Adapting To The Future | The Outlook For Real Estate 2017 Part II

BVI Villa Market Report and Development Summary

Returning to our annual review of the BVI villa market, analyzing the sale of villas over $500,000, we have updated the statistics to include leasehold sales since 2003, which has made a small adjustment to the total number of annual sales.

Chart 3 shows that the annual number of villa sales peaked in 2008 and in subsequent years reflect the uncertainties of the market after the financial crisis. While the market did show some evidence of recovery by 2013 and 2014, this was not sustained in 2015, when total sales fell to sixteen, compared to thirty-five in 2008. The first half of 2016 shows a small improvement over the same half year period in 2015, and encouragingly, there has been more emphasis on higher end villa sales, as shown by the increase in the median home sale price.

The majority of villas currently on the market in the BVI are priced between $1.0M and $3.0M. Therefore, when only two sales occurred in this price bracket in 2015, compared to twelve sales under $1.0M in the same year, it does raise concerns about the fragility of any recovery in the market. However, as shown in Chart 4, the sales figures for the first six months of 2016 struck a brighter note with four sales between $1.0M and $3.0M and two over $3.0M. This improvement is also reflected in total sales volume, which increased from $7,011,710 during the first half of 2015 to $16,317,000 in the first half of 2016. The half year median sale value also increased, from $665,000 in 2015 to $1.9M in 2016.

These statistics are encouraging for the many overseas home owners in the BVI who have struggled to sell in recent years. While this does not necessarily reflect a substantial change in the fortunes of the real estate market (bearing in mind that there were only eight closed sales between January and June 2016), it is at least a move in the right direction. The sales statistics for the third quarter of 2016, indicate that the number of villa sales closing in the latter half of 2016 could show further improvement, with nine additional sales closing in the third quarter of 2016.

Chart 5 shows the division of sales between Belongers and Non-Belongers. The standout feature of this chart is that Belongers have consistently remained in the market when overseas investors have fallen away as market conditions deteriorate, particularly between 2009 and 2012. Whereas prior to 2009 the market was dominated by overseas investors, now the market is spread more evenly between Belonger and Non-Belonger purchasers. However, out of the total of 81 sales to Belongers since 2003, 83% of the properties were priced below $1.0M and none of the sales was above $1.65M. This data clearly defines the Belonger market as being in the main below $1.0M. While we do not have the data to support any conclusions as to why these properties have been acquired, we do know that there is an active investment market by Belongers looking to acquire property to rent and hold as a long term property investment. This was particularly evident from the sales of the Nanny Cay town home development at Drakes Village, where over half of the purchasers were local investors.

Since 2013, we have collected data on the number of properties over $500,000 on the market in September each year, with Table 1 showing the total listings by price band between 2013 and 2016.

The data indicates that the number of properties listed for sale in the BVI is relatively stable. Over 50% of the listings fall within the $1.0 - $3.0M price bracket with almost a third of listings under $1.0M and only 15% over $3.0M. This indicates that the greatest competition between vendors will be in the $1.0 - $3.0M price bracket which, as noted above, had just two recorded sales in 2015 increasing to four sales in the first six months of 2016.

Tables 2 and 3 show the change in pricing for villas that were listed both in September 2015 and September 2016. The price of the majority of villas (71%) remained unchanged while 27% reduced their price over the course of the year. Table 3 shows how the total volume and average listing price changed between September 2015 and September 2016. There was a small increase in total volume of listings and a modest 4% fall in the average listing price, from $2.0M to $1.9M.

Overall, the data indicates that the majority of vendors have stuck with their pricing over the course of the last year despite the slow pace of sale transactions, compared to the total inventory of villas on the market. Less than a third of vendors reacted to market conditions by reducing the asking price of their home.

We have analyzed 30 selected sales over $1.0M on Virgin Gorda and Tortola, comparing the original listing prices with the sales price achieved. This analysis also allows us to compare the markets of Tortola and Virgin Gorda, which are distinct from each other.

Table 4 provides an analysis of villa sales by year, showing the average difference between the listing price and the sale price. The table also shows the average time properties sold in each year spent on the market. While the difference between listing and sale price ranges between 14% (2013) and 39% (2015), it is the average length of time on the market which is interesting. The data suggests that in the years immediately following the financial crisis (post 2008), vendors became more realistic with their pricing and were therefore able to achieve sales in a shorter period of time at a more modest differential between listing and sale price. More recently, there have been a number of sales of villas which have been on the market for longer, where the vendors had to settle for a larger reduction between their original listing and eventual sale price. Most of these transactions were villas priced above $3.0M.

