Barbados property prices continue to fall, but sales now improving
Last Updated: July 26, 2015
House prices are still generally 20% below pre-crisis levels, according to local real estate experts.
"A property that in 2007 was worth US$12 million was reduced to US$9.8 million two years ago and again now to US$6.95 million,” said Sam Mahon of Knight Frank.
The Four Winds, situated on the West Coast, was listed last year at a selling price of US$55 million. Now, the price has been reduced by about 27% to US$40 million. Likewise, Gardenia, another beachfront property originally valued at US$50 million, was recently reduced by 30% to US$35 million.
Yet optimism prevails among local realtors, due to increasing numbers of foreign homebuyers. Sales volumes are picking up. “Prices had gotten too inflated before but now they’re more realistic,” says Lee Gooding of Seaside Realty Inc. “That’s helping us to encourage people to look again at Barbados.”
The resiliency of Barbados’ real estate market continues to attract buyers – especially compared to the other parts of the Caribbean which have experienced greater price fluctuations, according to Chesterton Barbados chairman Kieran Kelly.
"It's a very stable place – economically and politically – it has a familiarity to it for British buyers, with low crime, good roads, hospitals and schools and excellent communication from US and Europe. It has a depth of culture which means buyers can winter there without going crazy," says Savills’ Caribbean director James Burdess.
In 2014, Barbados saw the highest sales transactions since 2004, according to Richard Young of Sotheby’s International. Knight Frank's luxury properties also saw record sales last year.
Other local real estate agencies also experienced sales increases:
- “This year has been extremely good in terms of sales,” said Kieran Kelly of property agency Chestertons. “It’s a big turnaround from 2010 and 2011, which were tough. Sales began to show a pickup in 2012 and have been increasing. We’re currently seeing around 10 new clients per week.”
- “Buyers are back and we are seeing regeneration in the market with more sales along the premium west coast from Bridgetown to Speightstown,” said Christian de Meillac of Knight Frank.
- “We’re seeing enquiries for newer developments, such as Lantana and Sugar Hill, but also more interest in off-plan projects, with entry prices of between US$250,000 and US$500,000,” said Janeace Thompson of local agency Altman.
- Royal Westmoreland recorded its best sales in over ten years, with US$60 million of its villa sales coming largely from Brits, according to Kim Goddard of Royal Westmoreland.
Foreign buyers in Barbados are predominantly British, American and Canadian, with some Russians and East Europeans.
The average luxury residence cost per square foot in Barbados is now US$875, according to a recent Wealth-X report.
Real estate prices in Barbados are typically listed in US dollars.
Expensive villas in Barbados
There is insufficient data on properties for rent since most rentals are for a short-term basis only. It seems though, that property prices are still very high in Barbados. Beachfront villas, with five bedrooms or more, sell for over $4M in St. James. Three and four-bedroom villas sell for at least 1M.
Rental income tax is high in Barbados
Rental Income: Rental income is taxed at a special flat rate of 15%.
Rental income earned by nonresidents is subject to 25% withholding tax, which is credited against the taxpayer’s final income tax liability.
Capital Gains: There are no capital gains taxes in Barbados.
Inheritance: Inheritance is not taxed in Barbados but transfers of property in Barbados are subject to property transfer tax.
Residents: Residents are taxed on their worldwide income at progressive rates, from 20% to 33.50%.
transaction costs are now moderate
With transfer taxes reduced from 7.5% to 2.5% in 2008, roundtrip transaction costs in Barbados are now moderate. Total costs for property sale and purchase range from 11% to 13.85%. The seller pays for a significant portion of the cost including the transfer tax, real estate agent's commission (5%, plus 15% VAT) and stamp duty (1%).
Buyer and seller pay for their own lawyer (legal fees are at 1% - 2%, plus 15% VAT).
The law is neutral in Barbados
Rent: Rent and rent increases can be freely negotiated.
Tenant Eviction: The landlord cannot evict a tenant without a court order under any circumstances, even when the tenant has not paid the rent for six months. It takes an average of 92 days to evict a tenant.
Economic growth remains weakDuring the first quarter of 2015, real GDP growth was 0.6%, after falling 0.8% a year ago, according to the Central Bank of Barbados.
Barbados' economy is expected to grow by 1% this year, up from a miniscule 0.2% growth last year and no growth in 2013, according to the International Monetary Fund (IMF), due to increased tourist arrivals, and key markets beginning to grow faster.
The island’s current account deficit is likely to fall to 5% this year, down from 8.5% last year, amidst lower oil prices, according to the IMF.
Inflation was 1.9% in 2014, slightly up from 1.8% 2013, but significantly down from an average of 6.1% from 2005-2012, according to the IMF.
Unemployment was 12.7% in Q1 2015, up from 11.7% in the same period last year.
Tourism is one of the main economic drivers of Barbados, accounting for about 12% of the country’s GDP. The sector employs 15,000 people, more than 12% of total employment. Tourism also drives home prices, and a strong tourism season is a good indicator that home prices may rise.
There's now a real surge. During the first two months of 2015, stop-over visitors rose by 11.1% to 109,186 people from the same period last year. In Q1 2015, arrivals from the UK, USA, Canada, and Caribbean and Latin American grew by 12.9%, 27.7%, 28.4% and 10.6%, respectively, according to William Griffith of Barbados Tourism Management Inc. (BTMI). Arrivals from Germany also grew by 23.6% over the same period.