Demand for Island Properties Is High, With Some Investors Buying Sight Unseen

With the northern hemisphere in the middle of winter and many regions still under pandemic lockdowns, wealthy buyers are more motivated than ever to invest in the Caribbean and other island getaways.

Many of the same islands where these investors vacation have managed to keep Covid-19 transmissions rates low, by locking down early and instituting strict travel restrictions. Now, with offices and schools still operating remotely in many cities, demand is growing from high-net-worth buyers ready to commit to secondary homes in countries with warm climates where life has largely returned to normal.

“We’ve found that because these international high-net-worth individuals were in lockdown, they took the opportunity to look at real estate, and it piqued their interest when they saw Bermuda was managing its numbers,” said Penny MacIntyre of Rego Sotheby’s International Realty in Bermuda. “The WHO [World Health Organization] validated Bermuda as one of the safest places in the world, and they saw it was affording a lifestyle where they could move around and dine in restaurants.”

For many already familiar with such island destinations, that sense of safety has persuaded them to look into second- or third-home purchases. With activity already heightened and pent-up demand building among buyers who cannot travel, getting into the market now—even if that means buying sight unseen—could mean beating the added competition when travel restrictions ease in the future.

“We’ve seen an uptick in purchases since the pandemic, from people looking for an escape from big cities,” said Neal Sroka, founder of Sroka Worldwide, a consulting firm for high-end international real estate. “They do buy without visiting, provided they know the product, so it’s much easier to sell on a branded hotel basis rather than individual homes.”

Some island destinations have seized upon this moment by offering easy pathways to citizenship for investors, or special permits for those working remotely. Bermuda, for instance, has a “digital nomad visa,” a one-year residential certificate for those who want to live in the country while working remotely in another. Barbados recently began offering a similar program, as has the Cayman Islands, drawing a new wave of buyers.

And in St. Kitts and Nevis, a citizenship-by-investment scheme confers citizenship to buyers who make a real estate purchase of $400,000 or more. This has enticed many American buyers, who can use a St. Kitts and Nevis passport as a back door to Europe.

At the ultra-luxury end of the market, brokers for private islands are reporting a flood of inquiries from investors, although transactions remain low.

“The interest is definitely there to find places in isolation but the purchase of these islands is usually delayed until the pandemic is over,” said Farhad Vladi of Vladi Private Islands, which lists islands for sale and rent in the Mediterranean, Caribbean, and around the globe. “There is very little activity on the island market at the moment.”

But those with the knowledge and means to make a purchase now have an edge, as other would-be buyers less familiar with these locations are itching to make a move the moment travel restrictions are loosened.

“We’re seeing a lot of curiosity from people imagining a different kind of life,” said KC Hardin, co-founder of real estate development company Conservatorio in Panama. “People are starting to book trips, with the mindset of, ‘As soon as I get the vaccine, I’m getting out of here.’”

Demand for Island Properties

For many high-end real estate investors, the pandemic has changed their priorities and encouraged them to reconsider their lifestyles.

“If you have the means, owning a second or third home became more of a necessity out of Covid,” Mr. Sroka said. “Now people do believe they need the ability to go somewhere they feel that they’re relatively safe.”

Such buyers typically have vacationed in island destinations in the past and are now committing to longer-term investments. Some are taking advantage of programs like Barbados’ Welcome Stamp visa, a 12-month residency permit for those working for overseas employers, while pursuing permanent residency. This program has already lured nearly 2,000 visa applicants, according to the island’s tourism board.

These schemes, coupled with the familiarity of branded residences, has convinced some to make investments even as travel restrictions prevent them from seeing properties in person.

“A number of people are making offers sight unseen,” said Eric Johnson, sales director at the Four Seasons Nevis. “They’re familiar with Nevis and have seen the homes they’re purchasing. With a branded residence, there’s a lot more confidence, because you know the ownership of the hotel and the strength of the brand.”

Some buyers, on the other hand, are seeking more privacy and individuality from their island purchase, and are willing to invest from overseas.

“We had three circumstances of properties bought sight unseen, and two were standalone homes,” said Buddy Rego of Rego Sotheby’s International Realty in Bermuda. “These are buyers who want to have control of an asset and lots of space. They want to customize the home themselves.”

On the Cayman Islands, brokers are reporting an increase in inquiries, a result of pent-up demand from earlier in the pandemic and the island’s efficient handling of the crisis. Life is essentially back to normal after a strict lockdown in the spring of 2020, but travel restrictions remain in place. Still, this hasn’t stopped overseas investors.

“We had an increase in demand last year, especially at the higher end of the market,” said Jonathan Sparrow of Cayman Islands Sotheby’s International Realty. “Our biggest sale was a modern house on the beach, which was sold for US$5 million without the buyer stepping foot in the house.”

In fact, the Caymans saw a 4.3% increase in total sales volume in 2020, with the value of the average transaction increasing by over 26% compared to 2019. Turks and Caicos experienced an increase in sales activity in its luxury condo sector in 2020, while St. Kitts and Nevis got a bump in luxury sales thanks to the Four Seasons villa collection closing a number of transactions last year.

What Buyers Need to Know

Buyers who act soon may find that their secondary homes in the Caribbean prove to be good investments, once tourism starts up again.

“As a pure investment, the numbers are very attractive, because most of these properties can end up in a rental pool,” Mr. Sroka said. “Based on what we’re seeing because of demand, those numbers could end up really high.”

But given the uncertainty of when these island nations will reopen, Mr. Sroka advised that buyers should be motivated primarily by the desire to enhance their lifestyle and invest in properties they will actually use.

Those with an eye on investment should educate themselves on the economic conditions of their preferred destinations, in addition to their rental prospects. Travel can be disrupted, so buyers may want to seek out island destinations that aren’t as heavily dependent on tourism dollars.

“The biggest difference between Cayman and other islands is that we don’t have a sole reliance on tourism,” Mr. Sparrow said. “We are a financial center, and trillions of dollars flow through related to the hedge-fund industry.”

Other factors they should consider is the ease of travel to these destinations—whether there are direct flights, for instance, and proximity of their investment property to airports. For those planning to work remotely from the Caribbean, look into the island’s broadband coverage, and consider the weather, as some regions are more impacted by hurricane season than others.

“People who are looking should consider whether they want to be in a branded residence or a townhome, and how often they’re going to be here,” Ms. MacIntyre said. “Definitely work with an agent who can help identify options and the parts of the island that would suit them best.” 

Be prepared, too, for competition, and potentially to jump through specific hoops when making a purchase as a foreigner.

In St. Kitts and Nevis, for instance, “Most transactions are all cash, and there is a vetting process [for foreign buyers],” Mr. Johnson said. “But once you go through that, you’ll be able to close on a transaction very quickly.”

Article Source: Mansion Global