Caribbean: The Caribbean

Guide to the Risk and Opportunity Ratings

At the end of each country profile, we have given a risk rating and an opportunity rating. These ratings are a summary of our analysis indicating the levels of risk when investing in a market and the level of opportunity to profit from it.

The ratings themselves are simple. Both work on a scale of one to five. The opportunity rating is indicated by the $ symbol. A single $ equals a low opportunity whilst 5 of them ($ $ $ $ $) equals the highest opportunity ranking.

For risk we have used the * symbol. A ranking of * equals a low risk rating whilst * * * * * equals a high risk rating.

Introduction

The Caribbean, though a small area, shows amazing diversity – in climate and landscape, in language, religion and customs, in the history showcased, and proud achievements in areas like music, sport and art, medicine and education. But there are common strands that run through the region, and the laid-back lifestyle, stunning scenery and friendly people combine with the incredible weather that the region is so famous for to make it no surprise that the Caribbean has taken off as one of the ultimate places to own property abroad.

The islands of the Caribbean Sea are divided into three main groups – the Bahamas, the Greater Antilles, and the Lesser Antilles. The Bahamas comprise an archipelago of 700 islands, of which only about 30 are inhabited, north of the Caribbean Sea. South of the Bahamas are the largest islands of the Caribbean, the Greater Antilles. These include Cuba, Jamaica, Puerto Rico, and Hispañola, home to Haiti and the Dominican Republic. Most of the rest of the Caribbean islands form an arc that stretches from Puerto Rico to the coast of South America – the Lesser Antilles. With such a large number of individual nations to consider, it is difficult to make any general statements about economic performance or the property market, although the desirability of this area and its popularity as a tourist destination are good indicators for potential profit.

Is this a good place to buy?

There are plenty of options for investment in the Caribbean, with more than 100 islands or regions to choose from and reasonable properties for sale on many. Buyers here will be able to take advantage of a massive tourist economy with good holiday rental opportunities, while those looking to relocate or to buy a holiday home will gain access to year-round crystal-clear seas and balmy temperatures, an extremely rich cultural heritage, incredible cuisine and a lifestyle that is second to none. Property taxes are low on most islands, as is the cost of living, and properties can cost as little as £25,000 ($44,000) in some areas.

Price history

Prices in the Caribbean vary hugely, accompanying the diversity in legal regimes, cultural themes, popularity and tourist appeal. The area has a reputation for being an exclusive, pricey holiday destination, and is therefore most popular with the wealthier investor. Areas such as St Lucia, Barbados, St Kitts, Antigua and Nevis reflect this, with prices that would generally be beyond the budget of all but the most moneyed, but other areas offer alternatives which are much easier on the pocket. Past performance is also very varied, and it is wise to conduct individual research to find out which areas are performing well or otherwise.

Which type of property should you go for?

Property types range from plots of land to studio apartments to eight-bedroom villas, each with their own benefits and selling points. The cost of building is low in most parts of the Caribbean, although it is a good idea to check what local regulations and requirements are. Apartments, houses and villas in tourist areas have good rental and capital growth potential, and there is a huge amount of variety available for those who want a second home or one to retire to in the Caribbean, so for these buyers it all boils down to personal choice. Some islands have more favourable residency allowances and regulations, so personal research is always worthwhile.

Buyers this market will appeal to

The Caribbean has something for all those wishing to invest or to own in a sun-lover’s paradise. Property is available to suit all budgets, although more serious investors would be advised to stick to the tourist destinations in the islands. This means that an investor wanting to own a piece of the Caribbean will require a fairly high sum of money to enter the market, whilst those wanting to live or to have a second home here will be able to find something cheaper as they will tend to be less affected by issues of amenities, rentability and infrastructure. Travel costs are likely to be the biggest outlay, and it is a good idea to check how accessible an area is before settling there.

Hotspots

With the sheer number of islands in the Caribbean, it is difficult to select ‘hot’ areas without having to include a huge number of destinations. The following, then, is a small selection of what is on offer with potential for investment purposes.

