.21 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 fell by 12.7% in Q2 2017 from a year earlier.
During 2017, there were 312 residential real estate transactions, down 1.3% from a year earlier, Sotheby's International Realty. Likewise, the value of transactions fell by 4% y-o-y to US$233.4 million.
By property type:
- The total value of villas sold dropped 7% y-o-y to US$111 million in 2017.
- The total value of condominiums sold plunged 26% y-o-y to US$64 million in 2017.
- The value of lots sold increased 32.4% y-o-y to US$45.8 million.
In September 2017, Turks and Caicos experienced two Category 5 hurricanes - Hurricane Irma and Hurricane Maria. Irma left severe damage to North Caicos and the island of Grand Turk - the major cruise ship port in the islands. But the cruise port quickly reopened in November last year and is actively receiving ships again.
Tourism is the bedrock of the economy, but visitor arrivals fell by 4.36% to 1,243,843 people in 2017 from a year earlier, according to the Tourism Board. Almost half of Turks and Caicos' gross domestic product (GDP) is generated by the hotel and restaurant sector. Nevertheless there was GDP growth of just 3.4% in 2017, but this was down from an average of 5% per year from 2014 to 2016.
Property market highly accessible to foreigners
There are no restrictions on foreign property ownership, and no requirements to develop land within a certain period of time. Undeveloped land can be held indefinitely for future use or investment.
The completion of Providenciales International Airport expansion, and the opening of two new private air terminals for private jet flights have boosted the advantages the Turks and Caicos Islands have over its regional neighbors.
There are minimal flight times from major US cities and Canada. The islands are low density, there are no traffic jams; a low crime rate; and US money is used.
There are no income taxes on revenue from property; no capital gains tax on property transfers; no estate or inheritance taxes; and no corporate taxes or exchange controls. Indirect taxation only comes in the form of customs duties, stamp duty on certain transactions, and departure tax, according to Sotheby's International Realty.
Furthermore, after payment of a one-time stamp duty charge payable to the Turks and Caicos Government on the purchase of property, the buyer is no longer burdened by taxes.
As a British territory, the Turks and Caicos Islands' political environment and legal system is considered more stable than other Caribbean neighbors. Another attractive factor is that Turks and Caicos uses the United States dollar.
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.
Economic growth slowed, amidst weak 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.
Yet all this was temporary. 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 markedly slowed in 2017, with GDP growth of just 3.4%, 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 last year (next to Grenada) and is expected to grow strongly this year, according to Dr. Justin Ram, Director of Economics at the Caribbean Development Bank (CDB).
Tourism is the bedrock of the economy. 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.
In July 2014, Turks and Caicos received its first-ever sovereign credit rating from Standard & Poor’s (S&P), receiving a rating of BBB+/Stable/A-2, which reflects its vibrant economy and net general government asset position. In July 2017, S&P maintained the islands’ credit rating and revised its outlook from stable to positive.
“Following several years of strong performance, TCI's economy will, we expect, steadily strengthen over the next three years,” the S&P report said. “Growth in the territory will come primarily from continued recovery in its largest visitor market, the U.S., as well as growth in public spending.”