How is Brexit affecting the Barbados property market?

As spring and summer approach, property hunters will be dreaming once more of their ideal holiday home, surrounded by pristine beaches and blue skies. Nowhere sums that up quite like the Caribbean, but what is the outlook for the market in 2017? What impact is Brexit having? We take a closer look at the current state of Barbados real estate.

Barbados has always been a popular destination for wealthy international buyers, thanks to its idyllic landscape and association with luxury. At the end of 2016, it jumped four places in TheMoveChannel.com’s Top of the Props chart to become the 29th most popular location on the site. In March 2017, it rose to become the 17th most popular – up by 15 on the previous month and the country’s first time in the Top 20 since April 2016.

The market, though, has lost the momentum that it once had, according to the latest Red Book from property firm Terra Caribbean. This is despite the fact that property prices have declined. The local and middle income sector of the market has seen sales fall by around 40 per cent over the last decade, as population growth and wealth creation both slow. In the last year, meanwhile, an “unprecedented” number of sales are using mortgages to purchase homes.

For international buyers, the overall value of the foreign luxury market has fallen 29 per cent in the last 10 years. This is largely a result of sellers lowering prices to attract buyers amid the slowdown. Indeed, after the booming years around 2008, a significant amount of inventory was built at peak prices, only for the buyers able to pay those kind of sums to disappear in the wake of the global financial crisis. Unique homes in areas with lower supply performed better than the majority. Otherwise, a number of sellers have had to discount their list prices, stimulating sales activity but also following the market down the slope.

The market’s peak activity was fuelled, in part, by the strength of the pound against the dollar, which was at a 10-year high of around $2. Today, though, sterling is much weaker, following the UK’s vote to leave the European Union. Indeed, the pound is around 40 per cent lower than 2007 at $1.21, making property more expensive for British buyers, who traditionally make up 70 per cent of the island’s prime purchasers. Uncertainty surrounding what a hard Brexit could mean for investors has added to the headwinds facing the market this year.

The knock-on effect has most notably been evident in the country’s tourism sector, which is a major component in the Barbadian economy and the housing market. Indeed, tourist arrivals in 2015 surged 14 per cent to an eight-year high, but that growth fell to 6 per cent in 2016, with British tourist arrivals rising just 3 per cent – half the overall average.

On TheMoveChannel.com, enquiries for property in Barbados fell 37 per cent in Q3 2016, the months immediately following the Brexit referendum.

Baroness Anelay, the British Foreign Office Minister for the Overseas Territories and Caribbean, has visited the region twice in recent months to reinforce the ties between Britain and the Caribbean, visiting Barbados, Jamaica and the Cayman Islands in October and St Kitts and Nevis and Saint Lucia in January.

In 2017, Knight Frank reports that Barbados’ property market is starting to move again, with the country recording one of its biggest beachfront sales ever: Four Winds, a property with a guide price of $40 million, which sold to a British buyer. One factor is that UK sellers are now in a position to accept lower offers from British buyers, knowing that they will recoup any discounts when converting their amount back from the dollar. (US buyers, on the other hand, are taking advantage of the favourable exchange rate in the euro-dominated St Barts.)

On TheMoveChannel.com, enquiries for Barbadian real estate doubled in Q1 2017, compared to Q4 2016, and are now 10 per cent higher than Q2 2016, the three months before the Brexit referendum. While Brits may be beginning to return to the discounted market, another factor may be the growing presence of other international buyers in the Caribbean. Indeed, Knight Frank reports a 500 per cent increase in Chinese investment in the region in the decade prior to 2012, with the confidence in the US economy encouraging non-UK tourist visits to the Caribbean. Prices, meanwhile, may be gradually bottoming out, suggests the firm.

Selecting the right sector of the market is key. Terra reports that there are some parts of the island still enjoying “strong demand”, such as the beachfront land in the Carlisle Bay area. The east coast is also particular sought-after by both local and foreign buyers.

“Whilst for some, the repercussions from the Brexit decision, Trump’s electoral victory, currency shifts, and in some cases, lingering oversupply may add an element of uncertainty,” concludes Knight Frank, “for others, they represent a buying opportunity.”

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