2016 has been an unpredictable and unexpected year on the world stage and here in the BVI we have seen an equally unexpected shift in the real estate market. After some years of drought in this market segment, several long term expat residents, typically working in the financial services industry, have recently traded up from their rented accommodations and purchased homes of their own. This has raised some very interesting questions, the answers to which have forced us to re-evaluate our own marketing strategy. Why, after sometimes upwards of ten years of contented renting, have these members of the professional community finally decided to buy property? Have they been swayed by new opportunities in real estate? Or is there something else going on?
To rent or not to rent, that is the question
Renting is a great way to start out in the BVI. It makes sense to explore life in the islands without tying yourself down to a mortgage in an area that you may find does not suit your lifestyle. Rental accommodation is plentiful and boosts the local economy. But there comes a point when paying a big rent no longer makes sense. Many expats continue renting for several years and never buy property. Why is that?
Part of the answer undoubtedly is the common misconception that buying property in the BVI is a difficult process.
There are anti speculation safeguards in place under BVI law to ensure that property is not bought and sold purely to turn a quick profit - that does little or nothing to benefit the BVI. A Non-Belonger’s Land Holding License must be sought from the Government before a purchase of land or a home can be finalised. Whilst a little patience may be required, this process is relatively straightforward and a good real estate agent will work with a lawyer, experienced in BVI real estate to hold your hand through each step.
The strongest objection to buying property in the BVI made by the expat resident audience, is the lack of liquidity in the market. Should their circumstances change and they need to leave the Territory, they fear being stuck with a large mortgage and cash being tied up for an unrealistic length of time. No certain path to residency or belongership in the long term, means the future is more uncertain for the expat audience than it might otherwise be. However, as in any other real estate market, if you ‘buy right’ – right price, right location, right accommodation and design – and your expectations about resale value and timing are properly thought through, it is possible to manage the risks. Again, a professional Real Estate Agent can advise.
One of the benefits of the licensing process is that it helps to take the ‘boom and bust’ out of the real estate market in the BVI. Prices generally over the years have been reasonably steady and, other than in some exceptional circumstances, relate to the value of land and the cost of construction. So, whilst it might not be the most liquid real estate market, its not inherently risky either.
12% stamp duty and the amount of upfront cash required to close on a home in the BVI is clearly a stumbling block for some. 12% stamp duty for Non-belongers is a tough nut to swallow. But this is somewhat offset in the long run by a relatively low annual property tax rate, which are certainly much lower than the rates incurred at home by many of our US buyers. By way of comparison, stamp duty charges in St Kitts & Nevis can climb to as much as 18.5%.
In addition, the purchase of a BVI home can of course be leveraged by taking out a personal mortgage with one of the 6 Banks in the BVI. VP Bank, for example, specialises in mortgages for both expats as well as local buyers, and can for example provide 20 year terms with leverage on your home for up to 70%. This would reduce the initial cash contribution and would allow for monthly repayments that may be close to your current rent payments.
Talk to the right BVI lawyer about the process of applying for permission to rent your home, should you need to leave the island. In that instance, there are plenty of professionally operated property management companies that can take care of your property whilst you are away. Whilst there should be no great expectation about turning a large profit from such rental activity, you should at least be able to offset some of the costs of ownership whilst you wait for your home to sell or perhaps continue to enjoy for holiday visits to the BVI?
Perceived complexity, upfront cash required and long term uncertainty are nothing new to the BVI real estate market. Nothing has changed dramatically in the market place. But what we have seemingly seen, is a shift in the thinking of expat resident buyers. Why now, particularly when the BVI finance industry is adjusting to changing global dynamics?
Being a long term expat is a peculiar thing. Gone are the days of multi-national corporations posting their staff overseas with big, lucrative relocation packages to match. Today’s expat is just as likely to have decided on a change of lifestyle and that the BVI is the ideal place to enjoy a better quality of life, better weather, a shorter commute and more time to enjoy leisure pursuits and/or the family. The longer they live away from their “home country” a feeling of displacement sets in. Returning to their home country will never be the same after living a different life for so long. So with such a feeling of displacement, increasingly more expats are choosing to make the BVI their permanent home by owning a property. Whether it is a new build or renovation of an existing property, owning a home helps put down roots and build relationships within the community. Talk to the majority of expat professionals who have bought a home here and you will likely find that most feel more at home and very few, if any, regret that decision.
There has been much discussion in the past year on the subject of “Third Culture Kids”, children who have grown up in countries that are not the birth country of their parents. Owning a home is an anchor to a particular country and helps to give these children a sense of belonging, somewhere to return to from boarding school and somewhere to call home. If you took a playground poll of expat youngsters growing up here in the territory and asked them which country they came from, you can be guaranteed that the majority would say the BVI. Another good reason for some expats to create a more permanent home base in the BVI perhaps?
So maybe it is a decision of the heart rather than the head that triggers the decision to buy. But in the long run, might not the head concede that the heart made the sensible choice? And with uncertain times for Europe and a controversial new US President, it remains to be seen if there will be an increased flow of people seeking a permanent home in a stable, peaceful, sunny location. But we suspect that will be the case. At Coldwell Banker BVI, we have a selection of properties to suit all budgets and the expertise to guide you through the buying process. Make 2017 the year that you finally put down roots in our beautiful islands.