With the economy struggling to see growth and an oversupply of properties whose prices do not match current market conditions, the real estate sector could take a further nosedive over the next 12 months.
Chief Operating Officer of Terra Caribbean Hayden Hutton gave the dim projection recently, as he pointed out that the number of properties to be sold over the next 12 months would depend heavily on a change in pricing.
“The prospects for market growth in the next 12 months are distant and minimum on the other side of the 2018 elections,” said Hutton in his latest assessment of the local real estate market in the Terra Caribbean Red Book.
He said two areas to watch would be the value of the British pound against the US dollar and local economic growth, which he acknowledged was well below two per cent.
Earlier this month, Governor of the Central Bank Cleviston Haynes delivered a less than favourable report for the first quarter of this year, noting that the economy contracted by 0.7 per cent, while forecasting growth between -0.25 per cent and 0.25 per cent this year.
In his outlook for the real estate market this year, Hutton said “in any event, with growth unlikely in 2018 and inventory in oversupply, price is key in the new market”.
“Those vendors with properties sitting on the market for protracted periods would be well served to mark the prices to market or to get comfortable for the long haul,” he warned.
According to Hutton there was a decline of 0.1 per cent in real estate sales volume last year resulting in Barbados recording its lowest sales volume in 25 years.
Hutton said with volume flat and most of the market still in oversupply, “the elephant in the market continues to be price”.
He said a substantial segment of the market had “grudgingly re-priced” adding that this was where some movement was taking place.
“The re-pricing effort has been driven in part by lending institutions marketing and selling distressed properties at scale,” he said, adding that the re-pricing was taking place at all levels of the market.
However, he said, “those vendors that continue their romance with the old market – and there are many – are finding their properties sitting for protracted exposure periods”.
According to data, 50 per cent of the properties sold were listed on the market for 12 months or less, 72 per cent for 24 months or less and approximately 90 per cent for 36 months or less.
“This is noticeable when one considers the staggering volume of inventory which has been sitting on the market in excess of five years and in some cases for 10 years or more,” he said.
“Notable is the fact that those properties listed for 36 months at the point of sale, generally had the highest number of recorded price reductions over the exposure period. The punchline for sellers with properties listed in excess of 36 months is they have likely carried their property unnecessarily and followed the market down,” Hutton said, explaining that the majority of residential properties were yielding marginal returns, and negative in the case of many luxury villas, and this hardly warranted holding a property for a “longer than necessary” period.
“With the considerable amount of inventory on the market,” he said, “perhaps it’s time for vendors to join together in universal acceptance that the old market is gone and the new market is here to stay, at least for the foreseeable future”.
“There is certainly one group of market participants that is very much aware of the new market, and that is the buyers,” he warned.
When it came to property rental, Christ Church and St James remained the most popular parishes, accounting for 53 per cent and 36 per cent of all rentals respectively.
According to Terra, apartments were the most commonly rented property type, accounting for about 47 per cent of rentals in the past three years. The most common size house rented during the period were three bedroom houses, with about 76 per cent of them carrying a price tag between $2,500 to $5,000.