BVI Property Market Predictions: Prosperous Prophecies
Photography provided by Smiths Gore
Looking ahead to 2014, we are often asked how we see the property market shaping up for the next high season. Do we expect more sales activity? Will prices rise? Will my house sell? These are challenging questionsafter such a long period of relative inactivity following the recessionary years after 2007.
As predictions normally come back to haunt those who make them, looking at some statistics can help define what may happen as we approach the end of the year. With our residential market primarily focused on North American investors, key economic indicators from this market give some clues about how investors are likely to view the next twelve months.
Although higher than expected GDP data for the US economy was released at the end of July, showing an annualized growth rate of 1.7%, the underlying growth for the second quarter was still modest, at only 0.4% (compared with 0.6% in the UK), mainly due to US Government spending cuts beginning to bite.
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The general improvement in the US economy, combined with the Federal Reserve keeping interest rates close to zero, has helped the stock market rise to record levels in recent weeks.
At the same time, the housing market experienced a slight, unexpected, dip as borrowing rates started to rise, anticipating that the Federal Reserve would cut its stimulus measures, leading in turn to a rise in interest rates.
Overall, while the indicators are more positive than negative, it remains a slow path to recovery.
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In previous issues of the British Virgin Islands Property and Yacht, we have commented on the cyclical nature of this recession and recovery period, where any gain in market confidence experienced in the winter months seems to be offset by depressing economic data in the summer months.
However, as we pass the mid-point of the summer this year, the improvement in the US economy appears to have maintained an overall positive outlook, which we hope will result in more interest from US investors next season.
Even though European economies remain in recession, this can sometimes have a positive effect for the Caribbean region, encouraging investors to look for alternative markets and, occasionally, lead to the acquisition of a property here in the BVI.
The overall fall in the number of villa sales in recent years has resulted in a corresponding rise in the unsold inventory of villas on the market. While we are hopeful of an increase in enquiries again over the next twelve months, prospective purchasers will be faced with a much wider choice of properties than ever before.
Many villa owners are “waiting for the right offer”, but there are plenty of others who remain keen to sell and move on to the next stage of their lives.
It may be a while before equilibrium between supply and demand is restored and in the meantime, as long as purchasers have so much choice and competition to sell remains strong, vendors should not expect to see prices rising.
The commercial property market in the BVI is more insulated against the vagaries of the world economy as it is dominated by local purchasers. Prime commercial real estate seldom becomes available on the market, although if bank repossessions rise as a result of continued strains within the local economy, this could change.
Concerns remain about the future of the financial sector, although there has been a trickle of new companies and some expansions in the financial sector in the BVI over the past two years which has helped to absorb commercial office space that has become available on the market.
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We expect commercial property opportunities over the next twelve months will remain limited, but with a wider pool of local investors looking for opportunities, those that do become available should be keenly contested for, provided the underlying real estate is sound.
For the last four years, it has been difficult to predict a turnaround in the market, however the past nine months has certainly provided more positive indications that the market has bottomed out and is beginning to move again. We are more confident that this next high season should see increased levels of activity but will wait to see if this translates into sales.
Nonetheless, it remains, for now, a buyer’s-market.
Edward Childs, Director - Smiths Gore
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