Table 5 shows the difference between the villa markets on Virgin Gorda and Tortola. On Virgin Gorda the average listing price is 34% higher and the average sale price 57% higher than on Tortola. Furthermore, the average sale price achieved for homes on Tortola was 32% less than the listing price compared to 20% less on Virgin Gorda. This data is consistent with the image each island presents to the market, with Virgin Gorda being seen as a holiday destination while Tortola remains a mixture of holiday villas and homes for residents involved in local businesses, particularly the financial sector.

Reviewing the development pipeline in the BVI, the majority of new development is occurring in North Sound, with the build out of Moskito Island and Oil Nut Bay. On Tortola the largest single development is the expansion of Nanny Cay. In the outer islands, Peter Island Resort is going through a renovation of the common areas and Cooper Island Beach Club is finishing off its extensive renovations, undertaken by the owners, following acquisition in 2009.

North Sound remains a unique luxury resort residential market, not just in the BVI, but in the wider Caribbean. The early years of development at Moskito Island and Oil Nut Bay, where infrastructure works and development of common areas took precedence, have given way to substantial villa development by end purchasers. Oil Nut Bay now has 13 completed villas and suites, with a further ten under construction, four of which will be completed by the end of 2016. A further three villas are scheduled to commence construction in the first quarter of 2017. Moskito Island has completed most of the common area infrastructure, together with the first villa, with additional villas now breaking ground. However, Virgin Gorda, and particularly local residents, felt the impact of the closure of two hotels, Biras Creek Resort and Little Dix Bay Resort, the latter in May 2016 for an extensive renovation programme. Fortunately, the construction activity at Moskito Island and Oil Nut Bay have created alternative employment opportunities for many of the displaced employees. While lots on Moskito Island have sold out, there remains significant inventory at Oil Nut Bay, so construction in both locations should be secure for several more years as the developments mature.

Cooper Island Beach Club has emerged as the BVI’s leading green, boutique resort, thanks to investments in green energy, particularly solar power, with the resort now 85% self-sufficient in energy with savings of over 875,000 lbs of carbon emissions since solar power was installed. Other green initiatives, include extensive recycling, growing fruit and vegetables, waste water treatment to recycle water for the landscaping and even a micro-brewery, which reduces the need to import canned and bottled beers. Following the renovations, the resort has had to upgrade all of its utilities to cope with an expanding operation which includes a brewery, rum bar, ice cream parlour as well as the existing twelve guest rooms, bar and restaurant. A favourite weekend get-away amongst locals, the resort has managed to take an older, well-loved resort and upgrade with new facilities while retaining much of its original charm.

Nanny Cay remains the most significant development on Tortola in the private sector, with an extensive new peninsular and marina under construction, with the first forty berths due to be ready for occupation by the end of 2016. Following a successful development of 32 town homes, now all sold out, Nanny Cay will commence in 2017, a new residential development on the recently created peninsula with the first phase comprising two blocks, each of six 3 and 4 bedroom apartments plus penthouse. While pricing has yet to be announced, the water front location and larger sized units will mean that pricing will likely commence around $1.375M, with an option to acquire a berth in the adjacent marina. In addition to the residential units and marina, Nanny Cay will be developing a new commercial area to add much needed facilities to the development to serve an expanding permanent residential community. With the development of these additional facilities, Nanny Cay will become one of the leading marina residential developments in the Caribbean.

In the public sector, the opening of the Tortola Pier Park, a retail and office development adjacent to the expanded cruise ship pier, provides a new location for tourists and locals alike to shop. Comprising 77,000 sq ft of mixed-use space, the development has just 3,500 sq ft remaining to lease. The successful lease up of the space in the months prior to and after the official opening in February 2016, is an indication of the importance of this development to many new businesses established by Virgin Islanders to cater to both the cruise ship and land based market. One further building remains to be constructed, which is scheduled to be a Margaritaville branded restaurant and hotel. This building is expected to commence construction during 2017 and should provide the development with a major anchor tenant to attract additional business.

To read the first part in this series, click here.

Last modified onWednesday, 22 March 2017 16:00

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