Caribbean paradise at a price

Caribbean property is either expensive or very expensive, but Graham Norwood's money is on the ever-developing Bahamas

Say "The Bahamas" and you think of sun, sea, sand, low taxes - and now construction cranes, too. Only 30 of the Bahamas' 700 islands are inhabited, but many now host developers creating second homes and resorts.

Say "The Bahamas" and you think of sun, sea, sand, low taxes - and now construction cranes, too. Only 30 of the Bahamas' 700 islands are inhabited, but many now host developers creating second homes and resorts.

The Ginn Corporation, a US firm, has a 10-year programme of hotel- and villa-building on Grand Bahama Island, close to other second home resorts branded with names such as Sheraton, Westin and Best Western.

A Bahamas Airways hop away is the tiny island of Abaco, where British developer Peter de Savary is building yet another resort. On New Providence Island, close to the capital, Nassau, groups of second homes are being built close to a hotel that will manage their rental for wealthy owners.

Why is the Bahamas seeing such a surge of development? Because its two main sources of income - tourism and financial services - have each taken a hit since 2001. Tourism accounts for over 60 per cent of the islands' GDP and employs 50 per cent of the workforce. But the industry suffered from overreliance on the US, which provided over 80 per cent of tourists. A slowdown in the American economy and a drop in US citizens willing to fly since 11 September 2001 have led to a dip in income.

As the Bahamas produces little and imports almost everything from the US, the government is effectively strapped for cash. So it gives tax breaks to developers to build holiday homes and is embarking on worldwide advertising to publicise its lack of income tax, capital gains tax and inheritance tax. The campaign seeks to attract two very diverse types of home owner.

The first is the Briton or American from the private yacht and jet set. For this sector Savills is marketing Shoreline, a 26-acre gated development of beach holiday homes on Grand Bahama. Ten types of two-, three- and four-bedroom villas are available. Prices range from about $680,000 (£378,000) to $2.6m (£1.4m), but remember there is also a $275 (£150) monthly service charge and $400 (£220) annual fee to the local port authority.

At the Abaco Club, Knight Frank is marketing a private "owner's club" run by de Savary, the Briton who turned Skibo Castle in Scotland into a world famous hotel. You need $50,000 (£28,000) to join, and in return you can use sailing, diving and sports facilities at Abaco. You are also entitled to buy an Abaco Club home: choose one of 70 West Indian style wooden cottages priced from $1.5m-$2m (£833,000-£1.1m), or buy a building plot of one to two acres valued at $1.5m-$3m (£833,000-£1.7m). But don't forget to add the $1.5m (£833,000) building costs and a $40,000 (£22,000) annual renewal of that members' club.

Knight Frank also has upmarket second hand properties at Lyford Cay on the western tip of New Providence island. Prices vary but they are all expensive. Top O'The Cay is a vast five-bedroom 8,400 square feet multi-tiered house at $5.5m (£3m), while Christie Terrace is a three-bedroom whipper-snapper costing a mere $1.7m (£950,000).

But not every Bahamas home is aimed at the rich. Indeed, the second target audience for the islands is the mass tourist second home. For example, MacAnthony Realty, a Spanish-based estate agency, is marketing three- and four-bedroom apartments on a gated developed at Paradise Island near Nassau with prices starting at about £125,000. The agent's publicity material describes the development's target audience as "Brits, investors, retirees, families".

The Bahamian government also wants Grand Bahama island to become a global leader in timeshare, a concept that does not have the badly discredited image it has in most of Europe. The Bahamas version of timeshare is linked to major hotel chains. They sell apartments in one- or two-weekly time segments and then provide additional services to owners when they visit once or twice a year. Most prices are around £40,000 for a small apartment in a low season week, up to £90,000 for a peak season week.

The government is courting Marriott to build a 400-unit development at Barbary Beach and a 350-unit version at Discovery Bay, both on Grand Bahama. "Some time ago Grand Bahama was a leader in the time-share business. Today we have lost our advantage. We aim to get it back," says Perry Christie, the Bahamian prime minister.

But whether you purchase at the top or bottom of the market, you should learn the ropes. Buyers pay half of the stamp duty levied on a property (varying from 2 per cent of purchase price to a hefty 10 per cent), plus legal fees. You will also need a government permit if you wish to rent out your home. If your purchase is via a company (a tax-avoiding ruse for many buying at the expensive end of the market), you will also need to spend $1,500 (£833) on registering the firm in the Bahamas.

The Bahamas may be too expensive for most, but if you do take the plunge into this part of the Caribbean, it may be a good investment with plenty more demand to come. "Prices in the islands are enjoying a steady increase of approximately 10 per cent a year," says Knight Frank.

Bahamas is clear on the move. Enjoy the sun - but watch out for the cranes.

Shoreline from Savills: 020-7824 9030, www.savills.co.uk; Abaco and Lyford Cay properties from Knight Frank: 020-7629 8171; MacAnthony Realty: 0808 178 5191, www.macanthonyrealty.com