Nancy Mitford once wrote that Louis XIV, in rebuilding Versailles, avoided the mistake of destroying the attractions that had first drawn him to the place. But how can investors in property in the Caribbean save themselves from experiencing the allure the region has for them crumbling, whether they see themselves in following in the footsteps of Captain Morgan, Cliff Richard or the late Princess Margaret.
This part of the world has definitely opened up for property investments by the mass affluent as well as the super-rich. Property investors have to accept that the robustness of the property market depends upon the epithets such as ‘undiscovered’ or ‘exclusive’ becoming qualified although, hopefully not to such an extent that they become completely inapplicable.
Timesonline recently reported villa properties for sale on Barbados, Grand Cayman and Grenada for £350K or less and property in the Dominican Republic priced at £275K. As any viewer of TV documentaries should be aware, the Caribbean covers an area half the size of the United States and Caribbean Islands come in many shapes and sizes. While the Dominican Republic is slightly smaller than Scotland, the Grand Cayman is a high-lying reef (max. elevation 24 metres). There are big variations in development, wealth and tourist facilities. Perhaps more significantly for property investors are considerations such as the frequency of hurricanes (Grand Cayman was devastated by ‘Ivan’ in 2004 but Grenada lies south of the main hurricane belt and has had only three severe hits since 1950 (although these include ‘Ivan’ and ‘Emily’ in 2005). Some of the low lying islands formed by coral reefs have severe problems with water supply, relying as they do on catchment or desalination systems.
Knight Frank has a fairly good coverage of some of the Caribbean’s better known destinations with, for instance, a 3 bedroom villa at Windsor Village, Grand Cayman on sale for £326K, with a mouth-watering photograph. However, the most superficial trawl of Google links will show you some saddening images of the damage done by ‘Ivan’ in the same locality. On the southern coast of Grenada, there is an off-plan investment opportunity at Bacolet Bay Resort . According to the brochure the investment offers breaks on CGT and alien land holding tax and the possibility of realising capital gains even before completion, plus the availability of mortgages – the maximum LTV is 70% and interest rates are 8%.
By contrast to Grenada, Barbados is more developed and properties are significantly more expensive. A small villa on the West coast of the island is being sold by Savills for £322K. Off-plan properties in the Lion Castle Polo state are being offered at prices similar to Bacolet Bay but the development is in the interior of the island, about four miles from the coast.
As for so much overseas property information, investors are heavily reliant on the conduits of marketing literature, lifestyle publishing and broadcasting and anecdotal evidence. However, it’s always good to have hard evidence in terms of flight costs, tourism statistics and facts about the legal framework and the currency situation. Another helpful reality check is the terms available for mortgages on overseas property. Visiting the sites of Conti Financial Services or Fidentia can be illuminating even if you’re not planning to borrow in order to invest. They’ll give you a reference point for interest rates in your region or country of choice (in this case 8% looks typical) but, possibly more importantly still, lenders like these are pricing the risk of property investments in particular countries into their rates so that’s something that one’s well advised to take note of. For example, fixed rate mortgages for Cayman Island properties are slightly cheaper than for Jamaican ones and to borrow to invest in Belize, Fidentia don’t advertise a rate at all. Generally speaking interest rates for Caribbean property look high even by UK standards. Remember that the recent turmoil in bond markets could impact the value of the US dollar and interest rates on dollar denominated mortgages (which are prevalent in the region) significantly. Possibly, this is reflected in the 8.9% interest rate on a two-year fixed rate dollar mortgage for investment in Barbados offered by Fidentia. Bear in mind that unless you can be flexible about travelling times, flights from the UK are relatively expensive; it’s not unusual to pay upwards of £400 return for flights to Grenada, for instance.
