- Random thoughts on currency fluctuations and investment
opportunities for Europeans considering the Turks & Caicos real estate market.
I'm Irish by birth, living and working in the Turks & Caicos which has the US
Dollar as its currency. As a result I have a tendency to watch the currency
exchange US Dollar / Euro rates on Bloomberg while I sip my first cup of tea in
the morning and lament the US dollar's extended decline - which doesn't seem likely to
change in the short-term. I have to return to the "auld sod" at some point this
year to touch base with kith and kin and looking at the exchange rate I'm
dreading it. Do you remember early in 2002 when the exchange rate was €1.165 or
£0.70 to US$1.00? Its now €0.78 / £0.53 to US$1.00. Other currencies from the
Bermudian Dollar to the Nicaraguan Cordoba have seen declines similar to the US
Dollar against the Euro and Pound. While this will put a damper on my
shopping when I am back in Eire, it does create interesting possibilities for
European investors looking to snap up a place in the sun as an investment, a
second home or retirement pad, so I thought I would put quill to parchment, so
to speak, and record my thoughts on the matter.
Which country?
The $64,000 question is where should you invest your Euros and Pounds if you
want to get a place on this side of the Atlantic?
About 2 years ago a nice young American fellow I knew decided that starting a
business in the Turks & Caicos would be too much of a hard slog. He sold his
truck, packed up his belongings and fiancé and moved to a family investment
property in the jungles of Belize. It turns out that the property was a hut
without indoor plumbing on an impressive stretch of land which I expect was
bought for a song. He affectionately called it the "Love Cabana". Fair play to
them, he and his prospective better half stuck it out bravely for about 6
months. But it was hard to keep the fires of love burning with monkeys jumping
up and down on the roof all night long. Some sort of territorial instinct
apparently drove the monkeys to pelt them with whatever came to hand whenever they ventured outside to bathe. To cut a long and
somewhat earthy storey short the fiancé left him for the mod-cons of the Big
Apple and he eventually followed suit, but Cupid's arrow was by then
irretrievably lost in the back woods of Belize. If there's a point to this it's
that you're often better off buying the best quality real estate product that
you can afford rather than going the other route. You only live once as they
say, so you might as well live as well as you can.
I have visited the Dominican Republic on various occasions, its just a short hop
on a small plane. Construction costs are comparatively cheap and the
craftsmanship and quality of materials are good so I have always kept an eye out
for "the deal", but I was never moved to buy property there. When I wasn't
dodging noisy mopeds I found myself trying, unsuccessfully, to evade
street-hawkers who I have learned can spot an Irish lass at 600 yards and efficiently cut
off all escape routes - "No, no hablo Espanol… no I
don't want to buy a Haitian painting … here, have a few pesos and leave me
alone" (for the record the last bit is a bad move). I personally have misgivings
about buying real estate where I can't read and understand the terms of the
contract for myself, which rules the Gulf Coast of Central America in one fell
swoop. I know I would fair better if I learned the language, but the prospect is
daunting.
Bermuda has always appealed to me, at least its English speaking. Perhaps it's
the fact that they get enough rainfall to make me feel homesick - though no
self-respecting Irish lad would be caught dead in shorts and knee socks. In any
event, I can't afford the price of a small damp cottage outside Hamilton or
anything else that I would regard as possibly habitable with investment
potential.
Cayman is similar in many respects to the Turks & Caicos but it has a tendency
to be walloped unmercifully by passing hurricanes. I am told that when foreign
developers first started buying up beachfront on Seven Mile beach it was
something of a joke among local vendors who happily retreated, cash-in-hand, to
higher, dryer ground. For whatever reason (and many have been cited) the Turks & Caicos
seems to be spared the worst of the hurricanes that pass through the region.
