7 Insider Facts You Wouldn’t Know About the Recession Impact on BVI Property Sales

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Property Sales in the BVI and the Impact of the Recession

Photography by Rainbow Visions BVI

As the 2013/14 high season approaches, property owners will be dusting off their villas ready for Christmas and the cool winter months through to Easter. For those with a property on the market, there will be hope that a general improvement in the US economy will lead to increased interest in real estate in the BVI.

Certainly, there was a more buoyant market last high season and the summer period managed to remain, for the most part, optimistic of a return to better economic times. Only the Republican/Democratic budget spat and on-going fiscal cliff issue managed to interrupt the improved mood in the markets.

The recession has had a significant impact on the property market in the BVI and wider Caribbean, resulting in an overall reduction in values as international purchasers all but disappeared.

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In the BVI, the correlation between local investment and the state of the market has never been more significant as local investment increased and real estate prices dropped. This market is price sensitive and typically investment is for property below $1.0M.

Understanding the real estate market, both past and present, will be key to determining current pricing. Here are a few relevant statistics:

1. In a ten year period between 2003 and 2012, a total of 162 villas over $500,000 were sold in the BVI. This equates to an average of just 16 sales per annum

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2. This inventory amounted to $180M in total sales which equates to an average of $1.1M per residence sold

3. At the height of the market in 2008 (reflecting sale activity in 2007), there were a total of 29 villa sales over $500,000 at an average price of $1.6M

4. In 2012, there were a total of 9 sales at an average price of $1.785M, aided by 2 sales, each over $4.5M

5. The statistics for the first 6 months of 2013 reflect the start of a recovery with a total of 11 sales over $500,000 compared to just 6 in the first 6 months of 2012. However, 3 of these sales were at Scrub Island which had contracted some time previously and took time to complete. Therefore, the improvement over 2012 is a more modest 8 completed sales.

6. The number of foreign investors completing on homes in the first 6 months of 2013 increased to 9, including the 3 sales on Scrub Island

7. Landholding licence processing time has improved as the market has contracted. While at the height of the market it would frequently take over 12 months to process a licence, this has now typically reduced to under 6 months. As the market improves, and more licences are required to be processed, any lengthening of the landholding licence approval process will continue to act as a brake on the expansion of the market

In summary, the BVI has a comparatively small market compared to many of the other Caribbean markets. The number of sales completed each year means there is significant competition for each purchaser in the market from those vendors seriously interested in achieving a sale.

A review of sales since 2010 indicates that the price difference between asking price and selling price is around 25%. However, pricing in a stagnant market can be difficult and frequently villas are placed on the market at over inflated rates. A subsequent drop in the asking price does not, therefore, represent a fall in value (as the value was never there).

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Vendors need to be cognisant that simple economics will continue to dominate the industry. With over 200 villas for sale in the +$500,000 price range, there is plenty of choice for purchasers seeking a home in the BVI. Pricing will need to remain competitive until the supply and demand dynamics start to even out.

Edward Childs, Director - Smiths Gore

Edward Childs, Director - Smiths Gore

Edward joined Smiths Gore in 1990 having trained with Savills in London in commercial property surveying. Edward established the commercial department at Smiths Gore and was instrumental in expanding the firm’s presence in the Caribbean region. He offers consulting to island and estate owners for establishing highest and best use development, based on the private island market in the Caribbean.
Edward Childs, Director - Smiths Gore

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