Turks and Caicos’ luxury property market heats up

Lalaine C. Delmendo | June 20, 2019

Turks and Caicos’ property market bounced back strongly in 2018, from the previous year´s hurricane season that severely damaged North Caicos and the island of Grand Turk. Property sales are now at record highs, thanks to strong foreign demand. Residential real estate prices are rising robustly again.

“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.

Turks and caicos island house price change

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.

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.

Turks and Caicos value property sales

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 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.

Turks and Caicos number of residential property sales

Foreigners particularly outnumber locals in Providenciales and North Caicos, according to the Turks and Caicos Business Guide.

Nearly 80% of homebuyers come from the United States, with the majority of investors from New York, Atlanta, Chicago, Miami, Boston, and California. However, Canadian second homebuyers are also rising, thanks in part to the availability of daily direct flights from major Canadian cities through Air Canada and West Jet, according to ERA Real Estate Turks & Caicos. There are also a growing number of Brazilians and other South and Central American investors in the islands in recent years.

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 4th best cruise destination in the region in 2018, 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.

Turks and Caicos value property sales

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 in the 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:

Turks and Caicos average property prices
  • 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 three-bedroom villa is currently listed for US$6.95 million while 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 offered for US$6.9 million, while villas are priced at an average of US$10 million. Estates are also offered starting at US$3 million up to US$48 million. 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.
  • The Rock House Resort, situated on the north coast of Providenciales, offers 41 oceanfront cottages and 4 hillside villas. A two-bedroom oceanfront cottage is currently offered for US$1,995,000 while a one-bedroom cottage is priced at US$700,000.
  • South Bank is a waterfront residential resort and marina on the southwestern end of Long Bay beach offering 15 villas. It offers two waterfront locations in its first phase: The Ocean Estate I comprised of 8 oceanfront homes with price ranging from US$1.75 million to US$2.1 million; and The Lagoon I with 7 beachfront homes with price ranging from US$3.95 million to US$7.95 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.

Well-developed construction sector

While no official figures have been released for the past three 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.

In 2018, BCQS International ranked Turks and Caicos as the second most expensive place to build in the Caribbean, next to The Bahamas.

TURKS AND CAICOS CONSTRUCTION COSTS

  Cost (US$/sq. ft)
Development 2014 2016 2018
Residential high quality 240-410 270-440 280-460
Residential medium quality 140-230 150-250 160-260
Residential modest quality 110-180 120-190 120-200
Hotels/condos five star urban 280-460 300-500 330-550
Hotels/condos five star low-rise 300-490 320-530 330-550
Hotels/condos three star economy 160-260 170-280 170-290
Source: BCQS International

Rental market continues to grow, thanks to good rental yields

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.

“Buyers see they can net a 6-12% return on investment annually through renting their properties. Showing them, they can get expenses covered and possibly get some extra income makes the sales process easier,” said Ian Hurdle of The Agency Turks and Caicos.

Mortgage loans falling

The amount of loans extended to borrowers for property purchase, which makes up more than 85% of total personal loans, fell by 4.5% to US$391.89 million in Q3 2018 from a year earlier, according to the Financial Services Commission.

In Q3 2018:

  • House, condo and land purchases: loans fell by 6.3% y-o-y to US$294.43 million
  • Home construction and renovation: loans increased 1.2% y-o-y to US$97.46 million

A wide array of mortgage options is available to home buyers. They can acquire financing through banks, trust companies, and private funds from investors.

Turks and Caicos house purchase loans

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.

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.

Economy improving, amidst strong 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.

Turks and Caicos cruiship arrivals

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.

Turks and Caicos gdp growth

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.


Sources:

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