Barbados was one of the first of the Caribbean islands to employ tourism as a major economic tool, and is therefore one of the most well-developed and economically prosperous. A vibrant party scene dominates the island and mixes calypso rhythms with reggae in an setting of stunning natural beauty. Barbados is also home to some of the most distinctive architecture in the Caribbean, and aged properties feature painted wooden shutters, rose-coloured coral blocks and grey roofing with ruby-coloured tiles. The island’s strong ties with Britain and modern infrastructure also make it attractive to first-time buyers and to those wanting to retire to the sun. Whilst Barbados remains small and charming, it also offers a varied lifestyle, and a variety of different properties are available for purchase, from resort-style condominiums to villas, with prices which vary according to location and amenities. One- and two-bedroom apartments in Christ Church can be found for £115,000 ($200,000) and £200,000 ($350,000) respectively, complete with landscaped gardens, a waterfall-filled swimming pool and 24-hour security. Villas on the west coast however, can often cost millions of dollars.

The tiny island of Antigua has traditionally been the preserve of the rich and famous, but new developments and more competitive air travel are opening the market and making it more accessible. There are many draws here – major yachting events, activities like golf and watersports, and the friendly and welcoming people are all attracting increasing numbers of buyers to the island. Antigua may not have as good an infrastructure as Barbados, but the laid-back lifestyle and rural feel combine with a low crime rate to make the island popular. Buying here is also financially advantageous, as it is one of the few countries in the world that does not levy personal income tax, capital gains tax, inheritance or wealth tax on its residents. Antigua’s laws are based on English legislation, a fact which also makes it accessible for UK buyers. A plot of land here costs between £30,000 and £70,000 ($120,000), depending on location and views. In other locations, such as Jolly Harbour on the west coast, a large villa can be built for around £255,000 ($445,000), whilst prices for property range from £170,000 to £430,000 for a large, three-bedroom villa.

Other islands offer access to a more traditional way of living (and therefore less extravagant entry costs), with Dominica, Guadeloupe, and St Vincent and the Grenadines at the top of the list. Dominica, known as the ‘Nature Island of the Caribbean’, is covered by lush rainforests which line the mountainous terrain with waterfalls, lakes and rivers. The island is the only one where the Caribs, the original Caribbean inhabitants, have survived, and the island is fast becoming one of the world’s best eco-tourism destinations. There is no capital gains tax here, and property taxes are negligible. The range of properties available on Dominica, like everywhere in the region, varies greatly in price and size depending on location and condition, but a great deal is available for not much money. Top end properties cost around £400,000, although there are also a number of two or three-bedroom properties around the £55,000 to £150,000 ($260,000) mark. In residential areas it is possible to find cheaper prices than this – with careful research, two-bedroom houses can be found for as little as £25,000.

The volcanic island of Guadeloupe is characterised by rolling hills, tropical forests and banana plantations. The island is a ‘department’ of France, uses the euro and is governed by French law, giving a real taste of France in the Tropics and making the island a low-risk option. Property here is comparable in price to buying in the south-west of France, and while there are expensive properties here, it is possible to find sea-view properties for £140,000 ($245,000), or two-bedroom apartments for as little as £58,000.

St Vincent and the Grenadines offer yet another alternative. The 32 islands and cays were recently made famous by the success of “Pirates of the Caribbean”, and give a feel of the real essence of the Caribbean. Several of the islands are privately owned, including Mustique, where villa prices start around £3 million. The best deals are likely to be found on other islands such as Bequia, an increasingly popular tourist destination in the area. Property prices here are rising, but it is still possible to find a bargain, with a wide range of property available and an added bonus in the fact that increasing tourism is creating a rental pool that will help to maintain a property on a year-round basis. A villa with amazing views which will sleep up to eight people can be bought for around £150,000 ($260,000) here, and will give a rental potential of around £1,300 ($2,250) a week.

Other locations offer different benefits: in the Cayman Islands, a two-bed condominium can be bought for £145,000 with a mere 5% transfer tax, while other islands can charge up to 12%. In the Bahamas, Commonwealth citizens do not need a visa, building rights do not expire and there is no income tax. In Panama, it is not necessary to be a resident or a citizen to buy property – all you have to do is to show your passport on purchase, and property can also be sold or left as an inheritance extremely easily. Prices and potential here are good, as is the case in the Dominican Republic and Belize. In Cuba, however, there are no property rights to speak of, making the investment potential poor, and Haiti’s political problems should warn off any sensible investor. It is therefore a good idea to look into the different areas, backgrounds and benefits of each area carefully before deciding where to purchase in the Caribbean.