Long may that last. A friend of ours who moved from Grand Turk to Grand Cayman
in 2000 to work with a company incorporation outfit managed to get a last minute
flight out before Ivan hit and has not yet seen a reason to return. Another
feature of Grand Cayman which I would have difficulties with is the
bumper-to-bumper traffic which has to pass right through the downtown tourist
area of Seven Mile Beach. I wish Cayman all the best and have no doubt that it
will come back bigger and better than ever, but at the moment it's hard to get a
clear sense of how the rebuilding process is going.
Dominica has (large) snakes which I can do without. I always thought St. Paddy
must have been a great man altogether for taking it upon himself to drive them
out of Ireland. I often wonder whether he was asked to do it by someone who felt
like I do about snakes, or if he just saw the need to do the right thing and
took the initiative. In any event, neither Dominica nor Puerto Rico have what I
would regard as white sandy beaches, which is central to my concept of a
Caribbean lifestyle, although I must confess that I'm more inclined to admire a
nice beach from a safe and respectable distance than actually to walk it or lie
on it.
Jamaica and the Bahamas have a bad rep for crime (but I gather from Jamaicans
working here that its not as bad in Jamaica as it is made out to be -
particularly for tourists who tend to be left out of the squabbles).
Leaving aside my obvious personal bias and my inclination to distance myself
from serpents and gun-fire I firmly believe that from an investment perspective,
real estate in the Turks & Caicos is a solid choice. It's cheaper than Bermuda,
Cayman and BVI but it's developing as a very high-end tourist destination, which
is the driving factor behind real estate price appreciation. There's an shared
view among many with broader investment experience than me, that because the
Turks & Caicos has a fresher product and better beaches than Cayman the "real
estate" tables will likely turn in 5 to 10 years with the Turks & Caicos leading
the island nations of the Caribbean Basin (and the North Atlantic) in terms of
pricing.
What type of investment should you consider in the Turks & Caicos?
From an investor's perspective the first point worth noting is that undeveloped
land prices here have been on an unmitigated tear for the past 5 years - so much
so that investors have increasingly (and quite rightly) been looking at other
areas of the local real estate market for the next investment opportunities.
First it was beachfront on North Caicos, which is getting its own port and has a
number of developments on stream. More recently interest has extended to Middle
Caicos with the possibility of a fly-over bridge linking it to North. Commercial
land on Providenciales has also had a good run with second tier undeveloped
properties in the Grace Bay area now fetching prices equivalent to beachfront
prices 5 years ago. After 10 years in the doldrums Grand Turk real estate began
an impressive gallop of its own as a result of the new Carnival Cruise Port
development.
So the second question - the Sixty Four Thousand and One Dollar question - is
what makes the most sense for a prospective European real estate investor
looking at the Turks & Caicos in 2006? There's no sure-fire answer but one
possibility which is right under everyone's nose and which I find increasingly
interesting is the condo market right in the center of Grace Bay beach, where it
all began. After all, while condos have proven to be solid investments over the
past five years they haven't doubled or tripled in price (yet) unlike
undeveloped oceanfront land in certain areas, so the best investment returns may
be yet to come.
Condos are also a comparatively hassle-free way for non-resident investors to
own developed real estate in the islands. You don't have to line up tradesmen to
help you with plumbing, electrical and other routine emergencies that crop up in
any privately owned building and unlike a hut in the jungles of Belize you can
invite family and friends to visit your condo on the beach and be assured that
they will enjoy a fair degree of pampering with a blessed absence of monkeys.
You may ask why I single out Grace Bay when it's already the heart of the
tourism industry here with prices comparably higher than elsewhere in the
islands. My answer to that is that Grace Bay beach will logically continue to be
the prime location in the Turks & Caicos and will therefore continue to command
a price premium going forward. And right now, it's the place to be. In Cayman,
which is 10 years ahead of us in development terms, Seven Mile beach real estate
continues to be a leader in price appreciation. I am confident (if not certain)
that condos on Grace Bay will continue to outperform the rest of the condo
market here. You can buy a beachfront condo elsewhere for a little bit less but
it is not the same thing.
