Hurricanes slow Turks and Caicos’ property market
Lalaine C. Delmendo | May 17, 2018
Turks and Caicos´ property market slowed sharply in 2017, amidst the damage caused by Hurricanes Irma and Maria. Property prices fell and sales were at their lowest level in three years.
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.
Foreign homebuyers fuel the high-end market
The islands´ population has expanded by 58.2% from 2001 to 2012. Foreigners without family connections to the islands now comprise a majority of the adult population: 57.5% of the population aged 18 and older are "Non-Turks and Caicos Islanders". Currently, the islands´ total population is estimated at almost 40,000 people.
Foreigners particularly outnumber locals in Providenciales and North Caicos, according to the Turks and Caicos Business Guide.
Background: a hidden gem in the Caribbean
The 40-island archipelago is divided into two main island groups. The first group is the Turks Islands, comprised of the Grand Turk (the country´s historic capital), the Salt Cay and other adjacent cays. The other group includes the world-famous Providenciales (where almost 80% of the islands´ total population of almost 40,000 live), South Caicos, East Caicos, Middle or Grand Caicos, North Caicos, West Caicos, and several other private islands like the Pine Cay, the Ambergris Cay and the Parrot Cay. A British overseas territory, the Turks and Caicos Islands are located off the West Indies, approximately 575 miles southeast of Miami and 30 miles south of the Bahamas.
Grand Turk. Home to the Grand Turk Cruise Center, the historic island of Grand Turk is the capital of the Turks and Caicos Islands. Although it lags behind the progressive island of Providenciales in terms of tourism, population growth, and economy, the capital island still has so much to offer. About 600,000 to 930,000 cruise passengers visit Grand Turk via the Grand Turk Cruise every year. The number of cruise passengers is expected to reach 1 million these coming years. Grand Turk was named as the 2nd best cruise destination in the region in 2016, next to St. Maarten, according to leading cruise reviews site Cruise Critic®.
The island is also the seat of the national government and the Financial Services Commission.
Grand Turk´s slower population growth compared to Providenciales means more properties in prime locations are still available for development. It is also home to the country´s most historic sites and other notable events such as the Grand Turk Carnival in July and the Grand Turk Summer Jam in summer.
Providenciales. Although only the third largest island in Turks and Caicos, the island of Providenciales is the most populous, with nearly 24,000 residents (a majority foreigners). It is the main entry point to the Turks and Caicos islands as it houses the country´s largest international airport.
The island is home to the 12-mile beach of Grace Bay, consistently rated one of the world´s best beaches by Trip Advisor, Conde Nast, and The Times.
North Caicos. The seat of the government of the Turks and Caicos Islands in the 19th century, the North Caicos is the second largest of the 9 inhabited islands of the Turks and Caicos. It is known for its lush green lands and abundant wildlife, thus, the island is more commonly known as the "Garden Island" and the "bread basket of Turks and Caicos." Most of the agricultural supply of the archipelago is produced inthe 41-sq. mile island.
North Caicos has benefited from the high tourist arrivals to nearby Providenciales, which is accessible via daily ferry service. Most vacation homes on North Caicos are in the Whitby area, home to white sandy beaches. Several luxury property developments are underway.
Middle Caicos. The 48-sq. mile Middle Caicos (also known as the Grand Caicos) is the largest island in Turks and Caicos, but one of the least populated. It was the home of the indigenous Lucayan Indians, the original inhabitants.
Visitors go to Middle Caicos to enjoy an array of water activities such as snorkeling, kayaking, bone fishing, and sailboat racing. It also features the Conch Bar Caves, the largest above ground cave system in all of the Bahamas and Turks and Caicos archipelago. Middle Caicos still remains undeveloped with only a few guest houses and villas for rent. Regular ferries travel to North Caicos, which connects to Middle Caicos via a causeway.
South Caicos. Popular for its rich marine life, avian species, diving and rich history, this is the fishing capital of Turks and Caicos Islands. A Fisherman´s Day was introduced locally in honor of the contributions of the local fishermen to the economy of the South Caicos.
South Caicos also hosts one of the most anticipated annual events in the country, the Big South Regatta, every May in commemoration of the visit of Her Majesty Queen Elizabeth II in South Caicos in 1966.
The newest development for vacation homes is Sailrock, located in the Peninsula Passage.
Salt Cay. As its name implies, Salt Cay, the smallest inhabited island in Turks and Caicos, used to be home to the country´s bustling salt production industry. The salt industry´s rich history includes providing salt to George Washington during the American Revolutionary War and aiding Canadian and American fishing fleets with preserving their catches. Buildings constructed during the island´s glory days remain, along with the salinas from which salt was harvested. The Salt Cay became a UNESCO World Heritage Site in 2012 along with other historic sites in the island including the White House, the Historic District, and the District Commissioner´s House.
Salt Cay also offers one of the best scuba diving and whale watching spots in the world especially during the months of January and April which are the migration seasons for humpback whales passing through the Columbus Pass. Another popular activity is bird watching, as migratory birds like blue heron and pink flamingos stop at the island to rest during migration.
Other private islands. The other smaller cays including the Parrot Cay, Pine Cay, and the Ambergris Cay are home to the most luxurious resorts and residential homes in the Turks and Caicos Islands. Parrot Cay island resort hosts the vacation homes of stars like Bruce Willis, Christie Brinkley and Keith Richards. The private residential island of Ambergris Cay in southeastern Caicos is home to the Turks & Caicos Sporting Club, which is regarded as one of the best private islands in the Caribbean. Pine Cay houses the Meridian Club, also a luxury property development.
