The last twelve months have proven quite challenging for the Barbados real estate market. These challenges have been both localized and internationally driven, and have pervaded the local residential market, the international second home market and the commercial market.

The genesis of the 2008 recession was overvalued real estate and the correction in prices and velocity of sales which took place then remains with us in mid 2011. Barbados whilst not being immune to the correction has not suffered as badly as Florida or Dubai, for example, but also has not recovered as quickly as some others. Internationally though, the price and velocity recovery has really only taken place in major metropolitan areas and in rapidly emerging markets. Barbados has done better than most Caribbean territories and the country returned to modest growth in Q1 2011.

Vacation Home Market

Barbados has huge profile in the UK and this segment continues to supply over 80% of the new sales. The island is the winter playground of famous footballers and entertainment industry stars and the media in the UK wastes no time in describing the aspirational attributes of the island

There are over 2000 vacation homes in Barbados and the supply increases at a rate of about 5% per annum. The product is largely split between the master planned, amenitised communities and the smaller beachfront condominiums and single homes. The condos have been hardest hit. Prices are off 25% from their peak of 2007, and volume is off about 30-40%. Beachfront prices range from around US $500 per square foot on the south coast to over $1,400 on the west coast. However deals are being done at averages of $540 on the south coast and $860 on the west.

2010 Q4 AVG PRICE PSF US$The real success story has been the golf communities of Royal Westmoreland and Apes Hill and the timeless reputation of the Sandy Lane Estate. Purchasers in 2010/11 have included Andrew Lloyd Webber, Wayne Rooney, Joe Calzaghe and many other famous names.

Barbados tourism product continues to expand and recent notable additions have included the new Apes Hill golf course, to add to the other five courses on island, and the beautiful Limegrove Lifestyle center which combines luxury retail, entertainment and residential town homes. The entertainment includes cinemas, spas, restaurants and over 30 retailers including Louis Vuitton, Cartier, Ralph Lauren, and Armani. A new residential marina is underway and a new commercial marina will be built in the near future. Developments such as these add to the variety of the tourism product and engender further success.

Tourism arrivals have increased steadily in 2011, both Cruise and long stay, and in total should top 1.2 m this year. These tourists have often evolved in to real estate buyers.

Tourist Arrivals 2010
Tourist Arrivals 2010

The offshore financial services sector remains robust and the cadre of expatriate staff they employ contribute to both the rental and sales markets.

In conclusion there are pockets of strength in the vacation home segment and signs of increase in business, which should accelerate going into 2012, based on trends in recovery of personal wealth during 2010/11

The Local Residential Market

The demand for new homes remains strong in Barbados. The government estimates a need for over 1,000 new homes a year. There are a number of developers active in the sector and many new communities springing up.  Much of the new development has taken place in the south of the island and there are a number of success stories. The Villages at Coverley is a good example. Over 1,000 units are being built plus civic, recreational and retail areas. The homes start at US $145,000.

Prices have remained fairly static as the price/cost equation has not been helped by increases in raw materials costs driven by the price of oil.

The expected reduction in lot prices has not materialized and as a result lot sales volume has decreased and as a result the construction industry has suffered volume losses. However the banks remain liquid and are actively marketing new cheaper mortgage products. Deal flow has started to increase and this usually indicates the start of the turnaround. The banking sector is largely Canadian owned and remained strong throughout the recession.

Opportunities exist in the low to middle income segments for opportunistic developers

The Commercial Market

There are strong signs of recovery in the commercial market. A number of new office buildings are being developed and the National Insurance Scheme has been a strong financier of this expansion. The Warrens area continues to develop, but possibly at the cost of Bridgetown which is experiencing higher vacancy rates. There is strong evidence of a migration to higher quality, more modern buildings.

Another contributing factor has been a slow shift in bank lending policies which hardened during the recession and are now returning to earlier norms.

Retail is also recovering which has meant some recovery in retail rental rates and some recent deals in shopping complexes. Manufacturing and warehousing remain weak but should start to recover 2011/12

Conclusion

Barbados remains a great place to invest in real estate. The economy outperforms most of its neighbors and the attributes of the country are aspired to by many. The government supports development with a number of attractive concessions and the regulatory framework whilst slow is relatively simple.

As a second home destination Barbados is a market leader in the world and the menu of attractive pursuits make it much sought after as a vacation destination. Barbados is now ranked 20th in the world on the Human Development Index and the quality of life is the overriding consideration for those who come here. Barbados ticks all the boxes, come and see for yourself.

About the Author

Terry Hanton
Terry Hanton - Managing Director, Property Consultancy Services Inc

Terry Hanton is a Chartered Accountant who specialises in consultancy services to the real estate and hospitality sectors. He is also a member and accredited valuer of the Barbados Estate Agents & Valuers Association (BEAVA), and previously held the position of Vice-President of this Organisation. Terry has over 10 years of experience in conducting valuations for residential and commercial properties. From 1984 to 1996, he was the Finance Director of St. James Beach Hotels Plc., a Barbados based hotel group which was listed on the London and Barbados exchanges.In addition to his role at Property Consultancy Services Inc., he is the Director of Sales of Altman Real Estate, which has allowed him to maintain an intimate knowledge of the real estate market.From 1998 to 2008 he was Project Director of the Sugar Hill Development which is a resort community located in Barbados, owned by David Lloyd and a syndicate of investors. The project is a tennis community consisting of 100 homes on 52 acres. The investors are nonexecutive, and Mr. Hanton was responsible for executing the project in its entirety. He is also a past Director of Needhams Point Holdings Ltd. as well as of several property development companies.He has conducted feasibility studies, market research projects and business valuations and has also provided project management, and property investment advice and financial and accounting services to a broad range of clients.