The reasons why I believe Grace Bay resort/condo real estate will continue lead
the condo market in price appreciation are too many to list in this article but
include the following:-
-
Grace Bay beach is consistently rated in the world's top-10
by Condé Nast) - there is no other comparable stretch of beach in the islands
suitable for condo development;
-
All of the prime undeveloped sites along Grace Bay have
been purchased by developers at this point and at increasingly higher prices,
meaning that newer developments will be priced higher creating a floor price
for condos in existing developments;
-
The Grace Bay area has the best known high quality
developments (The Palms, The Sands, the Somerset, Grace Bay Club, The
Renaissance, etc.); the benefit of 10 years of attendant marketing and
promotion; and is convenient to Providenciales' international airport - which is
the main port of entry into the islands with direct flights from various
cities in the US, Canada (and now London Heathrow);
-
Proximity to and availability of private medical
practitioner services and facilities, banking / financial services and other
basic services that you take for granted back home;
-
Proximity to general amenities - a choice of several
supermarkets, brand name boutiques, shops, restaurants, cafes and bars.
-
The majority of tourists (who are the principal buyers of
condominiums) visiting the Turks & Caicos Islands still stay in the condo
resorts and hotels along Grace Bay. Most of those don't venture out of the
area except possibly to hop on the Gecko buses for outings to specific
locations marked on the tourist map around the island. Grace Bay is where the
buyers are and it is what the buyers see.
These factors coupled with steadily increasing demand
indicate that current condo pricing on Grace Bay beach is built on a solid
foundation and is a relatively safe bet for price appreciation going forward.
There are now preconstruction condominiums offerings on outer islands that have
pricing comparable to what is offered on Grace Bay. Leaving aside the absolutely
valid consideration of personal preference and the desire to forge a new path,
Grace Bay is likely to be the better investment.
Existing Beachfront Condos on Grace Bay beach
Let's consider some figures in the context of currency fluctuations. If you
visited the islands in early 2002 and converted Euros to US$ in order to
purchase a US$1 million condominium in a development on Grace Bay beach it would
have cost you €1,165,000. That is €385,000 more than you would pay today if you
could find the same unit at the same price today (which you can't). However, if
you cross reference pricing on Grace Bay beachfront condominiums listed in 2002
with pricing on currently available units it's still possible to identify some
condominiums listed in high-end resorts and residential condo developments where
a purchaser buying with Euros today is actually paying less than he would have 4
years ago - yes, prices have gone up, but not always enough to counterbalance
the huge swing in the US$ / Euro exchange rate over that period. Its like having a second chance.
Is preconstruction still the way to go?
The answer to this is a definite maybe. Investment returns on preconstruction
condominiums in the Turks & Caicos have historically proven to be better
than on existing condos. Purchasers benefit from staggered payment
schedules allowing them to lock in the price on condos that are more luxurious
than they could afford if they had to pay the full price on a 30 day closing,
and financing charges are avoided.
Preconstruction condos may well continue to outperform as investments going
forward but the complicating factor which needs to be considered is that
developers have raised preconstruction pricing significantly over the past 3
years - from around the $400 per square foot to upwards of US$800 per square
foot on higher floors of some of the ultra-luxury offerings. Do bear in mind
that the trend has been for each successive development to be more lavish than
the last which accounts for some of that increase. Nevertheless, if investment
is the primary objective you need to look closely at comparable pricing to
ensure that you are not paying over the odds for what you get.
So, name a strong preconstruction option offered at a discount
The Seven Stars Resort is the possibly the best current example. It's the 800lb
gorilla of the Providenciales development scene with a financially strong
developer and advertising everywhere you turn. The completed development will be
the largest luxury resort on Grace Bay beach comprising seven 7 storey buildings
built in three phases on a sprawling site with full resort amenities. The
development is located in the most developed area of Grace Bay (on what was
formerly the Allegro hotel site) directly in front of the T-junction of Grace
Bay Road and Dolphin Avenue which connects Grace Bay to Provo's main road (the
Leeward Highway). You have restaurants, cafes, bars and quality shopping all
just steps away. The Seven Stars the first thing that you see when you drive
into Grace Bay and will quite literally be the gateway to the area setting the
tone for everything around it. It is a simple geographical fact that the Seven
Stars' advantageous location and scale can't be duplicated or equaled.
