CZP Article

Providenciales, the Manhattan of the Caribbean.

Just a year ago, as real estate brokers throughout the USA fretted through an ominously quiet third quarter, many Manhattanies waited for the housing market to reverse its madcap ascent and fall into line with the rest of the country.

The first quarter of 2007 echoed a similar voice in the minds of Providenciales’ real estate specialists. Was Turks & Caicos about to plunge into a “correction”? In order to answer this questions, we must ask ourselves:

Are we a reflection of the US national levels or is Providenciales the Manhattan of the Caribbean?

According to Teri Rogers, a New York Times journalist, “something happened on the way to the Great Manhattan Housing Slump. After what brokers optimistically termed a “pause” in the second half of 2006, buyers swarmed into the market. The torrent was so intense that by the end of this past June, it was clear that an astonishing gulf had opened up between Manhattan and nearly everywhere else.”

Where national levels experienced slumps in sales and swells in inventory, in Manhattan sales of new and existing apartments more than doubled.

In the second quarter of 2007, Miller Samuel Inc, a New York appraisal company said the average sale price of a Manhattan studio climbed 16.5 percent compared with the second quarter of 2005. The average for a one-bedroom climbed by 18.4 percent and a two-bedroom by 5.9 percent. Apartments with three bedrooms, which make up about 6 percent of the market but appeal to an ever-more-moneyed class of buyers, rose by 17.9 percent in the same period.

Similarly, while some of the purely speculative sparkle has faded from the Turks & Caicos market, sales momentum picked up with a remarkable surge in activity in the second quarter, bringing this year’s gross numbers in line with 2006 performance. . 2007 has seen over $100 Million in hard sales and another approximate $100 Million in reservation activity in the first two quarters of 2007 in the resort and condominium market.

The current sales momentum of 2007 can be attributed to a return of the end-user market, following on a trend that was visibly emerging in 2006. Though the number of transactions per year is down from 2005 levels, the average transaction price in 2007 is over 50% above 2005 average prices ($1.2 Million and $499 per square foot average in 2005 to $1.7 Million and  $700 per square foot average in 2007), more than compensating for a decrease in the amount of transactions. Condominium prices have reached new heights with price points over $8 Million on Grace Bay and private villa price points exceeding $11 Million at select managed properties.

Major brokerages in New York, including Halstead Property, Bellmarc Realty, Brown Harris Stevens, Prudential Douglas Elliman and the Corcoran Group, say they are recording sales and profits that rival boom-time results. In fact, Douglas Elliman and Corcoran predict that this will be their most lucrative year by far.

So how has Manhattan and, to a similar extent, Turks & Caicos managed to avoid a slump?

“Obviously, the market was helped first by the rumor and the reality of bonus money,” said Frederick W. Peters, president of Warburg Realty, one of New York’s top brokerages since 1856. He was referring to the fourth straight year of substantial bonus increases, particularly on Wall Street, that along with a rising stock market helped push buyers off the sidelines at the end of 2006.

When it comes to the Turks & Caicos Islands, there are other factors to consider, too. Tourism is at record high and the local economy is doing well in general.

In addition, by offering property attributes that were previously unavailable in this jurisdiction or even in the wider Caribbean, some of the most successful condo-resort properties have truly created their own demand. This end-user market is seeking out the very best of everything including location, quality, service and amenities either within existing properties with successful track record, or the most compelling new developments.

As a result, the TCI market continues to be dominated by a few prize existing properties (Amanyara, Villas at Grace Bay Club and The Regent Palms) and impressive newly launched properties (including Dellis Cay Mandarin Oriental Residences, and less recently The Estate at Grace Bay Club, Ritz Carlton Molasses Reef, & Seven Stars).

Buyers have proven they are willing to pay a significant premium to buy in to stabilized operating environments (Amanyara, The Villas at Grace Bay Club, The Regent Palms) contributing to a 37% increase in re-sale volume from 2006 levels with purchasers seeking immediate gratification and less risk. While the prospect of short term financial gains is not of as great importance to end users as it is to speculators, the purchase needs to make financial sense and represent a hassle free opportunity on both financial and practical levels nonetheless. Given that existing re-sale opportunities at prime properties can be limited in availability and command premium pricing, buyers are also seduced by opportunities within newly launched offerings with compelling promises of excellent service and quality that still afford them more relaxed payment schedules (construction progress payments), better selection and more favorable pricing.

In summary, the Turks & Caicos’ resort and real estate market is becoming as much about creating demand with highly unique, upscale properties with international reach, as it is about capturing demand with the more broad based Grace Bay type condominium projects. Purchasing a vacation property (and often third or fourth home) is clearly a buyer’s choice, not a necessity. And so, the most compelling properties (that speak to improved lifestyle) are usually the ones that do best for investment.

Developers and brokers alike remain believers themselves, overall positive on the long-term outlook of the real estate market. The Turks & Caicos Islands, in a similar way to Manhattan is being revealed as the one skillfully positioned to thrive in this increasingly discriminating and dynamic real estate landscape.       

Tina Lyra Stevens
published October 2007
Real Life magazine