In the world-famous Grace Bay, property prices range from US$300,000 for a studio apartment to more than US$10 million for the finest penthouse, according to Sotheby´s International Realty.
In Leeward, a posh gated community located on the east end of Providenciales, canal lot homes are priced from US$1.5 million to US$5 million, according to RE/MAX Real Estate Group Turks & Caicos.
"If you compare Turks and Caicos to other top comparable islands in the Caribbean, Turks and Caicos is still under-priced and offers tremendous value to foreign investors," said Blair MacPherson of RE/MAX Real Estate Group Turks & Caicos Islands.
Luxury property developments are plentiful
Here are some prices in the most popular developments:
- The Amanyara Resort offers 33 different villas on the coast of Northwest Pointon the island of Providenciales.The three, four or five-bedroom residences are situated either along the oceanfront, overlooking a tranquil pond or nestled in island vegetation. A four-bedroom villa is priced at US$9.5 million.
- In Parrot Cay Resort, one of the finest and most secluded resort islands in the Caribbean, a four-bedroom beach house is currently offered at US$6.9 million, while villas are priced at an average of US$10 million. Estates are also offered starting at US$9 million up to US$48 million for Oliver´s Cover on Parrot Cay. Moreover, individual parcels of beachfront land are also available starting at a price of about US$5 million.
- In Blue Cay Estate, located in the gated community of Leeward, Providenciales, five-bedroom beachfront villas are priced between US$4.25 million to US$5 million. Four-bedroom canalfront villas are offered for US$2.35 million. The Blue Cay Estate offers 16 four- and five-bedroom residences.
- At The Dunes, located at North Shore Beachfront Turtle Cove, Providenciales, five-bedroom single-family homes are for sale for US$4.25 million.
- At the Residences, in Grace Bay Resorts in Providenciales, 4-bedroom beachfront villas start at US$3.7 million.
- In the Shore Club, on the exclusive Long Bay Beach in Providenciales, luxury six-bedroom villas are offered in the market for US$5.5 million. The Shore Club also offers a total of 38 two- and three-bedroom condominium units for US$1.65 million to US$2.1 million.
- The Estates at Grace Bay Club offers 22 private condominium units on Grace Bay Beachfrom US$1.95 million to US$3.75 million.
- The Regent Palms is a US$95 million resort that features 72 one, two and three-bedroom condominiums with balconies and terraces on Grace Bay Resort. Two-bedroom condos are priced from US$850,000 to US$1.4 million while three-bedroom condos are offered from US$1.6 million.
- The Gansevoort Turks and Caicos offers a total of 52 studio, one-, two-, and three-bedroom apartments situated on a sweeping curve of pristine Grace Bay Beach in Providenciales. Two-bedroom apartments are priced at US$1,295,000.
- Beach Enclave Long Bay offers five luxury beachfront homes on a stunning stretch of Long Bay beach. A four-bedroom beachfront home at the Beach Enclave Long Bay is priced at US$4.15 million.
Remarkable growth of the Islands´ rental market
Rental yields - i.e., returns on investment from rentals - are hard to pin down, given that most rental property is short-term and subject to unpredictable vacancy rates. According to Conch Development´s Blog, up to 10% rental yields are to be expected at 95% occupancy. According to PropertyWorld.com, one can expect a rental yield of 6% or more for rental properties in the country. However, neither source is at all reliable.
Wide variety of mortgages
A wide array of mortgage options is available to home buyers. They can acquire financing through banks, trust companies, and private funds from investors.
The primary lenders are RBC, Scotiabank and CIBC First Caribbean, all Canadian banks doing business in the Turks and Caicos. Trust companies take investor money and lend them out as mortgages. These loans generally go up to 50% of the value of the property. The third option is usually facilitated by law firms on the islands who hold their clients´ money to invest.
According to the Financial Services Commission, the amount of loans extended to borrowers for property purchase, which makes up more than 85% of total personal loans, remained almost steady at US$413.3 million in 2017 from a year earlier.
- House, condo and land purchases: loans fell by 3.9% y-o-y to US$311.4 million
- Home construction and renovation: loans increased 10.6% y-o-y to US$101.8 million
Banks in Turks and Caicos follow United States interest rates, ranging from 0.4% to 2% for deposits to 4.5%-6.5% for secured lending and 9%-17% for unsecured lending, according to the Financial Services Commission.
Economic growth slowed, amidst weak tourism
Rapid 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 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."
Well-developed construction sector
While no official figures have been released for the past two years, residential construction activity in Turks and Caicos remains strong due to the construction of Beach Enclave Long Bay, Beach Enclave Grace Bay, and Rock House by Grace Bay Resorts, among others.
While commercial work dried up during the crisis, high-end single-family home construction has grown in the succeeding years, keeping many local firms afloat. New commercial projects in the pipeline will represent a big boost to the construction sector, according to Steve Thompson, managing director of Projetech, a long-established local firm.
Turks and Caicos has one of the region´s highest construction costs, according to BCQS International, as annual exposure to tropical storms and other weather conditions have necessitated high-quality building codes. Turks and Caicos now meets or even exceeds the standards of Florida.
TURKS AND CAICOS CONSTRUCTION COSTS
|COST (US$/sq. ft.)|
|Residential high quality||240-410||270-440|
|Residential medium quality||140-230||150-250|
|Residential modest quality||110-180||120-190|
|Hotels/condos five star urban||280-460||300-500|
|Hotels/condos five star low-rise||300-490||320-530|
|Hotels/condos three star economy||160-260||170-280|
|Source: BCQS International|
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