As Winter Approaches, Caribbean Islands May Be a Lure for Both Investors and Second Home Seekers
With fall weather setting in and many schools still conducting remote-only learning, families who fled major cities for the spring and summer may now be eyeing new second-home destinations for a safe and comfortable winter quarantine. And investors looking to diversify assets continue to expand their property portfolios amid ongoing market uncertainty. For some, that means leaving U.S. shores altogether in favor of high-end island homes in and around the Caribbean.
And in spite of shifting travel restrictions and assorted international red tape, buyers and renters looking for a winter retreat (or a new investment asset) may be wise to make moves sooner than expected, while inventory is available and there are still deals to be found.
“Almost all of our properties are booked already for the next season, December to April,” said Jonathan Schaede, a broker with Sunshine Properties/Luxury Portfolio International in St. Maarten. “Regardless of whether they can come or not [due to possible future travel restrictions], they know they want to come to the Caribbean.”
More: The Pied-à-Terre Could Make a Comeback With Buyers Who Want to Maintain Connections to Cities
Across destinations including the Cayman Islands, St. Barts, Turks and Caicos, and the British Virgin Islands, high-net-worth individuals are locking down properties now to keep their options open in the face of market volatility, a potential second wave of Covid-19, and the uncertainty of the U.S. presidential election.
On the rental side, visitors who would normally stay for a week or two are now heading to island homes for months on end, while buyers are increasing their budgets and seeking out diversified assets in locations that are often tax havens, and in some cases, offer residency programs for buyers.
“We’ve seen a significant increase in the number of people looking to relocate here permanently, said Sue Nickason, vice president of real estate marketing at Provenance Properties, the Cayman Islands affiliate of Christie’s International Real Estate. “People are looking to buy property as a vacation home, but also as a future place of refuge should there be a second wave [of the coronavirus] or something else catastrophic in the world that makes them want to retreat to a place like Cayman.”
More: Why You Might Want a Jumbo Mortgage Right Now—Even if You Don’t ‘Need’ It
“A lot of high-net-worth individuals are starting to look at future-proofing,” Ms. Nickason added. “They’re realizing that to transcend borders, you need to have residency status. Citizenship by residency programs across the globe are doing brisk business.”
“About 50% of our sales at the moment are driven by residency by investment,” said James O’Brien of International Realty Group Ltd./Luxury Portfolio International in the Cayman Islands. “It’s probably less than 20% normally.”
Over the summer, a new visa program allowing for a year of tax-free remote work in Barbados attracted a rush of new buyers, as well.
Another reason the Caribbean has become a draw is due to the low Covid-19 infection rates in the region, where there is high compliance on masks and other government guidelines. Many islands are reporting just a handful of cases at any given time, and some have already been declared Covid-free altogether.
In some regions, business is even up year-over-year.
“We’re seeing the villa market, cumulatively in the second quarter, increased over last year in Turks and Caicos,” said Robert Greenwood, director and senior broker at Regency Realty LTD, Turks Caicos affiliate of Christie’s International Real Estate. “People were buying sight unseen. I know there’s been a huge surge of purchasing in suburbia [in the U.S.], and our [high] net worth buyer wants to go one step further, to be able to evacuate and to get what could be a safe haven.”
This heightened interest is, in certain locations, compounded by low inventory. “We’re still seeing strong interest in condos, and demand for detached homes with spacious grounds, a swimming pool, tennis or basketball courts,” Ms. Nickason said. “That’s causing a shortage of supply in some of those styles of homes in key neighborhoods.”
Families Search for Winter Versions of Their Summer Escapes
Just as was witnessed in the Hamptons in New York, renters book out their summer properties early on in the year, many of those looking to rent an island property for the high season (which runs roughly through the first quarter of the new year) have already made moves.
“We have a development here [in the Cayman Islands], the Kimpton Seafire Resort + Spa, where you can do short-term rentals at some residential condos, and we’re pretty much rented out,” Ms. Nickason said. “We’ve had people say, ‘I want to make sure my short-term vacation property is on the books for January, February, March.’”
