A large percentage of the Caribbean luxury market relates to property/real estate development and investment — and growth in this sector continues to increase and really bounce back after the 2008 financial crisis. This increase in demand for luxury homes in the Caribbean is in line with the number of ultra high net worth (UHNW) individuals who live in the region.
According to Wealth-X a global wealth intelligence firm who published the Caribbean Wealth & Investment Report 2015 today, there are over 1,155 ultra high net worth individuals living in the Caribbean which represents a 2.1% growth over previous year. This exclusive club of ultra high net worth individuals includes only those with a minimum of US$30 million in assets and 67% relocated from 31 countries with the majority from Canada, the United States, and the United Kingdom. Representing less than 1% of the global ultra high net worth population of 211,275 — these Caribbean based high-flyers have a combined wealth of US$186Billion. The global wealth for ultra high net worth individuals is US$29.7 trillion.
The top 8 Caribbean destinations for these super-rich individuals to set up base and purchase luxury homes include the Dominican Republic (265 UHNW individuals), Puerto Rico (110 UHNW individuals), Bermuda (102 UHNW individuals), Barbados (66 UHNW individuals), Bahamas (45 UHNW individuals), British Virgin Islands (46 UHNW individuals), Cayman Islands (41 UHNW individuals) and Aruba (41 UHNW individuals). The other 449 ultra high net worth individuals are spread across 17 other Caribbean destinations.
While the number of ultra high net worth individuals in the Caribbean is tiny compared to other parts of the globe — there is no denying that the population is growing. As indicated in the report,
“This appeal is rooted in the fact that the Caribbean is extremely well positioned to provide value for ultra high net worth individuals looking to invest in luxury real estate. The region presents a unique opportunity to satisfy the desire for comprehensive value sought by ultra high net worth investors. It offers unique business opportunities together with an unsurpassed recreational lifestyle, all with easy access to global ultra high net worth social and business networks.”
View from the veranda of Palazzate, a 75,000 sq ft luxury beachfront mansion in Barbados.
More specifically contributing to the appeal, the report goes on to indicate that:
1. While Caribbean luxury real estate values remain 10-15% below their 2008 highs, prime sales have increased more than 10% in 2013 and 2014.
2. The Caribbean economy is bouncing back: It grew at 3.6% in 2014 and is forecast to grow at 4.5% throughout the rest 2015, and annually at over 4.0% for the next three years.
3. Several Caribbean destinations have begun offering programs incentivizing property buying, offering residency permits and citizenship.
Also, house prices in the Caribbean offer greater value when compared to other destinations popular with ultra high net worth individuals. As the graphic below indicates, luxury home on average cost US$875 per square foot in Barbados, while in St. Tropez it is US$925. In Honolulu, it is US$933, and in St. Barts it is US$950. Bal Harbor is US$1,400, and Aspen is US$1,900.
For ultra high net worth individual and really anyone looking to purchase a luxury home in the Caribbean, the Wealth-X Caribbean Wealth & Investment Report 2015 offers some great guidance including the need to:
1. Consider the tax implications – both in terms of the purchasing process and longer-term impact on personal and business tax rates.
2. Consider and plan for the estate and inheritance tax implications of the purchase.
3. Consider and explore the citizenship or immigration options available and get an understanding of what steps are required to gain citizenship or resident status.
4. Consider working with local experts — in particular real estate agents that know the Caribbean well and can provide background information and help scout each potential island to find the most suitable location for them.
5. Consider access for getting to your preferred Caribbean destination – whether via air or sea, and how the property will be secured if it is not your full-time residence.
6. Consider property management and upkeep as well as insurance needs.
7. Consider not just the property itself, but also evaluate and determine the most meaningful and economic way to plan for long-term ownership and the legacy implications for the next generation.
8. Consider working with an experienced team of advisors (lawyers, accountants, tax authorities, etc.) as this is paramount to ensuring that future goals related to the luxury home purchase are put in place.
To the above, would only add that it’s important to start with a list of requirements for the Caribbean destination along with luxury home and then match up to what is on the market. Also, keep an open mind as Caribbean destinations not yet popular may also present wonderful opportunities.
Top photo: Aerial view of Palazzate, a 75,000 sq ft luxury beachfront mansion for sale in Barbados. Asking price: US$125million. Contact: Alistair Brown 1-246-262-8112 or 1-772-341-0132