With the majority of its gross domestic product comprised of financial services and tourism, the British Virgin Islands has just begun to recover from the effects of the global recession. Tourism is up and there has been continued development of luxury resorts and properties as well, leading analysts to believe recent developments will bode well for the long-term health of BVI’s property market. See the following article from Global Property Guide for more on this.
The British Virgin Islands’ property market is showing signs of recovery after slowing in 2009. US visitors are returning to the islands, an investment hotspot for the super-rich.
Potential investors are not only looking for houses, but for land to develop—and the BVI is still largely undeveloped.
“There has been a real increase in interest from prospective buyers mainly from the US in the last six months” says Adam Richards, sales and marketing associate of BVI Sotheby’s International Realty. “Although we are not expecting a return to the boom years of the noughties, it certainly feels as though we are coming out of the dip in demand experienced in 2008 and 2009.”
The economic recession and the decline in tourism numbers significantly challenged the market. “The buyers hold the cards now and sellers are open to offers often up to 30% lower than the official listing price,” says Richards.
The average price of three-bedroom houses in the BVI is around US$1.2 million, while five-bedroom houses sell for about US$3.5 million.
Strengthening tourism and financial services
The BVI’s economy is one of the most prosperous in the Caribbean, with an average annual GDP growth of 9.5% from 2004 to 2007. In 2008, GDP was up by 2.5%. In 2009, however, government revenues fell by 5%.
In 2008, inflation increased to.7.1%, but decreased to 3% in 2009, due to drops in gasoline price and airline fare costs. It is expected to rise again as the US economy recovers.
Tourism accounts for about 45% of the BVI’s GDP. Financial services accounts for over 50% of GDP. These are the two pillars of the territory’s economy.
The year 2009 was difficult due to reduced leisure travel from the US and UK, with a 17% decline in overnight tourism arrivals. Cruise tourism, however, was stronger in some months than in 2008.
Figures from the Caribbean Tourism Organization show that in 2009 total visitors in the BVI declined 8.56%, after a 1.67% decline in 2008.
In 2010 there has been a recovery. In the first five months of 2010 there were 169,264 stop-over visitors — already more than half the total visitors in 2009, which numbered 308,793. Similarly, cruise passengers totaled 350,615, more than half of last year’s total of 530,327.
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The government has been encouraging the tourism sector to improve the BVI’s position in its main markets (US and UK) and introduce itself to new markets such as Asia. Recently, marketing campaigns to attract Canadian visitors have intensified. Efforts to promote heritage tourism have also increased.
The Virgin Gorda Airport, which was closed for renovation from May to July, will re-open before the year ends and will accommodate larger aircraft and heavier traffic.
The financial services sector also suffered in 2009. New international business incorporations decreased by 32%, after a 20% decline in 2008. Among the 69 leading international financial centers, the BVI ranked 37th in the Global Financial Centers Index published in 2009, down from 34th place in 2008.
Several bills passed in 2009, such as the Securities and Investment Business Act and the Money Services Act, along with the Regulatory Code, to strengthen the regulatory system.
Thriving construction sector
Despite the recession, the construction of new resorts and residential developments in the BVI continued:
- The Scrub Island resort marina opened in April 2010
- Oil Nut Bay, an exclusive residential community in Virgin Gorda
- Cooten Bay, a subdivision in Tortola
- The Raffles Tortola, scheduled to open in 2011.
The government strictly regulates the construction sector, having learned from other Caribbean countries’ mistakes, particularly from the over-development of neighboring St Thomas in the US Virgin Islands.
Rents and Yields
Most rental villas can be found in Tortola. Rents for three-bedroom villas are from US$3,000 to US$4,000 per month. For four- to five-bedroom luxury villas, rent is from US$5,000 to US$6,000 per month.
The average rent for a one-bedroom apartment is US$1,500 per month, and a two-bedroom apartment rents for around US$2,000 per month.
“Both long and short-term rental values have fallen with the drop in demand in 2009 and 2010,” says Richards. “But again we are starting to see a prick of interest for rental properties.”
According to Global Property Guide research, gross rental returns for houses are poor, a mere 2.85% on average.
All overseas buyers need to obtain a Non-Belonger Land Holding License (NBLHL) to purchase property in the BVI. The process takes about one year, from application to closing. The NBLHL application is administered by the Ministry of Natural Resources and Labor.
Existing homes, apartments, condominiums, home sites and raw lands are available for purchase. Since belongers have the first choice of any property for sale in the BVI, the Ministry requires that the property the foreigner wishes to purchase must first be advertised locally for four consecutive weeks in a local newspaper.
A stamp duty of 12% is levied on property transactions.
If a foreigner wants to buy undeveloped land, he is required to build a single-family home, worth not less than US$250,000, within two to three years. If he fails to do so, the government can impose a fine up to 40% of the sales price.
Undeveloped land cannot be resold until the development commitment has been fulfilled, or a penalty is paid to the government.
Tortola and Virgin Gorda, the places to be
Tortola is the largest and the most populated island in the BVI. The island is known for its pristine white sand beaches, aquamarine waters and yacht charters.
New developments in Tortola include the Raffles Tortola, which will officially open in 2011. Prices of units range from US$2.5 million to US$2.7 million.
Ocean-view plots in the new development Cooten Bay start at US$250,000 per acre.
In contrast to the crowded and overdeveloped Tortola, Virgin Gorda is secluded and peaceful, making it the choice of the wealthy who want ultimate privacy.
Prices for luxury villas typically range from US$1.2 million to US$3.5 million. Properties priced over US$10 million are also available.
Three-bedroom waterfront villas in Long Bay are priced at US$2,950,000. In Nail Bay luxury villa resort, a four-bedroom home starts at US3.5 million.
The newly opened Oil Nut Bay offers beachfront and hillside homes, and 27 estate lots ranging from 1.5 to 10 acres.
Developments in other islands
The Scrub Island resort is the BVI’s newest luxury private island development in over 15 years. Prices of villas range from US$2.5 million to US$3.5 million. Estate lots ranging from 1.5 to 7 acres are also on offer.
The Sands Hotel in Anegada, the second largest island in the BVI, is undergoing renovation to meet modern standards. Two- to three-bedroom eco villas on stilts will also be constructed.
This article has been republished from Global Property Guide. You can also view this article at Global Property Guide, an international real estate analysis site.