The first phase of the Seven Stars, comprising of 3 buildings named Alhena, Maia,
and Alya respectively, is well underway, with Alhena and Maia now up to ring
beam level. From an investor's point of view resales in this phase are "far and
away" the best option at the moment. Some of the resale listings currently on
our books in the first phase are set out below with pricing comparisons to the
2nd phase currently available through the developer (note: floorplans for the
second phase are different so I have focused on price per square foot and floor
levels to draw a clearer picture):
********* Note:
Prices have changed since this article was posted - please contact us for up to
date availability and pricing comparables *********
-
Alya C-300 | 3rd floor - 3bd/3.5bth | 2,672 sq. ft. Listed
Price: US$1,750,000 (or US$654.90 per square foot).
Equivalent 3rd Floor Pricing in the second phase on the west side of the
Meissa Building is $745 per square foot which would equate to a listed price
of US$1,990,640. In other words, the purchaser of this listing stands to save
US$240,640 over comparable unit pricing in the second phase on a per square
foot basis.
(Not surprisingly this unit sold in July)
-
Alya C-200 | 2nd floor | 3bd/3.5bth | 2,672 sq. ft. Listed
Price: US$1.7 mil. (or US$636 per square foot).
Equivalent 2nd floor pricing in 2nd phase west side of Meissa Building is
US$719 psf equating to a list price of US$1,921,168 meaning that the purchaser
of this unit will save $221,168 over a comparable unit in the second phase
based on the per square foot pricing.
-
Alya C-100 | 1st floor | 3bd/3.5bth - 3,372 sq. ft. Listed
Price: US$1,65 mil. (or $489 per square foot). The point to note in relation
to ground floor units in the Seven Stars is that because there is underground
parking these units are actually elevated about 10 feet from ground level
giving a surprising degree of separation and privacy.
Equivalent 1st floor pricing in 2nd phase west side of Meissa Building is
US$603.62 per square foot which would equate to US$2,035,406 for a unit this
size. That means savings of an incredible $385,406 over comparable unit
pricing in the second phase on a per square foot basis making this condo the
single best investment prospect in the development on a per square foot basis.
-
Alhena A200 | 2nd floor - 3bd/3.5bth | 2,672 sq. ft. Listed
Price: US$1,650,000 (or US$617.51 per square foot).
Equivalent 2nd floor pricing in 2nd phase west side of Meissa Building is
US$719 per square foot which would work out at US$1,921,168. On that basis the
purchaser of this unit would save $271,168 over comparable unit pricing in the
second phase.
-
Alhena A205 | 2nd floor | 3bd/3.5bth | 2,672 sq. ft. Listed
Price: US$1,600,000 (or US$598 per square foot). This listing is a personal
favourite of mine, located on the preferred eastern side of the building,
benefiting from the prevailing breeze and having views of the entire sweep of
the Grace Bay coastline to the east.
Equivalent 2nd floor pricing in 2nd phase east side of Meissa Building is
US$726 per square foot which would equate to US$1,939,872. That means the
purchaser of A 205 stands to save $339,872 over comparable unit pricing on a
per square foot basis.
********* Note:
Details have changed since this article was posted - please contact us for up
to date availability and pricing comparables ********* As a real estate agent/broker it's my job to identify
investments that make "good horse-sense" where buyers can feel confident they
have made a sound decision on various levels. I have a number of ideas at any
given time - but none at this particular moment which are quite as
straightforward and delightfully up-market as an investor simply finding a
comparative deal on a luxury condo "schlap-bang" in the middle of Grace Bay
beach and paying for it with Euros or British Pounds.
Bernadette Hunt
TURKS & CAICOS PROPERTY, LTD.
© June 2006
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