The real estate market here is facing some significant headwinds, with the local/middle income segment recording a decline of about 40 per cent in transactions over the past ten years despite a weakening in property value.
In addition, Chief Operating Officer of Terra Caribbean Hayden Hutton said the value of the luxury/foreign segment also declined and was unlikely to register any real growth over the next 12 months.
Notwithstanding a peak in demand for mortgages last year and local property sales between 2009 and 2010, Terra Caribbean said local property transactions fell from an average of about 4,250 per year in 2007 to just below 2,500 in 2016.
Addressing a media conference Wednesday to officially launch Terra Caribbean’s The Red Book 2017 which contains data on the real estate market, Hutton said of the five categories in the domestic segment – beachfront villa, beachfront apartment, beachfront land, local villa and local land – only the beachfront apartment and beachfront land registered some increase in value since 2007, up about two per cent and ten per cent, respectively.
The value of beachfront villas fell by 15 per cent, local villas were down by 18 per cent and local land dropped by 16 per cent during the ten-year period under review.
“One of the notable trends in the vacant land segment during the period is the general shift away from larger lots in the 15,000 square foot range to smaller lots in the 7,500 square foot range. This has had a substantial impact on those land developments which contemplated larger lot sizes, with many having to reduce prices substantially to compete,” Hutton said.
“The major headwind facing this market in 2016 continues to be the domestic economic environment. The fact that Standard & Poor’s and Moody’s issued a combined ten downgrades to the Barbados sovereign credit rating over the ten-year period is not insignificant. The decline in trading volume across the broader market during the period is approximately 40 per cent, with an unprecedented number of sales by mortgages being observed in the recent 12 months.”
Hutton said confidence among Barbadians remained low, contributing to low real estate sales in the local segment of the market over the past ten years.
The luxury/foreign market, which is also broken down into five segments – beachfront villa, beachfront apartment, beachfront land, luxury villa and luxury land – also recorded a steep 29 per cent decline in value since 2007, he added.
“The problem is that most of the inventory was built at 2008 prices and those buyers are simply not there,” Hutton said.
With Britons as the primary buyers of property in the luxury/foreign market, the Terra Caribbean executive said the falling value of the sterling was a major challenge, along with “continued oversupply of inventory and a general layer of uncertainty”.
“Broadly picturing both segments, with some exceptions, it is not a rosy one,” he said.
Chief Executive Andrew Mallalieu said the drop in the number of property transactions was the main indicator of how soft the market had been over the past decade.
Population growth and wealth creation were two of the main contributors to property value and transactions, he said.
“So without population growth, which we accept we do not have, and without wealth creation, which we have not had significantly in the last decade, what we are seeing is a stagnation in the local prices of real estate.
“On average since 2007 . . . we have seen a shrinking of the economy, we have seen higher taxation; that is what we have seen. That is on the demand side,” he said, adding that on the supply side the number of available properties outstripped demand.
Mallalieu said one of the most worrying issues was the steep drop in land designated for agriculture, from about 61,000 acres in 1966 to an estimated 32,000 acres in 2016.
Yet, he contended, much of this land was not under cultivation.
“Unfortunately, as all Barbadians know, as you drive around that 32,000 acres are in bush, they are not in actual production . . . . That means there is more land available for residential,” he said.