With parents working from home and many kids still in school remotely, families are also exploring the option of conducting their normal day-to-day routines from a luxurious vacation destination.
“In Turks and Caicos, we’ve seen that model of, ‘Our kids are going to be online this fall, let’s get a place on the beach and kind of live our best life during this and use it as an opportunity to travel,’” said Joe Zahm, president of Turks Caicos Sotheby’s International Realty. “We have an ultra high-net-worth client in Aspen. He’s coming down with his family and renting a compound on the beach for a few months. We have rentals in that respect. We also have people buying property for that reason.”
More: Low Mortgage Rates, Limited Inventory, and Pent-Up Demand Could Make This Fall a Busy Season
In the Bahamas, “the demand for what we would call short-term rentals has worked its way up to medium-term rentals,” said George Damianos, CEO of Damianos Sotheby’s International Realty in the Bahamas. “People are now asking for one, two, three months rather than two weeks. In the first shutdown with the pandemic, we were pretty much full with owners from the northeast that were here for two or three months.”
And just as buyers in U.S. markets have shifted their searches to larger spaces (and expanded their budgets accordingly), both new buyers and existing owners of island properties are now looking at larger, higher-priced options.
“Thirty percent of all inquiries in the past six months are priced at $3 million- plus,” said Lucienne Smith of Smiths Gore BVI Limited, British Virgin Islands affiliate of Christie’s International Real Estate. “The level of activity at higher price points, that’s capturing the desire for family compounds.”
“People who were looking before have increased their budgets. If they were looking at an apartment, now they’re looking at villas,” Mr. Schaede added. “One client had a budget of $700,000 for an apartment, and has now bought a $1.3 million house on the water so he can have his own private space he can walk around and enjoy. From an investment perspective, they see it as a safe haven.”
More: For Buyers Ready to Leave Major Markets, Smaller Cities Offer (Relatively) High Supply
Low Infection Rates and Strict Travel Regulations
The appeal of island homes is also tied up in a more literal form of safety. Most island communities have had extremely low rates of Covid-19 and a strong government response since the pandemic began, creating another powerful draw, particularly for visitors coming from the U.S.
“St. Barts is considered a refuge,” said Zarek Honneysett of Sibarth Real Estate, St Barts, affiliate of Christie’s International Real Estate. “We were basically virus-free for a number of months. The testing works well, the French government has been good about imposing [preventative] measures.”
The Cayman Islands were declared Covid-free over the summer, and Ms. Nickason said, “The word is out that we were one of the few countries in the world that were able to contain the virus very quickly.”
More: The U.K.’s Stamp Duty Holiday Has Opened a Window for Luxury Buyers Looking to Get Out of London
The catch-22 for prospective buyers and renters is that in most cases, low virus rates have been enabled partly by stringent travel restrictions, ranging from mandatory testing before arrival and quarantine periods after, to borders that remain closed entirely, such as on the British Virgin Islands. Borders are currently closed for the Cayman Islands, as well, but are currently slated for an Oct. 1 reopening.
For buyers uncomfortable purchasing sight unseen, this has meant extensive virtual tours and pre-vetting, with plans to view properties and move deals forward as soon as in-person visits are allowed. For renters, this means contracts with clauses that allow for flexibility if borders on either side of the transaction close back down.
“There is a standard clause now that’s being used if travel is restricted. You either get a refund on your deposit or you can reschedule your visit,” Mr. Damianos said. “I think everybody has to be a little tolerant in this time.”
More: As Manhattan Market Slumps, Classic Co-Ops Offer Safety and Stability
Even with so much logistical uncertainty, competition for prime properties can be stiff.
“We had a condo lined up for a client who was planning to be here on October 1st, the lease was ready to go, he’d done a virtual tour,” Ms. Nickason said. “But he wanted to push it to November 1st. The agent said ‘I have people waiting,’ and he lost the condo.”
Click for More In-Depth Analysis of Luxury Lifestyle News
Leave a Reply