US Virgin Islands' property market improving
Last Updated: March 16, 2015
In that haven of luxury residential properties St. John, the average home sales price fell slightly in 2014 - but only by 1.5%, to approximately US$1.04 million, according to Islandia Real Estate. This is a drop - but it is a sharp improvement from the price decline of 10.9% in 2013, and the decline of no less than 31.3% in 2012.
In St. Thomas, where the USVI’s capital Charlotte Amalie is located, the average home sales price rose by 16.1% to US$772,334 during the year to end-August 2014.
In St. Croix, the largest of the U.S. Virgin Islands, the average home sales price rose by 4.2% to US$332,950 in 2014 from a year earlier, after y-o-y drops of 18.8% in 2013, 10.1% in 2012 and 2.9% in 2011, based on figures released by Re/Max Team San Martin.
In 2013, the average home sales price in the U.S. Virgin Islands rose by 22.1% to US$538,369, according to the USVI Bureau of Economic Research. The recovery was led by St. John/St. Thomas, with home prices soaring by 49.6% in 2013 - clearly, most of this house-price recovery took place in St. Thomas, given the declines in St. John and St Croix noted above.
The condominium market was mixed, but on average less strong in 2014:
- In St. John, the average sales price of condominium units rose 16.5% to US$714,924 in 2014.
- St. Thomas average condo sales prices dropped 1.8% to US$219,512 during the first eight months of 2014, compared to the same period the previous year.
- In St. Croix condominium sales prices dropped 7.1% y-o-y in 2014, to an average of US$149,730.
Condo sales prices in the whole U.S. Virgin Islands fell 15.9% y-o-y in 2013, to an average of US$208,205. In St. John/St. Thomas, condo prices fell by 3.8% y-o-y in 2013 while in St. Croix, condo prices dropped 4.6% over the same period.
The USVI’s property market is expected to continue to recover this year, as more visitors come. However the USVI remains vulnerable to the overall state of the global economy.
Prices have fallen significantly over 4 years - now for the rebound?
St. John remains the US Virgin Islands’ most expensive island, even though square metre prices of houses have fallen. Four years ago (in 2011), house prices ranged from around US$5,300 to US$8,400 per square metre. Now, the price range is around US$4,500 to US$5,700 per square metre. That’s a significant fall - though we seem to be about to see a turnaround.
The same downward trend is observable in St. Croix. In 2011, the average square metre price of houses in St. Croix was around US$3,400. Now, it’s around US$1,800.
House prices in St. Thomas have been more stable; but they too have fallen in price from an average price per square metre of a 120 sq. m. condo of US$3,200 in 2011, to US$2,950 now.
Unfortunately, data on long-term rentals is too scarce to allow us to estimate rental yields.
Property transaction costs are reasonable in US Virgin Islands, by the admittedly expensive standards of the Caribbean.
US Virgin Islands taxes are low
Rental Income: Rental income considered “not effectively connected income” is taxed at a flat rate of 10% on the gross amount, withheld by the tenant. Nonresident foreigners electing to consider their rental income as “effectively connected income” are taxed on their net income at progressive rates.
Property: Property taxes are imposed at 1.25% of the property’s assessed value. The assessed value of the property is generally 60% property’s fair market value.
Capital Gains: Capital gains received by taxpayers within the 10% and 15% tax brackets are taxed at a flat rate of 10% as of 01 January 2011. For all other taxpayers, capital gains are taxed at a flat rate of 20%.
Inheritance: Foreigners and non-permanent residents of the United States are not subject to inheritance taxes in the US Virgin Islands.
Residents: US citizens and US permanent residents living in the islands are taxed on their worldwide income.
Buying costs are moderate in the US Virgin Islands
Roundtrip transaction costs range from 10% to 14.6% of property value. The transfer tax ranges from 2% to 3.5% depending upon property value. The real estate agent's fee, at around 6%, accounts for the greater part of the costs. Legal fees are at 1% to 2%.
US Virgin Islands law is pro-tenant
Rent Control: Rents in the US Virgin Islands are frozen at their 1947 level be the Rent Control Act.
For existing housing accommodations prior to July 1947, the maximum rent ceiling is the rent imposed on July 1947. For properties built afterward, the maximum rent allowed is the initial rent charged for the property.
Tenant Security: For reasons other than rent default, the landlord must give the tenant a month’s notice of termination and must apply for a court approval prior to evicting the tenant. If the landlord is given the right to repossess the property, the tenant can delay the eviction for up to six months to give him ample time to look for alternative housing.
Three Virgin IslandsThe US Virgin Islands is composed of three main islands: St. Croix, St. John, and St. Thomas. The archipelago is an unincorporated US territory. Most federal laws apply, though customs policies differ.
Island belongers are considered American citizens and enjoy all the benefits and rights of this status. They are represented in the US House of Representatives, but not in the Senate, and are not allowed to participate in US presidential elections. But the Island government acts with relative autonomy.
St. Croix is the southernmost and the largest of the three islands. It has many isolated beaches, dense forests, and fertile lowlands. It used to be one of the region’s wealthiest islands, with a multitude of sugar plantations and a successful slave trade. Colonial ruins lie amidst the beautiful scenery.
St. John, on the other hand, is the smallest and most serene. Two-thirds of the island is a protected National Park that is a favored tourist destination. There are about 40 beaches to relax in and numerous water sports to enjoy.
St Thomas is the most developed of the US Virgin Islands. St Thomas’ capital, Charlotte Amalie, is the commercial center of the territory. Every year, more than a million cruise passengers alight in the harbor to tour the towns and indulge in duty-free shopping.
Tourism is the US Virgin Islands’ main industry. It generates 2 million visitors every year, and accounts for 80% of GDP. From January to November 2014, the total number of stay-over tourist arrivals in the territory rose by 3.9% y-o-y to 655,477 people, according to One Caribbean, and cruise passenger visits increased 4.3% to 2,083,890 people in 2014.
The last few years have been very tough for the USVI's economy, despite tourism.
USVI’s GDP dipped 5.5% in 2009, based on figures from the U.S. Bureau of Economic Analysis. After a short-lived recovery in 2010 (real GDP growth of 1.3%), GDP plunged again by 7.5% in 2011. Real GDP then fell by a huge 13.8% in 2012, and by another 5.4% in 2013, mainly because of the closure of the HOVENSA refinery in 2012, which caused the layoff of around 1,200 employees.
No figures are yet available for 2014, but things look better. During the year to end-November 2014, the overall unemployment rate in the U.S. Virgin Islands dropped to 13% from 13.4% in the previous year, according to the USVI Bureau of Economic Research. In St. Croix, the jobless rate fell to 14% from 15.2% over the same period. In contrast, in St. Thomas/St. John, the jobless rate rose to 12.2% from 11.8%.