Perhaps, the final focus should be passed on Grenada, which may well offer the best medium term opportunity in the Caribbean. Typically outside of the hurricane belt, Grenada was recently struck by a major hurricane which wiped out most of the agriculture on which the island depended. In response the government has begun to push the tourism industry to replace the loss of agriculture in the economy. As a result, Granada is very investment friendly and the fact that it is less developed than its neighbours means that prices are generally much lower. This could, however, change as the infrastructure and profile of the island improves.

Purchase process

The best way to find out about the purchase process for the island on which you hope to buy is to find a reputable lawyer or agent who can advise you on the particular rules which will apply. These vary so much between islands that it is impossible to give a general overview, and different rules will apply in each area (note that googling property in the Caribbean will get you nowhere – internet searches must be specific). In Antigua, for example, there are no restrictions on buying for UK citizens, though you will have to apply for a foreign landholder’s licence, which will cost around 5% of the value of the land to be purchased. This document may take four months to issue. Buyers of freehold property must also pay a 2.5% purchase tax, 1-2% in legal fees and the 1% closing fee.

In Dominica, Guadeloupe and St Vincent and the Grenadines, land ownership by foreigners is governed by the Aliens Holding Regulation Act, and those wishing to buy land over a certain size (over three acres in Dominica) will need to apply for an Alien Land Holding Licence from the government before making a purchase. If the land is for a development project, details of any plans must be supplied, plus details of estimated costs and numbers of persons involved in the project. A lawyer will be able to make the necessary applications for this. These are just a couple of examples of information which a buyer will need to know – each region has its own legal regime, a fact which highlights the importance of individual research.

Key risks and opportunities

It can be expensive and difficult to get into the Caribbean property market, particularly if you do not conduct proper research. This research is a vital part of the purchase process here, as no two parts of the Caribbean will have the same policy with regard to non-nationals buying property. Each region will have its own tax and transfer costs, and rules vary according to whether you plan to build or to buy a completed property. Each area will also have a different degree of accessibility, something which will affect anyone with business or family interests elsewhere. These are all things to check before taking any action, and the local tourist board or a local real estate agent should be able to advise you of all the different costs and laws. Once the financial and legal details are established, living in your chosen location for a while before purchasing is a good idea, to confirm that it is the right one for you.

The Caribbean, therefore, although traditionally associated with the rich and famous, does offer fantastic opportunities for anyone wishing to own a holiday or retirement home or to invest in a tropical paradise. There is such variety here that there should be something for everyone, as long as the necessary research is conducted and precautions are taken.

Opportunity rating

The Caribbean is one of the most desirable areas on the planet, and as links with the rest of the world improve, so does interest in the area. There are still a number of regions here in which property can be purchased at a reasonable price. There is every reason to expect that these markets will grow to a level comparable to that of their more expensive neighbours.

Rating: $ $ $ $

Risk rating

For much of the Caribbean, the only major risk is from hurricanes. This risk is relatively easily mitigated with insurance, and buyers should also take comfort in the fact that even the worst-affected areas tend to recover relatively quickly.

Rating: * *

© Vacation Work 2005

“Where to buy a property abroad – An investors guide”, First edition 2006 David Cox, Ray Withers, Kate Godfrey.

Reproduced with the permission of Property Frontiers.

Further information on this topic can be found in “Where to buy a property abroad – an investors guide” 1st edition, by David Cox, Ray Withers and Kate Godfrey.

This book is available from all good bookshops nationwide at a recommended retail price of £12.95 or can be ordered directly from www.aninvestorsguide.com for £10.95 including postage and handling (to UK addresses only).

www.propertyfrontiers.com

All circumstances vary. BuyAssociation provides general advice for guidance purposes only. It is strongly recommended that you seek professional advice before making any purchase.