An island of prosperity as storms ravage world housing
As property investors and people hoping to retire abroad struggle to find a safe haven in the slump, St Lucia could offer a solution.
Sunday 08 March 2009
The credit crunch has put paid to property booms around the globe, right? No, not quite. While the US, UK and European property markets are in price freefall, the Caribbean, and in particular the holiday island of St Lucia, seems to be holding its own – for the time being at least.
"Property prices have remained robust throughout the financial crisis," says Allen Chastanet, St Lucia's minister for tourism. "The key is we didn't have a boom to begin with, so building levels were at sustainable levels. Therefore, we're not having a bust.
"The only price softening that has taken place has been reflective of the pound weakening against the dollar," he adds, with reference to the fact that St Lucian property is priced in dollars. "Sellers have been willing to bend prices a bit for British buyers to reflect this currency shift."
The sales are still coming. At the island's Cotton Bay resort, for example, stage two of a building programme has just been completed, with 22 two-bed villas priced between $360,000 (around £260,000) and $450,000 all sold in rapid time. Some one-bed flats priced at $290,000 were also sold.
St Lucia's profile is high at the moment, with singer Amy Winehouse pictured holidaying there. The island is small, no bigger than a medium-sized English county and with a similar population to Peterborough. It is mountainous, with dense rainforest vegetation and lots of inlets and sandy beaches. And property, while not as affordable as hotspots such as Spain or Florida, ranges in price from around $300,000 right up to $4m. Most developments tend to be gated, with on-site shops, boutiques and restaurants. Access to a beach and pool area is normally a given.
Some homes are sold as owner-occupier, perhaps to people looking to retire to a hot climate, with direct flights from the UK through Virgin and BA. However, most of the properties on the island are pitched as an investment.
"What generally happens is that the buyer has the right to use the property for a calendar month each year, say, and the rest of the time it is rented out to holidaymakers," says Naomi Cambridge from the Sugar Beach resort, a 190-acre development. "The rent then provides an income for the owner."
Ms Cambridge reckons that investors can expect an annual return of 7 to 8 per cent. However, the Sugar Beach resort is top-end, reflecting its location in the middle of a world heritage site. Prices start at $705,000 for a one-bed villa with a pool, but in high season tourists fork out up to $1,200 a night to stay there.
Even in these recession-haunted times, it seems that visitors from America, Canada and the UK are willing to pay such prices. Ms Cambridge says average occupancy rates at Sugar Beach are 80 per cent over the past two years, and similar statistics are claimed by The Landings resort for the high season, which runs from January to April.
Properties at The Landings can be either owner-occupied or rented out. Prices start at $550,000 for a one-bed home and $750,000 for two bedrooms and direct access to the beach and boat moorings, as well as other resort facilities such as a spa, gym and restaurant. "We find that our owners want to stay here for a while and then rent out the rest of the time," says Oliver Gobat, director of sales. "What we do is put the profits made across the resort into a big pot and then the owners get paid an income according to their square footage and how many nights it's available to rent."
In the case of The Landings therefore, investor income relies on the resort as a whole making a profit. At some other resorts, investors receive a cut of the total revenue instead.
"It's important to check the terms of the income you receive," says Miranda John, international manager at mortgage broker Savills Private Finance. "Do your homework and ensure you visit the property. If the resort seems dead then it may not be making a profit, in which case you're unlikely to get much of a regular income. You'd have to rely on capital growth instead."
Ms John adds that it's harder than it once was to fund a purchase in the Caribbean, but far from impossible. "The number of UK banks willing to lend on a property there has shrunk to some four or five big names, but that still represents a choice. There is also the option of a local bank like First Caribbean, although that can be time consuming due to bureaucracy."
Crucially, unlike other holiday-home hotspots, St Lucia hasn't suffered from the blight of poorly conducted valuations. "Generally, those assessing the value of property on the ground have been robust in the way they have gone about things, and this helps in getting a mortgage as banks can have confidence in the figures," adds Ms John.
As a result, mortgage rates have not risen as much as they have done elsewhere, with borrowers generally being charged around 2.75 per cent above US Libor – the rate at which American banks lend to each other. The maximum loan to value varies between 60 and 70 per cent, and income multiples of three to four times are also achievable. However, purchasers looking to borrow against potential earnings from letting may struggle. "If you're doing this as a buy-to-let then the banks are still going to want you to be able to make your repayments from your own income, rather than any rental money the property brings in," says Ms John.
The property-buying process is similar to in the UK, except you have to obtain the rather ominous-sounding "aliens landholding licence", arranged through a local lawyer at a cost of $1,500. If the property is part of a resort development, and the overwhelming majority are, then service charges may apply, based on square footage. If the home is rented out, expect service charges to be higher as regular cleaning has to take place.
The biggest bugbear, though for Britons looking to buy in the Caribbean or America is the collapse in the value of sterling. A year ago, the pound was worth two dollars; now it buys around one dollar forty cents, and it may sink further. Against this backdrop, Britons looking to purchase property in dollars could consider taking out what is in effect a futures option contract. Put simply, you purchase an option to buy a set amount of dollars at a specific date in the future at a set price, so insuring yourself against any adverse currency moves between making an offer on a home and having to find the cash to pay for it.
Regardless of currency fluctuations, Ms John says buying in the Caribbean is only for those with deep pockets: "This is not a cheap undertaking as it's a top-end holiday destination. But that makes it a little less sensitive to the world economic downturn."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Buyers beware of new-build home headaches
Five Questions: Changes to car tax discs
Bargain Hunter: There's one day left to book a bargain flight with Air Asia
A student's guide to financial survival: You don't have to drown in debt at university
How to save money: UK is crashing down the European league table for putting money away
- 1 Keira Knightley topless: Usually conservative actress does own take on #Freethenipple campaign for Interview Magazine
- 2 Joan Rivers: 'Palestinians deserve to be dead'
- 3 Lady al-Qa’ida: On the trail of Dr Aafia Siddiqui, the world’s most wanted prisoner
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 It's not just the savagery of Isis that is shocking – its weaponry is too
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
With Douglas Carswell joining Ukip, my party has taken another giant step forward
- < Previous
- Next >
iJobs Money & Business
Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...
£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...
£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...
£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony