Anguilla's property market remains depressed
Last Updated: December 22, 2014
House prices started to decline in Anguilla in early 2009, according to a report by Scott Hauser of Sotheby´s International Realty. Property sales also fell, as foreign demand weakened. From 2009 to 2012, residential lots dropped around 50% to 75%, according to some local property experts. In 2013, residential property prices continued to drop, albeit at a decelerating pace.
Anguilla experienced a property price boom from 2004 to 2007. The sharp property price increases during the period were driven by strong foreign demand, partly the result of celebrity sightings which have made the island ‘chic’. Brad Pitt and Jennifer Aniston spent their final days as a couple in the island. Denzel Washington celebrated his 50th birthday in Anguilla.
Anguilla experienced a construction boom in 2005, as demand for real estate increased.
- A new extended runway enabled private jets to land easily on the island
- The Temenos development was launched, with its Golf Club (the first golf course in Anguilla)
- The Viceroy Anguilla Resort and Residences was also unveiled
However, construction activity almost ground to a halt by end-2008 due to financing difficulties faced by developers, coupled with a sharp drop in demand. Numerous tourism and residential projects were cancelled or delayed. These included the construction of The Flag project at Temenos was stopped, the Flag’s golf course development at Rendezvous Bay, the expansion plans for Altamer at Shoal Bay West, the Rendezvous Bay Hotel, the Privee at Shoal Bay, and the Fairmont Anguilla at Forest Bay, among others. After almost five years, construction activity was improving gradually.
In 2013, the economy declined by 0.9%, after an annual contraction of 5.5% in 2012 and a growth of 4.3% in 2011. Anguilla’s economy is projected to grow by a meagre 0.74% this year, according to the Eastern Caribbean Central Bank (ECCB).
Non-belongers are required to obtain an Alien Land Holding License to purchase property, which can only be up to half an acre. If more land is needed, further permission from the Government of Anguilla is required. A fee of US$1,200 per year is payable for a permit to rent out a property.
Yields are high at 38.8% in Anguilla
Current yields are around 38.8% for properties with at least 12 bedrooms located in prime coastal areas particularly the West End, the center of Anguilla's rental market. This figure applies to short-term leases, usually one week, and takes into consideration varying rates during peak season and off-peak season.
The government has abandoned a previous rule that foreign-owned property cannot be rented out. The restriction was aimed at stopping tax evasion by non-resident owners. Instead, from 2007, all landlords must appoint locally-registered representatives to be responsible for tax payments.
Rental income tax is low in Anguilla
Rental Income: Properties rented by tourists are liable to the 10% Accommodation Tax, which is levied on the gross rent.
Property: Property taxes are levied at 0.0175% of the property's assessed value.
Capital Gains: There are no taxes on capital gains in Anguilla.
Inheritance: There are no inheritance taxes in the island.
Residents: There are no taxes on income in Anguilla. But stamp duties and fees are levied on certain types of income.
Buying costs are high in Anguilla
Roundtrip transaction costs are between 21.55% and 24.70% of the property value. The Alien Land Holding License is 12.5% of property value with a filing fee of ECD1,075 (US$398). Stamp duty is 5% while legal fees are typically at 2%. Real estate agent's commission ranges from 2% to 5%.
Anguilla's tenancy protection laws
Tenancies in Anguilla are usually short-term. It takes an average of 91 days to evict a tenant.
Booming tourism fails to fuel economic growthAnguilla’s economy relies mainly on tourism and financial services. Anguilla's tourist industry targets the luxury market, and caters mainly to visitors from North America and Europe.
After a tourism boom (2004-2006), tourism in the island declined sharply in 2007-2009, mainly due to the adverse impact of the global crisis.
Now Anguilla’s tourism sector is booming again. During the first nine months of 2014, the total number of tourist arrivals surged by 16.3% compared to the same period last year, to 135,095, according to Anguilla Statistics Department and the ECCB.
From January to September 2014:
- The number of stay-over visitors rose by 2.3% y-o-y to 53,969 people. The number of Canadians and Caribbean residents who visited Anguilla increased, while the number of Americans and Britons dropped.
- The number of excursionists soared by 28% y-o-y to 81,126 people
From 2004 to 2007, Anguilla’s average annual GDP growth was 15%. However, the economy contracted by 1.34% in 2008, plunged by 18.5% in 2009 and by another 4.44% in 2010. The economy posted a positive growth rate of 4.3% in 2011, but contracted again by 5.5% in 2012. In 2013, the economy declined by 0.9%. Anguilla’s economy is projected to grow by a meagre 0.74% this year, according to the Eastern Caribbean Central Bank (ECCB).
Unsurprisingly, Anguilla actually recorded a deflation (decrease in prices) of 0.73% in September 2014, its third quarter of annual decline in consumer prices. This is in sharp contrast with the 5.4% average inflation rate seen in 2003-2008, before the global crisis.